Spotlight 09 01
Transcript of Spotlight 09 01
SpotlightLatin AmericanSeptember 2001
2 Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America
DOMESTIC ECONOMY GDP change Inflation Budget balance
in % (real) in % (year-end) in % of GDP
2000 2001f 2002f 2000 2001f 2002f 2000 2001f 2002f
Argentina -0.5 -1.4 1.1 -0.7 -0.2 0.6 -3.5 -2.7 -0.4
Bolivia 2.4 2.0 4.0 3.4 4.0 4.2 -4.5 -4.4 -4.0
Brazil 4.5 1.8 3.0 6.0 6.0 4.3 -4.6 -6.0 -4.0
Chile 5.4 3.4 4.7 4.5 3.2 3.0 -1.6 -2.1 -1.3
Colombia 2.8 2.3 2.5 8.8 9.5 9.0 -3.6 -3.0 -2.8
Costa Rica 1.7 1.0 3.0 10.2 10.5 10.0 -3.7 -3.5 -3.2
Dominican Republic 7.8 2.5 4.5 9.0 6.5 6.0 -2.1 -0.5 -1.5
Ecuador 2.3 4.0 4.2 91.0 20.0 8.0 1.5 -1.0 -0.8
El Salvador 2.0 2.8 3.8 4.3 3.5 2.7 -3.0 -4.0 -4.0
Guatemala 3.3 1.5 2.3 5.1 8.0 9.0 -2.2 -2.5 -2.7
Honduras 4.8 3.0 3.6 10.1 9.5 9.0 -4.5 -5.5 -5.0
Jamaica 0.8 1.5 2.2 6.0 6.7 6.2 -5.3 -3.7 -4.5
Mexico 6.9 1.1 4.2 9.0 4.9 5.2 -1.1 -0.8 -0.5
Nicaragua 4.3 2.5 3.5 9.9 8.0 7.9 -15.2 -15.0 -14.0
Panama 2.7 2.0 2.5 0.7 0.5 0.6 -0.8 -1.0 -0.5
Paraguay -0.4 0.0 2.0 8.6 10.5 12.5 -5.7 -3.5 -2.6
Peru 3.1 0.0 3.0 3.7 3.0 3.2 -3.0 -2.2 -2.1
Trinidad & Tobago 4.0 3.9 4.5 5.6 6.0 5.0 1.6 0.0 -0.3
Uruguay -1.3 -0.5 2.0 5.1 9.0 8.0 -4.2 -3.5 -2.5
Venezuela 3.2 2.5 2.5 13.4 13.0 22.0 3.9 -3.0 -4.0
Latin America (17 countries) 4.1 1.2 3.1 7.0 5.4 5.5
EXTERNAL SECTOR Current account balance Import cover Gross foreign debt
FOREIGN DEBT in % of GDP in months* in % of exports*
2000 2001f 2002f 2000 2001f 2002f 2000 2001f 2002f
Argentina -3.3 -2.4 -2.5 8.1 6.4 6.9 382 369 370
Bolivia -5.6 -4.5 -4.0 6.2 5.5 5.3 427 354 300
Brazil -4.2 -5.2 -4.6 4.1 3.9 3.9 347 324 298
Chile -1.4 -2.2 -2.9 7.0 6.3 6.1 155 161 153
Colombia 0.0 -3.4 -3.7 6.0 5.5 4.7 218 242 245
Costa Rica -5.6 -6.4 -6.7 1.8 1.5 1.2 58 67 66
Dominican Republic -5.2 -2.8 -1.7 0.6 0.8 1.2 55 57 56
Ecuador 8.8 -5.1 -5.8 1.8 1.3 1.4 238 278 287
El Salvador -3.2 -4.9 -7.1 3.8 3.7 3.0 111 124 127
Guatemala -4.9 -4.0 -4.3 3.7 3.4 2.6 131 132 129
Honduras -3.4 -5.5 -4.1 4.5 4.0 3.8 207 207 184
Jamaica -3.8 -6.7 -7.8 2.6 2.8 2.4 119 134 135
Mexico -3.1 -3.2 -3.2 2.0 2.1 2.0 88 86 81
Nicaragua -25.5 -24.9 -24.6 2.7 2.4 2.0 734 777 729
Panama -9.4 -5.9 -4.5 0.8 1.1 1.2 77 80 78
Paraguay -1.8 -3.2 -3.6 2.6 2.3 2.4 105 111 117
Peru -2.8 -2.4 -1.6 8.3 8.2 7.8 275 283 273
Trinidad & Tobago 7.7 1.6 -0.4 3.8 4.3 4.9 54 58 62
Uruguay -3.1 -3.3 -2.7 5.9 6.4 6.5 205 219 207
Venezuela 11.1 3.8 2.1 6.4 4.3 3.6 90 109 117
Latin America (17 countries) -2.5 -3.1 -3.1 3.9 3.5 3.4 176 177 170
* goods and services f=forecast
LALALALALATIN AMERICA ATIN AMERICA ATIN AMERICA ATIN AMERICA ATIN AMERICA AT A GLANCET A GLANCET A GLANCET A GLANCET A GLANCE
3Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America
Latin America at a glance
LATIN AMERICA: No change to fundamentals _____________________ 4
FOCUS: End of currency board system in Argentina? _______________ 6
Country analyses
ARGENTINA: What impact will the IMF deal have? _________________8
BOLIVIA: A new generation ____________________________________14
BRAZIL: Crisis management ___________________________________16
CHILE: Economic trend reversal?________________________________22
COLOMBIA: Economy lacking in dynamism ______________________28
EL SALVADOR: Assistance with reconstruction ____________________34
JAMAICA: In the debt trap _____________________________________36
MEXICO: Congress must deliver ________________________________38
NICARAGUA: Liquidity bottlenecks _____________________________44
PANAMA: Debt buyback _______________________________________46
PARAGUAY: Touch and go _____________________________________48
PERU: Moment of truth ________________________________________50
VENEZUELA: "Soft" exchange controls ___________________________56
Financial market indicators Latin Amercia
Stock market indices __________________________________________62
Bond yield spreads ___________________________________________63
Global economy - figures and forecasts _______________________ 71
TABLE OF CONTENTS
4 Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America
Latin America (17 countries) 1998 1999 2000 2001f 2002f
DOMESTIC ECONOMY
GDP change (real) % 2.4 0.2 4.1 1.2 3.1
GDP US$ bn 1956 1714 1889 1863 1961
Inflation (year-end) % 10.0 8.8 7.0 5.4 5.5
EXTERNAL SECTOR
Merchandise exports US$ bn 271.1 286.9 346.0 344.4 369.4
Merchandise imports US$ bn 294.3 286.4 334.3 344.3 370.7
Trade balance US$ bn -23.2 0.5 11.7 0.2 -1.3
Current account balance US$ bn -85.3 -55.5 -46.4 -58.6 -61.3
Current account balance % GDP -4.4 -3.2 -2.5 -3.1 -3.1
Gross foreign direct investment US$ bn 57.0 63.2 62.6 56.5 51.8
Foreign exchange reserves, year-end US$ bn 161.1 153.9 157.0 148.2 151.2
Import cover ** months 4.4 4.4 3.9 3.5 3.4
FOREIGN DEBT
Gross foreign debt US$ bn 770 769 745 755 773
Foreign debt % exports** 228 217 176 177 170
Short-term foreign debt US$ bn 142 125 125 128 134
Foreign debt amortization US$ bn 80 97 82 87 90
Foreign debt service US$ bn 130 147 135 141 157
Foreign debt service % exports** 38 42 32 33 35
FINANCIAL MARKETS (year-end)
IFCI stock index (US$ based, 2001: 08/22) 482 275 520 510
Yield spread (2001: 08/22)* bps 487 968 692 898
* JP Morgan Latin America-Eurobond-Portfolio ** goods and services f=forecast
LALALALALATIN AMERICA:TIN AMERICA:TIN AMERICA:TIN AMERICA:TIN AMERICA: NO CHANGE TO FUNDAMENTALSArea 20.5 million sq. kmPopulation 518 million (+1.7% p.a.)
Share of global exports 5.6% (2000)Share of global GDP 6.7% (1999)GDP per capita US$ 3 900 (2000)
Exports (2000) Purchasing countries USA 54%, Latin American countries 17%, EU 13%, Japan 3%
Imports (2000) Supplier countries USA 47%, Latin American countries 16%, EU 15%, Japan 5%
SUMMARY AND OUTLOOK
5Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America
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1998 1999 2000 2001f 2002f
% y-o-y LA Argentina Brazil Mexico
200
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1400
1600
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Jan-01 Mar-01 May-01 Jul-01
bps Argentina Brazil Mexico
90
100
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Aug-00 Nov-00 Feb-01 May-01 Aug-01
(Index August 2000=100) Reais/ Peso Euro/ Peso $
Cyrus de la Rubia +49 40 3595 3889
US$ EXCHANGE RATE
Argentina is keeping both the continent and its investors in suspense
despite the announced increase in the current standby facility by about
US$ 8 billion. We only anticipate short-term relief from this accord
unless the IMF manages to pull off the difficult task of restructuring the
country's debt without waiving part of the principal and yet bringing
about a drastic reduction of Argentina's debt service for two to three
years. There may be considerable delay with the organization of
another "megaswap", and the depletion of deposits and reserves will
not be halted automatically. Accordingly, the underlying fundamentals
(including the continued poor economic growth in the U.S. and low
prices of nonoil commodities) for the other countries in the region
basically remain unchanged.
The significant increase in key interest rates and energy savings by
20% in Brazil are having a stronger impact than initially expected after
all: in the second quarter, GDP only rose by 0.8% year-on-year, inducing
us to revise our growth forecast for the current year downward from
2.8% to 1.8%.
In Mexico the slowdown appears to be increasingly impacting on
domestic demand. However, the accompanying decline in inflation
rates is making it easier for the central bank to ease its monetary policy
reins further, which means that the country might soon be able to benefit
from the moderate upturn anticipated for the U.S. economy in the fourth
quarter.
Following the announcement of the new Peruvian cabinet, there are
increasing signs that the government will pursue a more prudent fiscal
policy than that announced during the election campaign and that it is
well on track with its further privatization plans. The situation is quite
the contrary in Venezuela, where the introduction of "soft" exchange
controls has made investors skittish. Apart from these dirigistic
measures, the reduced oil production quotas in particular have caused
us to lower our growth forecast from 3.3% to 2.5% for the year 2001.
While there are no signs of economic revitalization in Colombia owing
to setbacks in the peace process (GDP forecast: 2.3%), in Chile a
silver lining is visible on the horizon: in June growth was unexpectedly
high, and if this trend proves to be reinforced, we will consider revising
our forecast (2001: 3.4%).
For the region as a whole, we have lowered our forecast yet again for
the year 2001 (from 1.6% to 1.2%).
YIELD SPREAD OVER US-TREASURIES
GDP CHANGE (REAL)
6 Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America
EU22%
NAFTA22%
Mercosur29%
Other 27%
60
70
80
90
100
110
120
130
140
150
Jul-89 Jul-91 Jul-93 Jul-95 Jul-97 Jul-99 Jul-01
overvalued by approx.13% (July 2001)
longterm average
real effective exchange rate, Argentine peso
REAL EFFECTIVE EXCHANGE RATE
FOCUS: FOCUS: FOCUS: FOCUS: FOCUS: END OF CURRENCY BOARD SYSTEM IN ARGENTINA?
Speculation about devaluation
The number of voices calling for a change to the Argentinean
exchange-rate regime is growing again in light of the never-ending
speculation concerning the country's future. However, the
abandonment of the Currency Board system does not represent a
solution to the country's deeper-seated problems. The proponents of
a flexibilization of the exchange-rate regime (in other words allowing
the exchange rate to float, followed by a depreciation of the currency)
believe this will generate a strong impetus for the benefit of Argentina's
export sector and a revitalization of economic activity driven by rising
exports. Higher growth would then make the country's debt appear to
be more easily manageable.
Overvalued peso?
This plan would probably not work out, at least not in this form. First of
all, there is some doubt as to whether the peso's exchange rate really
is as sharply overvalued as many happen to believe. Since 1999 Argen-
tina has undergone a significant deflation, which means that in relation
to the U.S. a devaluation has even taken place. For foreign trade, the
exchange-rate regime was already rendered more flexible several
months ago by linking the currency to a euro- and dollar-denominated
basket; this has resulted in the Argentinean peso no longer following
the appreciation of the dollar relative to the euro to the full extent.
According to our calculations, the peso in terms of wholesale prices is
only overvalued by about thirteen per cent. This year, the Argentinean
economy is likely to generate a trade surplus in the order of some US$
STRUCTURE OF ARGENTINE EXPORTS
Exchange rate systems in Latin AmericaExchange rate systems in Latin AmericaExchange rate systems in Latin AmericaExchange rate systems in Latin America 1991199119911991 2001200120012001
Argentina Currency Board Currency Board / Currency Basket
Brazil Crawling Peg Floating
Chile Crawling Peg Floating
Columbia Crawling Peg Floating
Mexico Crawling Peg Floating
Peru Floating Floating
Venezuela Floating Crawling Band
7Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America
1000
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2000
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3000
Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01
US$ mn
100
110
120
130
140
150
160
1998 1999 2000 2001f 2002f
US$ bn
90
100
110
120
130
140
150
Aug-00 Nov-00 Feb-01 May-01 Aug-01
(Index August 2000=100) Reais/ Peso Euro/ Peso $
EXCHANGE RATES
GROSS FOREIGN DEBT (ARGENTINA)
ARGENTINE EXPORTS5 billion, which is double the level recorded in the previous year.
Even if this is largely attributable to the recession and poor domestic
demand, it nevertheless means that foreign trade is not necessarily
Argentina's main problem. And finally, Argentina's traditionally low
export quota indicates that it would not make sense to use devaluation
as a prescription. Only 8% of Argentina's GDP is exported. While a
massive depreciation, which would be inevitable following a free
float of the exchange rate, might boost exports, but the effect for the
aggregate economy would be of less significance owing to the low
export quota.
Devaluation causes fresh problems
A devaluation of the peso would not solve any problems but create
new ones instead. The state, corporations and private households
are heavily indebted on a dollar basis. A devaluation would cause
the country's debt on a peso basis to skyrocket. Not only would this
automatically mean an insolvency of the Argentine state, but also of
numerous corporations. This would result in a long-term
destabilization of the relatively solid financial sector at present (one
of the strongest points of the Argentinean economy), the insolvency
of the state and a deep and long-lasting recession. In addition, there
is the danger of this triggering a domino effect for other emerging
markets dependent on capital inflows.
However, this does not mean that the Argentine peso necessarily
needs to be linked to the US dollar on a long-term basis. On the
contrary: the fact that the export sector is so underdeveloped and
hardly competitive is attributable in large part to the inflexible
exchange-rate regime.
Dollarization has its vagaries
Accordingly, the alternative proposal for a complete dollarization of
the Argentinean economy also has its vagaries. Dollarization means
the complete relinquishment of a country's own national currency.
Once abolished, a subsequent return to an own currency and inde-
pendent monetary policy is very difficult. Countries like Argentina
which, due to their economic structure, are heavily dependent on
global economic developments, need their own independent
monetary policies and exchange-rate regimes to ward off external
shocks. In the long run, Argentina will need to find a way out of the
"dollar trap". But not in the country's current situation.
Dr. Heinz Mewes +49 40 3595 3482
8 Dresdner Bank Lateinamerika, Spotlight 9/2001, Argentina
ARGENTINA:ARGENTINA:ARGENTINA:ARGENTINA:ARGENTINA: WHAT IMPACT WILL THE IMF DEAL HAVE?
SUMMARY AND OUTLOOK
The reinforcement of the existing IMF accord announced by IMF president Horst Koehler on August 21, comprising
US$ 8 billion, is likely to provide Argentina only with a brief respite. Presumably an attempt will be made using part
of the IMF funding to restructure the country's debt one more time on a voluntary basis and/or reduce the level of
amortization payments significantly in the next several years. However, it should be difficult to convince investors of
a plan of this kind. At the same time, it must be taken into account that the population is increasingly unwilling to
accept the austerity measures this agreement will entail. Accordingly, for us the bottom line is that while Argentina
will gain some time thanks to the new IMF accord, this has not really brought the country any closer to solving its
actual problems. Accordingly, we adhere to our assessment that the danger of a default has not been averted at this
stage.
Area 2 736 700 sq. kmPopulation 37.1 million (+1.3% p.a.)
State president Fernando de la RuaEconomy minister Domingo CavalloCentral bank president Roque Maccarone
Next elections State president: 2003House of Deputies (half) andSenate: 14. October 2001
GDP per capita US$ 7 690 (2000)
Investment 18% of GDP (2000)Savings 17% of GDP (2000)
Exchange rate system Fixed exchange rate to the US$ (1:1)Monetary policy Currency board
Exports (2000) 10% of GDPPurchasing countries Merosur 32%, EU 18%, NAFTA 14%Products Primary goods and crude oil 39%,
industrial goods 31%, processedagricultural produce 30%
Imports (2000) 9% of GDPSupplier countries Mercosur 29%, EU 23%, NAFTA 22%Products Capital goods 41%, intermediate goods 34%,
consumer goods 18%
Rating Moody’s: Caa1 S&P: B-
9Dresdner Bank Lateinamerika, Spotlight 9/2001, Argentina
1998 1999 2000 2001f 2002f
DOMESTIC ECONOMY
GDP change (real) % 3.9 -3.4 -0.5 -1.4 1.1
GDP US$ bn 299.1 283.4 285.2 280.0 297.2
Inflation (year-end) % 0.7 -1.8 -0.7 -0.2 0.6
Inflation (average) % 0.9 -1.2 -0.9 -0.6 0.0
PUBLIC SECTOR
Budget balance, central government % GDP -1.4 -2.6 -2.3 -1.9 0.0
Budget balance, public sector % GDP -2.2 -4.0 -3.5 -2.7 -0.4
Public debt % GDP 38 43 45 48 48
Amortization US$ bn 6.3 11.4 12.2 11.8 16.6
Gross financing needs US$ bn 11.4 19.7 19.8 17.1 16.6
EXTERNAL SECTOR
Merchandise exports US$ bn 26.4 23.3 26.4 27.6 29.5
Merchandise imports US$ bn 29.6 24.1 23.9 22.9 24.4
Trade balance US$ bn -3.2 -0.8 2.5 4.7 5.1
Current account balance US$ bn -14.6 -12.3 -9.4 -6.7 -7.0
Current account balance % GDP -4.9 -4.3 -3.3 -2.4 -2.5
Net foreign direct investment US$ bn 4.4 11.1 10.6 6.9 7.0
Foreign exchange reserves, year-end*** US$ bn 30.4 32.2 32.5 25.0 28.0
Import cover ** months 7.0 8.3 8.1 6.4 6.9
US$ exchange rate, year-end Pesos 1.0 1.0 1.0 1.0 1.0
US$ exchange rate, average Pesos 1.0 1.0 1.0 1.0 1.0
FOREIGN DEBT
Gross foreign debt US$ bn 141.9 146.0 147.2 146.5 153.1
Foreign debt % exports** 381 431 382 369 370
Short-term foreign debt US$ bn 20.9 19.7 22.8 24.0 25.5
Foreign debt amortization US$ bn 9.8 12.9 16.0 17.6 19.6
Foreign debt service US$ bn 21.1 23.7 28.5 29.7 32.4
Foreign debt service % exports** 57 70 74 75 78
FINANCIAL MARKETS (year-end)
Prime rate % 10.6 11.5 13.8 15.0 10.0
Merval stock index (peso based, 2001: 08/22) 430 549 417 329
IFCI stock index (US$ based, 2001: 08/22) 798 1064 797 614
Bond market yield (2001: 08/22)* % 11.0 11.2 12.5 18.5
Yield spread (2001: 08/22)* bp 581 447 672 1239
* 93/4 % US$-Bond (2027) **goods and services *** incl. liquidity requirements held abroad f=forecast
ANNUAL FIGURES AND FORECASTS
10 Dresdner Bank Lateinamerika, Spotlight 9/2001, Argentina
Partido Justicialista
99 Alianza 129
UCR: 84Frepaso: 37Provincialparties: 8
Acción por la República 12
Provincialparties 17
Partido Justicialista 39
Alianza 21
Provincial parties 9
UCR: 20Frepaso: 1
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02
US$ mn
GOVERNMENT FINANCING NEEDS
SEATS IN THE SENATE
SEATS IN THE CHAMBER OF DEPUTIES Domestic policy: overshadowed by the economic crisis
Elections to congress are scheduled to be held toward the middle
of the De la Rua government's term of office, on October 14 of this
year. For the first time all 72 seats in the senate will be up for re-
election, while of the 257 deputies only half (exactly 127) continue
to stand for election. In view of the ongoing economic crisis, we
anticipate that the parties of the ruling coalition (UCR and Frepaso)
will lose seats. The Peronists (Partido Justicialista), the strongest
opposition party, will hardly be able to benefit from the govern-
ment's weakness. Its strategy of dissociating itself from Cavallo's
strict austerity measures will probably not succeed since their en-
actment was only possible with their (albeit halfhearted) support.
The high popularity of minister of economy Cavallo when he took
office has declined in the course of the stringent austerity measures
imposed. The party (Acción por la República) he founded in 1997
should nevertheless do better than at the congressional election of
1999 without being able to come close to the two major parties,
however. We take it for granted that the dissatisfaction among the
population will chiefly lead to votes gained by splinter and provin-
cial parties.
We expect the ruling coalition to lose its majority in the house of
deputies along with some seats in the senate, where it is already in
the minority. The outcome of the election will probably complicate
the government's tasks further. However, the special powers con-
ceded to the government when Cavallo took office will continue to
apply until April next year.
Economic activity: no turnaround in sight
Following three years' recession, the economic slide has acceler-
ated yet again. The latest figures on GDP trends show a decline of
2.1% for the first quarter year-on-year. Investment activity once again
declined sharply (-9.2%) and private consumption likewise
continued to decline (-1.8%). For the second quarter we anticipate
similarly negative figures. In view of the uncertain economic outlook
and high interest rates, a revitalization in terms of consumption
and investment is out of the question at present. A further increase
in the number of layoffs is likely to have led to an increase in the un-
employment rate, which stood at 15.5% in May this year. One fur-
ther indicator of poor trends in consumer demand is that inflation is
declining again (July: -1.1% year-on-year).
The public spending cuts (salaries and pensions in the public
11Dresdner Bank Lateinamerika, Spotlight 9/2001, Argentina
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II/98 IV/98 II/99 IV/99 II/00 IV/00 II/01f IV/01f
%, y-o-y
0
500
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Jun-01 Jul-01 Aug-01
US$ mn
70
75
80
85
90
Jan-01 Mar-01 May-01 Jul-01
US$ bn
BANK DEPOSITS
CENTRAL BANK REPOS
GDP CHANGE (REAL)service were reduced by 13%) within the scope of the zero deficit
plan will also hamper growth in the course of the year. A substantial
part of the reduced GDP decline to -0.6% we anticipate for the
second half year-on-year is attributable to statistical base effects.
For the year as a whole, we expect a GDP decline of 1.4%.
Fiscal policy: IMF accord - a new mega-swap?
The renewed intensification of the crisis induced the Argentinean
government to enter into talks with the IMF once again. After two
weeks of sluggish negotiations, on August 21 IMF president Horst
Köhler announced that he would recommend increasing the past
credit volume by US$ 8 billion, to US$ 22 billion. Of this sum, US$ 5
billion is to be made available to increase the central bank's foreign
currency reserves once the IMF's Board of Directors has agreed
early in September. The remaining US$ 3 billion will presumably be
used to give investors some incentive to agree to a further restruc-
turing of the country's debt (after the mega-swap of June 2001). In
other words, in view of the high volume of debt maturing in the next
several years (2002: US$ 19.6 billion) the maturity structure of the
debt could be extended to gain time once again. To perform a
transaction of this kind, Argentina will need to do a great deal of
propaganda work to convince investors and the markets. In par-
ticular, Argentina will have to deliver credible evidence that the
country actually is willing and able to assert the required reforms.
Part of this will be the unconditional enforcement of the zero deficit
plan passed at the end of July, which provides for the entire public
sector (including the provinces) to spend no more than is collected
by way of revenues. This issue will depend on acceptance by the
broad population, which for several weeks now has voiced its dis-
satisfaction with the country's austerity policy by calling for general
strikes and setting up roadblocks.
In our opinion, the US$ 5 billion earmarked to bolster the country's
foreign currency reserves is a drop in the ocean; there has been
an outflow in foreign currency reserves of more than US$ 5 billion
since end-June 2001 alone. This liquidity injection will only be
sensible if a debt restructuring actually takes place. But skepticism
is justified even here: only a restructuring that will drastically reduce
the level of debt service in the next two or three years could give
Argentina the necessary leeway to push through the reforms and
return to a growth path. In light of past experience with the IMF
packages of March 2000 (US$ 7.2 billion) and January 2001 (US$
(US$ and Peso deposits)
12 Dresdner Bank Lateinamerika, Spotlight 9/2001, Argentina
10
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30 EMBI+ spread, bps US$-prime rate, %
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Jun-99 Dec-99 Jun-00 Dec-00 Jun-01
%, y-o-y, 3 month moving average
exports
imports
Günter Köhne +49 40 3595 3483
Cyrus de la Rubia +49 40 3595 3889
EXPORT AND IMPORT GROWTH
US$-PRIME RATE AND BOND SPREAD
COVER OF THE MONETARY BASE 14 billion) it is likely to be extremely difficult to obtain adequate
consensus among investors for a transaction of this kind.
Monetary sector: meltdown of deposits and reserves
The Argentinean investors' fear of a devaluation and bank deposits
being frozen is reflected in a massive decline in deposits and re-
serves. Bank deposits declined by 10% within five weeks, to US$
75.0 billion by mid-August. The central bank responded by easing
the liquidity reserve commitments. Since mid-July it has also been
adding liquidity to the market with the increasing use of repo trans-
actions. However, its means within the currency board system are
restricted, indicating that a further meltdown of deposits is not likely
to be sustainable for long. The central bank's foreign currency
reserves declined by a quarter in the five weeks since the begin-
ning of July, to US$ 17.4 billion. The new IMF agreement is only
likely to yield a brief respite. If the liquidity outflow is not capable of
being stanched, this will mean an immediate danger to Argentina's
solvency since a banking crisis is likely to intensify the recession
and cause tax revenues to collapse. Moreover, the banks are heav-
ily engaged in financing the country's public-sector debt.
External sector: slowdown in imports
The decline in imports in the second quarter of the year ( -9% year-
on-year) mirrors the country's weak domestic demand. What is
especially worrying is the reduction in imports of investment goods
by 32% in June. Exports are increasingly suffering due to the de-
valuation of currencies in neighboring countries essentially pre-
cipitated by the Argentinean crisis. For the year as a whole, exports
are unlikely to rise by more than 4%. The trade surplus is expected
to increase in the current year to US$ 4.7 billion (2000: US$ 2.5
billion) and contribute to a reduction of the current account deficit
to 2.4% (2000: 3.3%) of GDP. The price of these "successes" is the
increased recession.
13Dresdner Bank Lateinamerika, Spotlight 9/2001, Argentina
MONTHLY INDICATORS Apr 01 May 01 Jun-01 Jul-01
DOMESTIC ECONOMY
Industrial production % yoy 0.1 -2.4 -1.3 -2.6-2.6-2.6-2.6 17-Sep
Construction % yoy 1.2 0.7 0.1 24-Aug
Supermarket sales % yoy -4.3 -3.2 -1.7 24-Aug
Budget balance US$ mn -878 -1002 298 27-Aug
Consumer prices % yoy -0.2 0.2 -0.3 -1.1-1.1-1.1-1.1 05-Sep
Consumer prices % mom 0.7 0.1 -0.7 -0.3-0.3-0.3-0.3 05-Sep
Money supply M3 % yoy -1.5 -2.4 -2.3 -6.9-6.9-6.9-6.9 15-Sep
Overnight peso rate (latest: 08/22)* % 7.6 4.8 8.5 23.5 13.813.813.813.8
Overnight US$ rate (latest: 08/22)* % 6.5 5.0 4.4 11.0 13.313.313.313.3
Private sector borrowing (latest: 08/22)* US$ bn 61.0 60.3 60.3 58.258.258.258.2 15-Sep
Public sector borrowing (latest: 08/22)* US$ bn 14.8 14.7 14.2 14.814.814.814.8 15-Sep
Peso deposits ***(latest: 08/21)* US$ bn 24.2 24.0 23.9 21.7 20.320.320.320.3
US$ deposits (latest: 08/21)* US$ bn 47.5 48.6 48.8 46.4 44.744.744.744.7
EXTERNAL SECTOR
Merchandise exports US$ mn 2381 2602 2531253125312531 07-Sep
Merchandise exports % yoy 2.0 0.0 6.06.06.06.0 07-Sep
Merchandise imports, cif US$ mn 1908 2075 1764176417641764 07-Sep
Merchandise imports % yoy 0.0 -6.3 -19-19-19-19 07-Sep
Trade balance US$ mn 473 527 767.0767.0767.0767.0 07-Sep
Foreign exchange reserves (latest: 08/21)* US$ bn 27.4 27.2 28.5 21.821.821.821.8 17.217.217.217.2
next/latest
QUARTERLY INDICATORS Q2 00 Q3 00 Q4 00 Q1 01
DOMESTIC ECONOMY
GDP % yoy 0.2 -0.5 -2.1 -2.1 20-Sep
Private consumption % yoy 1.0 -0.3 -2.6 -1.8 20-Sep
Public consumption % yoy -0.8 -0.4 -1.2 -0.5 20-Sep
Private and public investment % yoy -7.4 -11.4 -11.9 -8.6 20-Sep
Domestic demand % yoy 0.2 -0.9 -2.0 -2.2 20-Sep
Export (goods and services) % yoy 2.0 0.8 1.8 1.0 20-Sep
Import (goods and services) % yoy 2.5 -2.0 -2.3 0.1 20-Sep
Budget balance, central governm. (latest: Q201) US$ mn -234 -1553 -2798 -3120 -1582-1582-1582-1582
Public debt US$ bn 123.5 123.7 128.0 127.4 27-Sep
EXTERNAL SECTOR
Current account balance US$ bn -1.4 -2.3 -2.0 -2.9 26-Sep
Net foreign direct investment US$ bn 1.4 6.0 1.0 1.1 26-Sep
Net portfolio investment US$ bn 1.9 -2.6 -2.3 -2.3 26-Sep
Capital account** US$ bn 0.7 1.5 3.5 -0.3 26-Sep
Change in foreign reserves (latest: Q2 01) US$ bn 1.5 0.0 0.1 -3.7 -1.7-1.7-1.7-1.7
Gross foreign debt US$ bn 144.4 147.7 147.2 145.6 26-Sep
Short-term foreign debt US$ bn 19.5 22.5 22.8 23.2 26-Sep
* month-end ** incl. residual items ***by the private sector
next /latest
MONTHLY AND QUARTERLY FIGURES
14 Dresdner Bank Lateinamerika, Spotlight 9/2001, Bolivia
1998 1999 2000 2001f 2002f
DOMESTIC ECONOMYGDP change (real) % 4.7 0.6 2.4 2.0 4.0GDP US$ bn 8.5 8.4 8.3 8.7 8.9Inflation (year-end) % 4.4 3.1 3.4 4.0 4.2Budget balance, public sector % GDP -4.1 -4.0 -4.5 -4.4 -4.0
EXTERNAL SECTORMerchandise exports US$ mn 1104 1051 1230 1350 1490Merchandise imports US$ mn 1983 1755 1830 1857 1950Trade balance US$ mn -879 -704 -600 -507 -460Current account balance US$ mn -666 -488 -464 -390 -359Current account balance % GDP -7.8 -5.8 -5.6 -4.5 -4.0Net foreign direct investment US$ mn 955 1014 760 950 720Foreign exchange reserves, year-end US$ mn 885 917 824 720 730Import cover * months 5.8 7.1 6.2 5.5 5.3US$ exchange rate, year-end*** Bolivianos 5.65 5.99 6.40 6.73 7.10
FOREIGN DEBTGross foreign debt US$ mn 5125 5100 5150 4800 4500Foreign debt % exports* 450 474 427 354 300Short-term foreign debt US$ mn 575 625 700 680 640Foreign debt amortization US$ mn 324 300 275 190 220Foreign debt service US$ mn 608 550 540 380 400Foreign debt service % exports* 53 51 45 28 27
*goods and services f=forecast
Area 1 098 581 sq. kmPopulation 8.3 million (+ 2.8% pro Jahr)
State president Jorge Quiroga RamirezFinance minister Jacques TrigoCentral bank president Juan Antonio Morales AnayaNext elections State president: 2002
Parliament: 2002
GDP per capita US$ 1 012
Rating Moody’s: B1 S&P: B+
ANNUAL FIGURES AND FORECASTS
BOLIVIA:BOLIVIA:BOLIVIA:BOLIVIA:BOLIVIA: A NEW GENERATION
SUMMARY AND OUTLOOK
15Dresdner Bank Lateinamerika, Spotlight 9/2001, Bolivia
Kai Stefani + 49 40 3595 3486
BALANCE OF PAYMENTS
GDP AND INFLATION
0
2
4
6
8
10
12
14
1994 1995 1996 1997 1998 1999 2000e 2001f
% GDP change (real) inflation
0
200
400
600
800
1000
1200
1400
1600
1996 1997 1998 1999 2000 2001f 2002f
US$ mn exports FDI FX reserves
Domestic policy: old guard bowing out
Newly appointed president Jorge Quiroga took advantage of his
opportunity when he took office to almost completely reshuffle the
cabinet. Only four of the 16 ministers remained in office. The business
community was especially pleased with the appointment of Jacques
Trigo, the chairman of the banking supervisory office, as finance minister.
In addition, the fact that the influence of the old guard of the ruling party
(ADN) has been reduced on the whole is a positive signal. The
government only has a few months before the next presidential election
campaign. According to the constitution, Quiroga will not be able to
stand as a candidate. It remains to be seen whether Quiroga, a trained
engineer in the U.S., will manage to deliver any significant impetus in
this short space of time. In the medium to long term, economic policy is
being dictated above all by the program to combat poverty. By 2003
economic growth is to be raised from 2% at present to 5% per annum
amid ongoing low inflation rates. In the short term, infrastructural
measures are to generate growth and prove beneficial to rural regions.
Monetary sector: reinforcement of the banking system
The weak level of growth for three years now poses a substantial burden
to the Bolivian banking system. The share of non-performing loans
(8.5%) is in danger of rising due to the high level of interest rates and the
economic situation. An additional financial injection via the state-owned
bank "NAFIBO" is to help private banks in restructuring their loan portfolios
and contribute toward a reduction of interest rates on US$ loans (end-
July: 15.5%). At the same time, banking supervision is to be reinforced.
External sector: decline in foreign currency reserves
Due to the intervention of the central bank on the forex market - the
devaluation of the boliviano is being contained to check inflation - the
central bank's foreign currency reserves have been fluctuating
considerably from month to month. Despite the sharp increase in natural
gas exports as well as the especially high net inflows of direct investment
this year on account of capital spending on a mining project (San
Cristobal), we fear that there may be an net outflow of foreign currency
reserves of US$ 100 million by the end of this year. Import cover by that
time should be around 5½ months. On the other hand, the debt remission
performed within the scope of the HIPC Program will enable the indicator
of foreign debt as a percentage of exports to fall by well over 70
percentage points, and maturities of medium to long-term debt will also
see a significant decline.
Owing to his severe illness (cancer), the past
president Hugo Banzer handed over the staff of
office to his much younger deputy, Jorge
Quiroga. This was followed by an extensive
reshuffle of the cabinet equivalent to a political
change of generation. The state's support of the
banking system and the increase in public
investment are to make it possible next year to
increase the level of growth, which at present is
being driven by gas exports.
16 Dresdner Bank Lateinamerika, Spotlight 9/2001, Brazil
BRAZIL:BRAZIL:BRAZIL:BRAZIL:BRAZIL: CRISIS MANAGEMENT
SUMMARY AND OUTLOOK
Unexpectedly negative global economic trends, the Argentinean crisis and scarce energy resources are responsi-ble to
a great extent for the substantial decline in inflows of foreign investment this year and the fact that the real is under constant
devaluation pressure. This made it necessary to raise the level of interest rates, which has contributed to the economic
slowdown. In the second quarter of the year 2001 GDP growth declined surprisingly sharply to as little as 0.8% year-on-
year. While we do not rule out a subsequent upward revision of this figure, we have nevertheless lowered our GDP forecast
for the current year from 2.8% to 1.8%. At the same time, we have raised our exchange-rate forecast for the end of this year
from 2.38 to 2.50 reais per US dollar. The devaluation of the real and flagging economic activity is likely to help ease the
current account. The IMF is supporting the economic adjustment under a new stand-by agreement.
Area 8 511 965 sq. kmPopulation 170 million (+1.4% p.a.)
State president Fernando Henrique CardosoFinance minister Pedro MalanCentral bank president Armínio Fraga
Next elections State president: October 2002Parliament: October 2002
GDP per capita US$ 3 450 (2000)
Investment 19% of GDP (1999)Savings 16% of GDP (1999)
Exchange rate system Flexible exchange rateMonetary policy Inflation targeting
Exports (2000) 9% of GDPPurchasing countries EU 27%, USA 24%, ALADI 23%, Asia 12%Products Manufactured goods 68%,
Primary products 32%
Imports (2000) 9% of GDPSupplier countries EU 25%, USA 23%, ALADI 21%, Asia 15%Products Capital goods 41%, primary products 34%,
crude oil 14%, consumer goods 11%
Rating Moody’s: B1 S&P: BB-
17Dresdner Bank Lateinamerika, Spotlight 9/2001, Brazil
1998 1999 2000 2001f 2002f
DOMESTIC ECONOMY
GDP change (real) % 0.2 0.8 4.5 1.8 3.0
GDP US$ bn 787.5 529.4 588.0 511.3 525.0
Inflation (year-end) % 1.7 8.9 6.0 6.0 4.3
Inflation (average) % 3.2 4.9 7.0 6.5 5.3
PUBLIC SECTOR
Budget balance, central government % GDP -5.4 -6.9 -3.2 -5.0 -3.5
Budget balance, public sector % GDP -8.1 -10.0 -4.6 -6.0 -4.0
Public debt % GDP 43.3 49.4 49.5 -54.0 52.0
Amortization US$ bn n.a. n.a. n.a. n.a. n.a.
Financing needs, central government US$ bn 42.5 36.4 18.8 25.6 18.4
EXTERNAL SECTOR
Merchandise exports US$ bn 51.1 48.0 55.1 59.8 66.0
Merchandise imports US$ bn 57.7 49.3 55.8 60.5 65.0
Trade balance US$ bn -6.6 -1.3 -0.7 -0.7 1.0
Current account balance US$ bn -33.6 -25.4 -24.6 -26.5 -24.0
Current account balance % GDP -4.3 -4.8 -4.2 -5.2 -4.6
Net foreign direct investment US$ bn 26.1 26.9 30.5 19.0 19.0
Foreign exchange reserves, year-end US$ bn 42.6 34.8 32.5 34.0 35.0
Import cover ** months 5.1 4.8 4.1 3.9 3.9
US$ exchange rate, year-end Reais 1.2 1.8 2.0 2.5 2.5
US$ exchange rate, average Reais 1.2 1.8 1.8 2.3 2.4
FOREIGN DEBT
Gross foreign debt US$ bn 267.3 254.0 236.2 242.2 244.0
Foreign debt % exports** 418 430 347 324 298
Short-term foreign debt US$ bn 40.0 32.0 30.0 31.0 32.0
Foreign debt amortization US$ bn 30.7 44.3 28.1 30.2 32.0
Foreign debt service US$ bn 46.5 61.4 45.2 48.4 51.0
Foreign debt service % exports** 73 104 66 65 62
FINANCIAL MARKETS (year-end)
Interbank interest rate, overnight % 29.2 18.8 15.8 17.0 14.0
Bovespa stock index (real based. 2001: 08/22) 6784 17091 15258 12952
IFCI stock index (US$ based, 2001: 08/22) 275 459 411 291
Bond market yield (2001: 08/22)* % 15.3 12.5 13.1 15.4
Yield spread (2001: 08/22)* bp 968 562 731 950
* 101/8 % US$-Bond (2027) **goods and services f= forecast
ANNUAL FIGURES AND FORECASTS
18 Dresdner Bank Lateinamerika, Spotlight 9/2001, Brazil
PSDB*18%
PMDB*19%
PFL*21%
PPB*11%
Others19%
PT12%
*government coalition
PSDB*20%
PMDB*32%
PFL*25%
PPB*5%
Others9%
PT9%
*government coalition
-15-13-11-9-7-5-3-1135
Dec-98 May-99 Oct-99 Mar-00 Aug-00 Jan-01 Jun-01
% of GDP, moving 12 months period nominal primary
PUBLIC SECTOR BUDGET BALANCE
SEATS IN THE SENATE
SEATS IN THE CHAMBER OF DEPUTIES Domestic policy: corruption and election campaign
Brazilian political situation is once again being dominated by a case
of corruption. A commission of inquiry was set up in congress against
president of the senate Barbalho (on leave at present) to investigate
his involvement in several unlawful acts. Proof of having made a
false statement before Congress would be sufficient for impeachment
proceedings. In view of the political isolation by and large of the
president of the senate, we anticipate that the procedure in congress
will run its course in several weeks' time and Barbalho will resign
before the work routine in congress is unduly disrupted for too long.
In the campaign for the presidential election (October 2002) former
president Itamar Franco has had to contend with defeat within his
own party. His plans to become party chairman of the coalition party
PMDB and lead it into the opposition have failed because he did not
manage to prevail against the powers interested in an ongoing
cooperation with the government. As a result, the likelihood of Fran-
co being nominated presidential candidate of the PMDB has declined,
which would mean his departure to a smaller party or adversely
affect his chances. The party will make its decision on September 9
whether or not it will remain in the ruling coalition.
The outcome of the election remains completely open – contrary to
the opinion of some analysts, who consider the victory of the oppo-
sition a certainty. Whereas the popularity of Cardoso (whose party
has not nominated a candidate yet) has surprisingly increased
according to the latest opinion polls, the opposition candidates Ciro
Gomes and Itamar Franco had to contend with losses. Some 60% of
all voters are still undecided, and the government has not even
launched its election campaign. From today's perspective a tight
election victory is likely. If the opposition remains divided and the
coalition parties work together a similar grouping as in 1998 may
arise, when the candidate of the ruling coalition and Luís Ignácio da
Silva ("Lula") of the PT workers' party faced each other in a run-off
ballot. Unlike the situation at the time, however, the PT has mean-
while moved away from its radical views hostile to the business
community, which means that even in the event of an opposition
victory (which we consider to be unlikely) a certain continuity in
economic policy would nevertheless be likely.
Public finance: tighter fiscal policy
In the first half of the year the public sector reported a surplus be-
fore interest of R$ 30.4 billion (5.4% of GDP), exceeding the target
19Dresdner Bank Lateinamerika, Spotlight 9/2001, Brazil
0
10
20
30
40
50
60
70
80
May-99 Oct-99 Mar-00 Aug-00 Jan-01 Jun-01
share in % US$ fixed rate Selic
-2
-1
0
1
2
3
4
5
6
I/98 IV/98 III/99 II/00 I/01 IV/01p
%, yoy
-2
0
2
4
6
8
10
Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01
% mom yoy
INFLATION
GDP CHANGE (REAL)
PUBLIC INTERNAL DEBTlaid down by the IMF for the first six months by R$ 9 billion. However,
if the substantially higher interest rates on public debt are included
in the equation, this produces a deficit for the same period of R$ 29
billion or 4.9% (1st half of 2000: 3.1%) of GDP. The interest burden
rose from R$ 40 billion to R$ 59 billion, or 10.2% of GDP. This increase
is explained by the weak exchange rate (roughly a quarter of
domestic debt is linked to the exchange rate of the US dollar) and
the increase in interest rates. The ratio of public debt to GDP is likely
to rise to 54% by end-2001 (end-2000: 50%). In view of this trend,
the government has raised its target for the primary surplus for 2001/
02 from 3% to 3.35% or 3.5% of GDP. This measure was adopted
within the framework of a new stand-by agree-ment with the IMF
scheduled to run until December 2002 and linked to an additional
credit line of US$ 15 billion. The minimum level of foreign currency
reserves was lowered from US$ 25 billion to US$ 20 billion, widening
the central bank's scope for intervention to a corresponding degree.
Economic activity: decline in growth
GDP grew at a lower rate than expected in the second quarter of
2001, rising by as little as 0.8% (first half of the year: 2.5%) year-on-
year. Particularly sharp reductions were registered in the agricul-
tural sector (+0.2%) and industry (+0.4%) but the services sector
(+2.2%) also remained behind expectations, especially due to the
sharp decline in the telecommunications sector (-11%). Growth rates
remained satisfactory in the banking industry (5%) and in mining
and the oil sector (6%). The economic weakness is attribut-able to
various factors: in addition to the negative global economic
environment and the ongoing Argentinean crisis, it was especially
the hike in key interest rates (375 basis points since March) that has
impacted adversely on investment. The energy crisis enduring since
June has been an additional burden. These unfavorable conditions
are likely to continue in the third quarter; for this reason we have
lowered our GDP growth forecast for the year 2001 from 2.8% to
1.8%. However, since some of the figures used to calculate second-
quarter GDP still are estimates and other indicators reflect a
considerably more upbeat image in terms of economic develop-
ment, we cannot rule out a subsequent upward revision of GDP
growth figures.
Monetary sector: increase in inflation
The inflation rate peaked at 1.3% in July, reaching its highest rate
20 Dresdner Bank Lateinamerika, Spotlight 9/2001, Brazil
1.5
1.7
1.9
2.1
2.3
2.5
2.7
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01
Reais/US$
10
15
20
25
30
35
40
45
50
Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01
interbank overnight %, annualized rate
0
5
10
15
20
25
30
35
Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01
US$ bn current account deficit foreign direct investment
CURRENT ACCOUNT AND FDI
INTEREST RATES
EXCHANGE RATE
Humberto Santamaria, São Paulo +55 11 5188 6884
Christine Thomas do Prado, São Paulo +55 11 5188 6968
this year (twelve-monthly rate to end-July: 7.1%). This acceleration
is largely attributable to higher, state-imposed price adjustments
concentrating on the months of June and July; starting in August
the inflation rate should return to a lower level. However, the cumu-
lative inflation rate in the course of this year (4.3%) is so high that
we have raised our forecast for the year 2001 from 5.5% previously
to 6%, the upper limit of the central bank's inflation target. At the
center of inflationary expectations lie two counteracting factors:
the weakness of the Brazilian real and the decline in consumer de-
mand. In view of the economic slowdown in the second quarter,
which is likely to continue into the third, we expect the pass-through
to be very slight in the next several months even if the weakness of
the real continues for the time being and a recovery only eventu-
ates at the end of the year. We have raised our exchange-rate
forecast for 2001 from R$ 2.38/US$ to R$ 2.50/US$, and we expect
the base interest rate to reach a level of 17% by the end of this year.
External sector: lower investment inflows
In the first half of the year 2001 the current account deficit rose to
reach US$ 13.3 billion (first half of 2000: US$ 11.2 billion). At the
same time, the level of direct investment declined from US$ 13.4
billion to US$ 9.9 billion. For the year as a whole we anticipate a net
direct investment inflow of US$ 19 billion and a current account
deficit of US$ 26.5 billion. The deterioration in the balance of pay-
ments situation is essentially attributable to the cooling down of the
global economy, which is dampening foreign investment and im-
peding export growth. After two years in which it was possible to
reduce the level of Brazil's foreign debt, fresh net borrowing will be
necessary once again in the year 2001. We expect the country's
total foreign debt to rise from US$ 236 billion to US$ 242 billion. A
certain relief is likely to result from the slower level of economic
activity and the weakness of the country's national currency, which
stimulates exports and enhances the competitiveness of domestic
products relative to imports from abroad. Owing to the country's
dependence on foreign capital, Brazil's necessary adjustment to
internal and external crisis factors is ultimately leading to an in-
crease in foreign debt and slower economic growth.
21Dresdner Bank Lateinamerika, Spotlight 9/2001, Brazil
MONTHLY INDICATORS Apr-01 May 01 Jun-01 Jul-01
DOMESTIC ECONOMY
Capacity utilization (CNI) % yoy 81.0 81.8 80.380.380.380.3 06-Sep
Industrial production (IBGE) % yoy 6.1 4.2 -1.4-1.4-1.4-1.4 06-Sep
Retail sales (FCESP) % yoy -3.1 -6.4 -7.7-7.7-7.7-7.7 29-Aug
Unemployment rate (IBGE) % 6.5 6.9 6.46.46.46.4 29-Aug
Real wages per working hour (FIESP) % yoy 7.8 7.1 4.74.74.74.7 04-Sep
Consumer prices % yoy 6.6 7.0 7.4 7.17.17.17.1 12-Sep
Consumer prices % mom 0.6 0.4 0.5 1.31.31.31.3 12-Sep
Money supply M1 % yoy 22.7 25.1 21.321.321.321.3 26. Aug
Interbank interest rate (latest: 08/21)* % 16.2 16.8 18.3 18.9 19.119.119.119.1
Financial sector lending US$ bn 153.5 145.6 135.1135.1135.1135.1 26. Aug
EXTERNAL SECTOR
Merchandise exports US$ mn 4730 5367 5042 4965496549654965 03-Sep
Merchandise exports % yoy 13.1 6.0 3.7 -0.8-0.8-0.8-0.8 03-Sep
Merchandise imports US$ mn 4610 5156 4765 4857485748574857 03-Sep
Merchandise imports % yoy 9.6 9.7 3.5 -0.6-0.6-0.6-0.6 03-Sep
Trade balance US$ mn 120 211 277 108108108108 03-Sep
Foreign exchange reserves (latest: 08/21)* US$ bn 34.7 35.5 37.3 35.5 34.934.934.934.9
US$ exchange rate (latest: 08/22)* Reais 2.22 2.38 2.30 2.43 2.532.532.532.53
next/latest
QUARTERLY INDICATORS Q3 00 Q4 00 Q1 01 Q2 01
DOMESTIC ECONOMY
GDP % yoy 5.1 4.1 4.3 0.80.80.80.8 14-Nov
Agriculture % yoy 3.9 -7.3 1.8 0.20.20.20.2 14-Nov
Industry % yoy 4.7 4.9 5.1 0.40.40.40.4 14-Nov
Services % yoy 4.5 3.9 2.8 2.22.22.22.2 14-Nov
Public debt Reais bn 547.9 563.2 588.7 619.4619.4619.4619.4 26-Oct
EXTERNAL SECTOR
Current account balance US$ bn -4.5 -9.0 -6.7 -6.9-6.9-6.9-6.9 26-Oct
Net foreign direct investment US$ bn 8.2 9.6 4.6 5.25.25.25.2 26-Oct
Portfolio investment US$ bn 2.1 0.5 2.5 -0.9-0.9-0.9-0.9 26-Oct
Capital account ** US$ bn 7.5 9.0 7.8 9.69.69.69.6 26-Oct
Change in foreign exchange reserves US$ bn 3.2 1.6 1.0 2.92.92.92.9 26-Oct
Gross foreign debt US$ bn 232.4 236.2 236.8 26-Sep
Short-term foreign debt US$ bn 29.3 30.0 29.0 26-Sep
* month-end ** incl. residual items
next/latest
MONTHLY AND QUARTERLY FIGURES
22 Dresdner Bank Lateinamerika, Spotlight 9/2001, Chile
CHILE:CHILE:CHILE:CHILE:CHILE: ECONOMIC TREND REVERSAL?
SUMMARY AND OUTLOOK
A few months before the congressional elections, opinion polls seem to indicate that the Lagos government may find it
difficult to defend its majorities in both houses of parliament; in particular, its majority in the senate might be at stake. This
is likely to be the background to the reform plans relating to the labor market, which are heavily geared to regulation and
which the government hopes will win additional votes. Looking at the economy, in spite of the high growth in June we do
not see any immediate indicator of an economic trend reversal as this growth is partly attributable to special effects, and
the factors impeding growth (commodity prices, Argentinean crisis) continue to prevail. Accordingly, we are leaving our
GDP forecast at 3.4% for the time being. The peso weakness is impacting positively on foreign trade figures. We have
therefore revised our current account deficit forecast for the year 2001 from 2.6% to 2.2% of GDP.
Area 756 629 sq. kmPopulation 15.2 million (+1.2% p.a.)
State president Ricardo Lagos EscobarFinance minister Nicolás Eyzaguirre GuzmánCentral bank president Carlos Massad Abud
Next elections State president: December 2005Upper House: December 2001Lower House: December 2001
GDP per capita US$ 4 599 (2000)
Investment 22% of GDP (2000)Savings 25% of GDP (2000)
Exchange rate system Flexible exchange rateMonetary policy Inflation targeting
Exports (2000) 26% of GDPPurchasing countries EU 25%, USA 17%, Japan 14%Products Mining 46%, Industry 45%,
Fishing, Agriculture, Forestry 9%
Imports (2000) 26% of GDPSupplier countries USA 19%, Argentina 16%, EU 16%Products Capital goods 21%, consumer goods 19%,
fuel and lubricants 16%
Rating Moody’s: Baa1 S&P: A-
23Dresdner Bank Lateinamerika, Spotlight 9/2001, Chile
1998 1999 2000 2001f 2002f
DOMESTIC ECONOMY
GDP change (real) % 3.9 -1.1 5.4 3.4 4.7
GDP US$ bn 72.7 67.0 69.9 63.1 65.5
Inflation (year-end) % 4.7 2.3 4.5 3.2 3.0
Inflation (average) % 5.1 3.3 3.8 3.7 3.2
PUBLIC SECTOR
Budget balance, central government % GDP 0.4 -1.5 0.1 -0.5 -0.1
Budget balance, public sector % GDP -0.7 1.6 -1.6 -2.1 -1.3
Public debt % GDP 12.1 12.4 11.3 11.3 11.3
EXTERNAL SECTOR
Merchandise exports US$ bn 14.8 15.6 18.2 17.6 19.4
Merchandise imports US$ bn 17.3 14.0 16.7 17.2 19.2
Trade balance US$ bn -2.5 1.7 1.4 0.4 0.2
Current account balance US$ bn -4.1 -0.1 -1.0 -1.4 -1.9
Current account balance % GDP -5.7 -0.1 -1.4 -2.2 -2.9
Net foreign direct investment US$ bn 1.8 4.4 -1.1 2.0 2.5
Foreign exchange reserves, year-end US$ bn 15.7 14.5 14.7 13.2 14.3
Import cover ** months 7.7 8.3 7.0 6.3 6.1
US$ exchange rate, year-end Pesos 474 528 574 660 670
US$ exchange rate, average Pesos 460 509 539 623 655
FOREIGN DEBT
Gross foreign debt US$ bn 31.7 34.2 36.8 37.5 39.0
Foreign debt % exports** 158 167 155 161 153
Short-term foreign debt US$ bn 7.9 7.4 7.9 7.5 8.0
Foreign debt amortization US$ bn 2.3 2.6 2.8 5.4 3.5
Foreign debt service US$ bn 3.7 3.9 4.6 6.9 7.0
Foreign debt service % exports** 18 19 19 29 27
FINANCIAL MARKETS (year-end)
Base rate, 90 days (PRBC) % real 14.5 10.7 8.5 6.2 6.6
IPSA stock index (peso based, 2001: 08/22) 71 100 96 115
IFCI stock index (US$ based, 2001: 08/22) 451 613 520 509
Bond market yield (2001: 08/22)* % 8.1 7.5 6.7
Yield spread (2001: 08/22)* bp 152 221 181
* 67/8 % US$-Bond (2009) **goods and services f=forecast
ANNUAL FIGURES AND FORECASTS
24 Dresdner Bank Lateinamerika, Spotlight 9/2001, Chile
PDC*
PS*
P. Radical Social-
Demócrata*
PPD*
RN
Independent deputies
UCCP Partido Unión-Demócrata
Independiente5
1
22
16
22
5 11
38
*Concertación
RN
appointed Senators
6
UDI
appointed Senators*
3
Senators for life*
PPD*PS*
PDC*
Independents
5
75
1
2
14
*Concertación4
4000
5000
6000
7000
8000
9000
10000
11000
1991 1993 1995 1997 1999 2001(Jun)
US$ mn
PUBLIC FOREIGN DEBT
SENATE
CHAMBER OF DEPUTIES Domestic policy: poor poll results for government
Only a few months before the parliamentary elections scheduled
for December 16, according to a CERC poll taken in July the govern-
ment's approval ratings dropped to 47% (following 53% in April),
while its rejection rose from 39% to 44%. The proportion of respon-
dents who believe an election victory of the opposition "Alianza por
Chile" is correspondingly high (roughly 40%), while only 33% be-
lieve the ruling Concertación will win. The majorities in the senate
and in the house of deputies are likely to remain close owing to the
election system and are likely to change to the detriment of the
ruling coalition particularly in the senate. At present the labor mar-
ket reform is being debated in congress. We believe this topic is
receiving so much attention merely because of the run-up to the
elections. In light of the many regulations planned (particularly
with regard to protection from dismissal and strike conditions), we
feel the project is likely to be more of a hindrance than a help in
terms of the competitiveness of the Chilean economy.
Fiscal policy: budget remains on target
Expenditure of the central government came to the equivalent of
US$ 8.2 billion in the second quarter (slightly below the figure
budgeted); accordingly, the budget almost balanced against some
US$ 7.9 billion in revenues. In the first half of the year the govern-
ment managed to achieve a surplus amounting to 0.5% of GDP. It
was possible for the negative impact of the weak copper price to
be absorbed by the copper equalization fund and the weak peso,
among other factors. On the expenditure side, the public sector
has so far exercised restraint with regard to its investment projects
planned; accordingly, investment spending only rose by about 1.5%
in the first half of the year. The government has announced plans to
boost its spending in the second half, with a real growth rate of 7%
being targeted. We are keeping to our forecast of a budget deficit
amounting to 0.5% of GDP.
Meanwhile the law to reduce income tax and raise taxes on corpo-
rate profits from 15% to 17% has passed through congress. This
law, which is geared above all to distributive effects, is only likely to
have a negative impact on investment trends of companies, which
had agreed to an increase in corporate income tax by 1.5 of a
percentage point in the period leading up to the legislative process.
25Dresdner Bank Lateinamerika, Spotlight 9/2001, Chile
-7
-5
-3
-1
1
3
5
7
9
Jun-99 Dec-99 Jun-00 Dec-00 Jun-01
Imacec index, % y-o-y
-1
0
1
2
3
4
5
6
Jan-00 Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01
Inflation, % y-o-y m-o-m
450
500
550
600
650
700
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01
Pesos/US$
EXCHANGE RATE
INFLATION
ECONOMIC ACTIVITYEconomic activity: long-awaited trend reversal in sight?
Following low growth rates in April and May (2.6% and 2.4%, re-
spectively) in June the Imacec, with an increase of 5.1% year-on-
year, indicated an acceleration of economic activity. On the one
hand, this might reflect an economic trend reversal attributable to
monetary policy and the exchange rate. The weak peso in particu-
lar has several benefits in economic terms: the competitiveness of
exports is rising, which is discernible from the significant increases
in export volume. The local industries are in a better position than
in the past to compete with imports, which have become more
expensive. The 6.3% industrial growth rate (June) may be a possible
indicator. And finally, the weak peso is also likely to be perceived
as a good opportunity for foreign investors to enter the market or
reinforce existing investments. The two-fold increase in gross direct
investments in the first half of the year to US$ 3.2 billion might be a
contributory factor.
On the other hand, there are several negative factors relating to
economic activity. In this context, firstly the sharp decline in prices
of key commodities must be taken into account. The copper price
in particular was down to 65 cents/lb at times, or just over 20%
lower than at the beginning of the year. Even if this is not attended
by a decline in export volumes, lower prices of merchandise ex-
ports nevertheless are impeding growth. Secondly, the Argentine-
an crisis is a factor that is leading to lower profits for parent compa-
nies, especially via Chilean direct investment in Argentina (which
accounts for more than 50% of Chile's direct investment portfolio
abroad) and hurting the economy. Finally, the ongoing high unem-
ployment rate is stifling consumption. In addition, taking several
special effects into consideration that led to the high level of growth
in June, we believe it would be premature to raise our growth fore-
cast from 3.4% for the year 2001. Instead, we will need to wait and
see whether the economic indicators will point to a consolidation
of the good growth figures.
Monetary sector: massive support announced for the peso
Early in August the central bank announced its plans to use a
nominal interest rate as a key rate rather than a real one. The past
policy resulted in very stable real interest rates, whereas short-
term nominal interest rates were subjected to significant fluctuations
because they were determined on the basis of inflationary
expectations. However, since most short-term loans are granted
26 Dresdner Bank Lateinamerika, Spotlight 9/2001, Chile
60
70
80
90
100
110
120
I/98 III/98 I/99 III/99 I/00 III/00 I/01200
220
240
260
280
300 Price Index Volume-Index
-1600
-1200
-800
-400
0
400
800
I/98 III/98 I/99 III/99 I/00 III/00 I/01
US$ mn, balances
-1000
-500
0
500
1000
1500
2000
Jul-98 Feb-99 Sep-99 Apr-00 Nov-00 Jun-01
US$ mn exports imports balance
TRADE BALANCE
CURRENT ACCOUNT
EXPORTS
Cyrus de la Rubia +49 40 3595 3889
on a nominal basis, under the past policy it was difficult for the
central bank to exert an influ-ence on interest rates prevailing on
the market. – In mid-August the peso hit an all-time low (691 pesos/
US$) against the backdrop of the Argentinean crisis and the decline
of the copper price to 65 cents/lb. Thus far no inflationary pressure
is discernible. In July there was even a price decline by 0.2%
month-on-month. However, if the peso fails to recover, the latest
devaluation push could lead to imported inflation and put the
inflationary target of 2-4% at risk. The central bank therefore decided
to take more stringent measures to combat the devaluation,
announcing issues of dollar-linked papers (PRD) to extend the
volume already in circulation by up to US$ 2 billion beyond the
past level planned, resulting in a total stock equivalent to US$ 4.5
billion by the end of the year. In addition, US$ 2 billion of the central
bank's reserves is to be used for support buying operations. Apart
from combating inflation, this measure is also intended to cover the
high demand for hedging instruments on the part of private
companies (private foreign debt at end-June: US$ 31.7 billion). In
contrast, the country's public foreign debt (US$ 5.3 billion) is no
cause for concern.
External sector: decline in commodity prices
The weak peso is impacting significantly on the trade balance. In
the second quarter, exports rose 12.4% year-on-year. Among other
factors, this is attributable to industrial goods exports, which ex-
panded by 10.7% in spite of a 7.5% price decline. In other sectors
too (mining and the agricultural sector) it was possible for the de-
cline in export prices to be offset by appropriate expansions in
volumes exported. In contrast, imports declined significantly. In
this context, consumer goods in particular were imported to a lesser
extent (-12.6%). On the other hand, in July the increased price
decline on commodity markets (e.g. for copper and fishmeal) led to
a 14.1% drop in exports year-on-year. In forthcoming months too,
the effect of the sharp decline in commodity prices will predominate
by far. We have therefore lowered our forecast for exports slightly
to US$ 17.6 billion. Imports will likewise grow to a lesser extent
than previously assumed (3% year-on-year). We have corrected
our forecast for the current account deficit from 2.6% to 2.2% of
GDP.
27Dresdner Bank Lateinamerika, Spotlight 9/2001, Chile
MONTHLY INDICATORS Apr 01 May 01 Jun-01 Jul-01
DOMESTIC ECONOMY
IMACEC % yoy 2.6 2.4 5.15.15.15.1 17-Sep
Industrial production % yoy 3.1 0.6 6.3 30-Aug
Mining production % yoy -3.5 3.2 5.2 30-Aug
Retail sales % yoy 0.4 0.5 3.8 23-Aug
Unemployment rate % 9.1 9.6 9.7 30-Aug
Employment mn 5.28 5.25 5.26 30-Aug
Labour cost index % yoy 0.3 0.3 0.3
Consumer prices % yoy 3.5 3.7 3.6 3.23.23.23.2 05-Sep
Consumer prices % mom 0.5 0.4 0.1 -0.2-0.2-0.2-0.2 05-Sep
Wholesale prices % yoy 10.7 10.9 8.5 7.47.47.47.4 05-Sep
Wholesale prices % mom 1.9 1.5 -0.1 0.90.90.90.9 05-Sep
Money supply M1 % yoy 16.8 18.0 20.9 23.423.423.423.4 07-Sep
Base rate (PDBC, 90 days, latest: 08/21)* % 8.62 8.69 6.74 6.46.46.46.4 6.426.426.426.42
Deposit rate (month-average) % 5.94 5.98 5.83 6.06.06.06.0 23-Aug
Financial sector lending* Pesos bn 27500 27584 27391 23-Aug
Total financial savings M7* Pesos bn 36676 36512 37217 23-Aug
EXTERNAL SECTOR
Merchandise exports US$ mn 1693 1544 1428 1332133213321332 23-Aug
Merchandise exports % yoy 28.6 -11.9 12.6 -14.2-14.2-14.2-14.2 23-Aug
Merchandise imports US$ mn 1280 1361 1380 1390139013901390 23-Aug
Merchandise imports % yoy -6.1 -13.1 3.7 -4.7-4.7-4.7-4.7 23-Aug
Trade balance US$ mn 413 183 48.4 -57.8-57.8-57.8-57.8 23-Aug
Net foreign direct investment US$ mn 122.9 50.9 225.5 23-Aug
Foreign exchange reserves* US$ bn 14.4 14.5 14.3 14.514.514.514.5 23-Aug
US$ exchange rate (latest: 08/22) CLP 592.7 611.0 631.8 670.3670.3670.3670.3 665.4665.4665.4665.4
next/latest
QUARTERLY INDICATORS Q2 00 Q3 00 Q4 00 Q1 01
DOMESTIC ECONOMY
GDP % yoy 6.0 5.6 4.5 3.3 23-Aug
Total consumption + change in stocks % yoy 14.5 5.0 2.1 2.1 23-Aug
Private and public investment % yoy 1.6 7.8 12.0 9.7 23-Aug
Domestic demand % yoy 11.0 5.7 4.7 3.9 23-Aug
Exports (goods and services) % yoy 3.9 9.7 5.7 5.6 23-Aug
Imports (goods and services) % yoy 15.3 9.0 6.1 6.9 23-Aug
Budget balance, public sector Pesos bn 34 -160 -232 200 23-Aug
EXTERNAL SECTOR
Current account balance balance US$ bn -0.62 -0.53 -0.31 0.11 23-Aug
Net foreign direct investment US$ bn 0.21 -0.53 -0.45 0.86 23-Aug
Portfolio investment US$ bn -0.10 0.29 -0.13 -0.96 23-Aug
Capital account** US$ bn 0.49 0.76 -0.77 -0.05 23-Aug
Change in foreign exchange reserves US$ bn -0.13 0.22 -0.38 0.06 23-Aug
Gross foreign debt US$ bn 35.0 35.5 36.8 37.4 23-Aug
Short-term foreign debt US$ bn 4.77 4.99 7.90 7.5 23-Aug
* month-end ** incl. residual items
next/latest
MONTHLY AND QUARTERLY FIGURES
28 Dresdner Bank Lateinamerika, Spotlight 9/2001, Colombia
COLOMBIA:COLOMBIA:COLOMBIA:COLOMBIA:COLOMBIA: ECONOMY LACKING IN DYNAMISM
SUMMARY AND OUTLOOK
The peace process between the government and the two leftist guerrilla groups, the FARC and the ELN, once again saw
severe setbacks. The guerrilla conflict will continue to hurt the country's economic development. To some extent in view
of the latest economic data (industrial production in June was even slightly lower year-on-year), our GDP growth forecast
for the year 2001 as a whole remains at 2.3%. The current account this year is likely to record a deficit of more than 3% of
GDP especially due to declining oil export revenues. This deficit is being financed e.g. by issuing government bonds on
international capital markets. The peso, which regained some of its value following an announcement by the government
that assets located abroad would be repatriated, is likely to decline again in the next several months. The reason for this
is that the reforms to reduce the public-sector budget deficit, especially the new rules and regulations relating to old-age
pension provisions, continue to be delayed.
Area 1 141 748 sq. kmPopulation 42.3 million (+1.9% p.a.)
State president Andrés Pastrana ArangoFinance minister Juan Manuel Santos CalderónCentral bank president Miguel Urrutia Montoya
Next elections State president: May 2002Parliament: March 2002
GDP per capita US$ 1 925 (2000)
Investment 12% of GDP (2000)Savings 14% of GDP (2000)
Exchange rate system Flexible exchange rate (floating)Monetary policy Inflation targeting
Exports (2000) 17% of GDPPurchasing countries USA 50%, EU 14%, Venzuela 10%Products Manufactured goods 38%,
Crude oil and derivatives 34%, Coffee 8%
Imports (2000) 14% of GDPSupplier countries USA 34%, EU 17%, Venezuela 8%Products primary and intermediate products 51%,
capital goods 30%, consumer goods 19%
Rating Moody’s: Ba2 S&P:BB
29Dresdner Bank Lateinamerika, Spotlight 9/2001, Colombia
1998 1999 2000 2001f 2002f
DOMESTIC ECONOMY
GDP change (real) % 0.6 -4.1 2.8 2.3 2.5
GDP US$ bn 98.8 84.9 81.3 81.8 84.7
Inflation (year-end) % 16.7 9.2 8.8 9.5 9.0
Inflation (average) % 18.7 10.9 9.2 8.4 9.0
PUBLIC SECTOR
Budget balance, central government % GDP -4.9 -7.4 -6.5 -4.8 -4.3
Budget balance, public sector % GDP -4.6 -6.4 -3.6 -3.0 -2.8
Public debt % GDP 30 37 42 45 45
Amortization US$ bn 4.4 6.1 5.7 n.a. n.a.
Gross financing needs US$ bn 8.8 11.0 8.3 n.a. n.a.
EXTERNAL SECTOR
Merchandise exports US$ bn 11.5 12.0 13.6 12.7 13.1
Merchandise imports US$ bn 13.9 10.2 11.1 12.5 13.0
Trade balance US$ bn -2.4 1.8 2.5 0.2 0.1
Current account balance US$ bn -5.2 0.1 0.0 -2.8 -3.1
Current account balance % GDP -5.3 0.1 0.0 -3.4 -3.7
Net foreign direct investment US$ bn 2.1 1.2 2.3 1.2 1.0
Foreign exchange reserves, year-end US$ bn 8.7 8.0 8.9 9.0 8.0
Import cover *** months 5.2 6.2 6.0 5.5 4.7
US$ exchange rate, year-end Pesos 1536 1874 2229 2455 2610
US$ exchange rate, average Pesos 1426 1756 2088 2335 2530
FOREIGN DEBT
Gross foreign debt US$ bn 35.9 36.1 36.0 38.0 40.0
Foreign debt % exports*** 251 246 218 242 245
Short-term foreign debt US$ bn 8.6 5.7 5.7 5.9 6.2
Foreign debt amortization US$ bn 4.4 4.9 5.0 5.7 5.5
Foreign debt service US$ bn 7.0 7.5 7.7 8.5 8.5
Foreign debt service % exports*** 49 51 47 54 52
FINANCIAL MARKETS (year-end)
Deposit rate (DTF, 90 days) % 34.3 15.8 13.4 12.5 12.5
IBB stock index (peso based, 2001: 08/22)* 1109 998 713 984*
IFCI stock index (US$ based, 2001: 08/22) 439 353 198 236
Bond market yield (2001: 08/22)** % 11.0 11.6 13,1 9.5
Yield spread (2001: 08/22)** bp 601 474 757 477
* as of July 2001: IGBC ** 75/8 % US$-Bond (2007) ***goods and services f=forecast
ANNUAL FIGURES AND FORECASTS
30 Dresdner Bank Lateinamerika, Spotlight 9/2001, Colombia
-8
-5
-2
1
4
II/98 IV/98 II/99 IV/99 II/00 IV/00 II/01e IV/01f
% yoy qoq
-25
-20
-15
-10
-5
0
5
10
15
20
Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01
% y/y industrial production retail sales
5
10
15
20
25
30
35
40
Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01
% deposit rate inflation, yoy
INTEREST RATE AND INFLATION
ECONOMIC INDICATORS
GDP CHANGE (REAL) Domestic policy: positions entrenched in guerrilla conflict
The slight easing of tension between the government and the FARC
(with more than 16,000 fighters the strongest leftist group of rebels)
was very brief: even after abducted members of the security forces
had been exchanged for detained guerrilla fighters in June, the first
noticeable advance in the peace process, the FARC continued its
abductions and other acts of violence. Subsequently, the government
discontinued the cease-fire negotiations. In the ensuing weeks
hundreds were killed in skirmishes in various areas of Colombia
between FARC rebels and security forces and in clashes between the
FARC and rightist paramilitary groups, which have meanwhile
expanded to approx. 8,000 fighters.
Meanwhile the positions between the government and the ELN,
consisting of about 5,000 rebels, have become completely en-
trenched. The guerrillas had broken off talks with the government after
the establishment of a demilitarized zone in which peace negotiations
were to be held had failed on account of protests by the inhabitants.
Early in August the government likewise terminated the dialog as the
ELN had also rejected peace negotiations outside the country – Vene-
zuela had offered to host the peace talks. Meanwhile the rebels have
reinforced their violent attacks, also dealing sensitive blows to the
country's infrastructure, and the armed forces have intensified their
military activities against the rebels.
In view of this situation, state president Pastrana, whose four-year term
of office will be coming to an end as early as in August 2002 and who
is prohibited by the constitution from standing again, will not reach his
objective of concluding peace agreements with the guerrilla groups.
Accordingly, he will leave his successor to deal with the internal conflict,
which has raged for almost 40 years now and cost nearly 40,000 lives
in the last decade alone. Three presidential candidates have chances
of winning the election in May 2002: Horacio Serpa, the leader of the
liberal party, independent Noemí Sanín, former conservative minister
of parliament, and the former liberal and independent Alvaro Uribe.
Uribe in particular wants to negotiate significantly more strictly with
the leftist rebel groups and is in favor of a further military reinforcement.
Serpa also criticized Pastrana's management of the negotiations as
too soft; he intends to include the paramilitary groups in the peace
effort.
Fiscal policy: bond issues at lower spreads
In the course of this year, Colombia has already placed several bond
31Dresdner Bank Lateinamerika, Spotlight 9/2001, Colombia
-200
0
200
400
600
800
1000
1200
1400
May-99 Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01
US$ mn exports imports balance
5
10
15
20
25
30
35
40
Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01
US$/barrel Cusiana Caño Limón
-6
-4
-2
0
2
4
1997 1998 1999 2000 2001f 2002f
balance, US$ bn current account trade
EXTERNAL SECTOR
OIL PRICES COLOMBIA
FOREIGN TRADEissues on the international capital markets to cover the public sector's
financing requirements. The country managed to benefit in particular
in recent months from the considerably lower risk premiums. They fell
because some advances had been made in the interim with the peace
process and because the budget structural reform to limit transfer
payments by the central to regional government offices has finally
been passed. Moreover, Colombian bonds also appeared less risky
in light of the turmoil in Argentina – and the country took advantage of
that propitious moment: this year's public financing requirements on
the international capital market (US$ 2.7 billion) have already been
covered and, in addition, a total of US$ 1 billion in issues planned for
fiscal 2002 (US$ 2.2 billion) have already been placed. The
government wants to continue the advance funding by placing further
bond issues, which is a wise move because of the uncertainty
associated with the gradually approaching presidential election. This
uncertainty might lead to higher spreads even though none of the
candidates is expected to make any major changes to the country's
economic policy.
Economic activity: stubborn weakness in growth
There are increasing signs that economic growth this year will turn out
lower than in 2000 (2.8%). In the first quarter of 2001 the GDP increase
had only amounted to 1.7% year-on-year, and in the second quarter it
is unlikely to have exceeded 2%. While retail sales rose more sharply
in the second quarter than in the first, growth of industrial production
declined at the same time. Among other things, the economy is being
impeded by the higher tax burden that arose once the tax reform
entered into force at the beginning of 2001 and by declining oil
production, which is also attributable to the oilfields becoming less
productive. In contrast, a significant impetus is being generated by
exports, especially those of the non-traditional variety (including
industrial goods). Exports to Ecuador and Venezuela have risen
substantially in the course of this year, benefiting from the high
competitiveness of Colombian goods in neighboring countries thanks
to exchange-rate related factors. We are sticking to our forecast for
GDP growth for the year 2001 as a whole, which we had reduced to
2.3% within the scope of our recent Latin American Spotlight update
(previously 2.6%). Easing monetary policy – in July and August the
central bank lowered its key interest rates, including the repo rate, by
a total of 150 basis points – like the interest rate cut of March 2001,
should not generate any significant economic impetus. The economic
32 Dresdner Bank Lateinamerika, Spotlight 9/2001, Colombia
30
32
34
36
38
40
42
1997 1998 1999 2000 2001f 2002f200
210
220
230
240
250
260 US$ bn % of exports
0
2
4
6
8
10
1997 1998 1999 2000 2001f 2002f4
4.5
5
5.5
6
6.5
7 US$ bn import cover in months
1600
1800
2000
2200
2400
2600
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01
Pesos/US$
EXCHANGE RATE
FOREIGN EXCHANGE RESERVES
FOREIGN DEBT
Luz Knees +49 40 3595 3488
climate remains depressed, with the banks' lending volume still slightly
below the previous year's level. On the one hand, the banks frequently
prefer less risky assets such as government bonds; on the other, the
demand for credit by corpora-tions remains weak.
External sector: current account in deficit this year
Colombia's external accounts will turn out less upbeat this year. As
regards the trade balance, which finished the year 2000 with a surplus
of US$ 2.5 billion due to price-related higher oil export revenues and
substantially higher exports of industrial goods, we only anticipate a
modest surplus this year. Oil exports will see a significant fall, especially
due to the decline in the export volume, which is also attributable to
the increasingly frequent acts of sabotage by the guerrillas; in the first
half of 2001, at US$ 1.6 billion they were 31% lower year-on-year.
Although exports of non-traditional goods and coal rose appreciably,
in the first half total merchandise exports fell by 3% year-on-year.
Merchandise imports continue to grow. Owing to the deterioration of
the trade balance, we continue to believe that the current account
(which closed with small surpluses in 1999 and 2000 of US$ 98 million
and US$ 41 million, respectively), will record a deficit of US$ 2.8 billion
(or 3.4% of GDP). In the first quarter the current account deficit amounted
to US$ 736 million.
Exchange rate: strong peso – but how much longer?
The peso, which shed 6% of its value from the beginning of the year to
mid-May, has since appreciated by some 4% (Aug. 22: 2,283 Pesos =
US$ 1.00). The primary cause in this respect was the government's
announcement of its intention to repatriate assets located abroad to
pay for domestic debt. However, we believe the value of the peso will
decline again soon and adhere to our exchange-rate forecast (end-
2001: 2,455 pesos = US$ 1.00). There are several factors in favor of
this trend, which would be beneficial to the competitiveness of exports:
in October the government will need to decide yet again whether it
wants to allow the FARC to retain the demilitarized zone. In addition,
the reduction of the public budget deficit is not likely to proceed on
schedule since the new rules relating to vertical financial equalization
have been watered down and the reform of the old-age pension system
remains stalled due to a lack of political consensus.
33Dresdner Bank Lateinamerika, Spotlight 9/2001, Colombia
MONTHLY INDICATORS Apr 01 May 01 Jun-01 Jul-01
DOMESTIC ECONOMY
Industrial production % yoy 4.9 2.6 -2.6-2.6-2.6-2.6 11-Sep
Retail sales % yoy 1.1 2.7 6.46.46.46.4 21-Sep
Unemployment rate (urban) % 17.8 18.1 18.618.618.618.6 31-Aug
Active labour force (urban) % yoy 3.0 2.1 2.82.82.82.8 31-Aug
Consumer prices % yoy 8.0 7.9 7.9 8.18.18.18.1 06-Sep
Consumer prices % mom 1.2 0.4 0.0 0.10.10.10.1 06-Sep
Producer prices % yoy 10.7 11.1 10.2 9.09.09.09.0 06-Sep
Producer prices % mom 1.4 0.8 -0.1 0.10.10.10.1 06-Sep
Money supply M1 (latest: 08/15)* % yoy 15.5 9.0 10.9 7.1 5.85.85.85.8
Money supply M3 (latest: 08/03)* % yoy 5.7 6.0 7.1 5.8 5.85.85.85.8
Lending rate (latest: 08/10) % 22.0 22.8 22.1 21.4 21.621.621.621.6
Deposit rate (DTF, 90 days, latest: 08/17)* % 12.7 12.7 12.8 12.7 12.512.512.512.5
Treasury bills (TES, 1 year, latest: 08/22)* % 13.2 13.0 12.9 12.9 12.412.412.412.4
Interbank interest rate (latest: 08/16) % 10.6 11.7 11.3 10.8 10.910.910.910.9
Credit volume (latest: 08/03)* % yoy -5.1 -3.6 -2.4 -2.1 -2.1-2.1-2.1-2.1
EXTERNAL SECTOR
Merchandise exports US$ mn 1057 1086 991.0991.0991.0991.0 31-Aug
Merchandise exports % yoy 19.3 -5.2 -13.9-13.9-13.9-13.9 31-Aug
Merchandise imports US$ mn 1086 1060 27-Aug
Merchandise imports % yoy 33.6 8.3 27-Aug
Trade balance US$ mn -29 26 27-Aug
Foreign exchange reserves (latest: 08/15)* US$ mn 9567 9561 9187 9365 9495949594959495
US$ exchange rate (latest: 08/22)* pesos 2347 2325 2305 2298.0 2283228322832283
next/latest
QUARTERLY INDICATORS Q2 00 Q3 00 Q4 00 Q1 01
DOMESTIC ECONOMY
GDP % yoy 3.4 3.2 2.3 1.7 28-Sep
GDP % qoq 0.0 1.2 0.1 0.4 28-Sep
Domestic consumption % yoy 1.7 0.9 -0.2 1.2 28-Sep
Domestic investment % yoy 24.6 19.4 7.7 7.2 28-Sep
Domestic demand % yoy 4.4 3.2 0.8 2.1 28-Sep
Exports (goods and services) % yoy 3.0 6.5 8.1 6.6 28-Sep
Imports (goods and services) % yoy 9.1 7.0 0.2 9.2 28-Sep
Manufacturing industry % yoy 11.5 13.0 6.4 2.2 28-Sep
Financial sector and real estate % yoy 0.0 1.1 -0.7 1.0 28-Sep
Budget balance, central government Pesos bn -2106 -1118 -6594 -1632 28-Sep
EXTERNAL SECTOR
Merchandise exports US$ bn 3.31 3.53 3.53 3.09 28-Sep
Merchandise imports US$ bn 2.77 2.77 2.85 3.06 28-Sep
Trade balance US$ bn 0.54 0.76 0.68 0.03 28-Sep
Current account balance US$ bn -0.03 0.06 0.03 -0.74 28-Sep
Net foreign direct investment US$ bn 0.42 0.85 0.72 0.37 28-Sep
Portfolio investment US$ bn 0.14 0.09 0.35 0.71 28-Sep
Capital account** US$ bn 0.13 0.26 0.21 1.05 28-Sep
Change in foreign exchange reserves US$ bn 0.09 0.25 0.41 0.28
* month-end ** incl. residual items
next/latest
MONTHLY AND QUARTERLY FIGURES
34 Dresdner Bank Lateinamerika, Spotlight 9/2001, El Salvador
1998 1999 2000 2001f 2002f
DOMESTIC ECONOMY
GDP change (real) % 3.5 2.6 2.0 2.8 3.8
GDP US$ bn 15.4 12.4 13.2 14.0 14.9
Inflation (year-end) % 4.2 -1.0 4.3 3.5 2.7
Budget balance, public sector % GDP -2.1 -3.0 -3.0 -4.0 -4.0
EXTERNAL SECTOR
Merchandise exports US$ mn 2460 2546 2972 3015 3355
Merchandise imports US$ mn 3763 3903 4690 5289 5840
Trade balance US$ mn -1303 -1357 -1718 -2274 -2485
Current account balance US$ mn -83 -286 -418 -682 -1065
Current account balance % GDP -0.5 -2.3 -3.2 -4.9 -7.1
Net foreign direct investment US$ mn 872 178 179 200 300
Foreign exchange reserves, year-end US$ mn 1613 2004 1922 2100 1900
Import cover * months 4.3 4.7 3.8 3.7 3.0
US$ exchange rate, year-end Colones 8.76 8.76 8.76 8.76 8.76
FOREIGN DEBT
Gross foreign debt US$ bn 3.6 4.0 4.2 5.0 5.4
Foreign debt % exports* 127 122 111 124 127
Short-term foreign debt US$ bn 0.8 1.1 1.1 1.4 1.5
*goods and services f= forecast
Area 21 041 sq.kmPopulation 6.3 million (+ 2.2% p.a.)
State president Francisco Guillermo Flores PérezFinance minister: Juan José DaboubCentral bank president Rafael Barraza
Next elections State president: March 2004Parliament: March 2003
GDP per capita US$ 2 110
Rating Moody’s: Baa3 S&P: BB+
ANNUAL FIGURES AND FORECASTS
EL SALEL SALEL SALEL SALEL SALVVVVVADOR:ADOR:ADOR:ADOR:ADOR: ASSISTANCE WITH RECONSTRUCTION
SUMMARY AND OUTLOOK
35Dresdner Bank Lateinamerika, Spotlight 9/2001, El Salvador
Ingrid Grünewald 040 3595 3487
CURRENCY RESERVES
INDUSTRIAL PRODUCTION
-2
0
2
4
6
8
10
12
Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01
Real change, % y-o-y
0
500
1000
1500
2000
1996 1997 1998 1999 2000 2001f 2002f0
1
2
3
4
5 FX-reserves US$ mn Import cover, months
Domestic sector: upturn around the corner?
At the beginning of the year, severe earthquakes in El Salvador caused
some US$ 2 billion in damage. In March of this year - at the meeting of
the consultative group for Central America - foreign governments and
multilateral financial institutions approved funding to assist the country
with the reconstruction of its economy. The consultative group will grant
the country US$ 1 billion in the next several years in the form of loans
(one third of which in the fast-track process) as well as grants-in-aid
(US$ 0.4 billion that do not need to be repaid). Since El Salvador can
now use the funds approved to push forward the reconstruction of its
devastated infrastructure and as investment activity is being stimulated
by declining interest rates (currently in the region of 9.9% p.a.) within
the framework of the dollarization process initiated, economic growth is
likely to accelerate in the course of the year; even in the first quarter of
this year the growth rate was in the region of 1.7% year-on-year due to
a 7% production increase in the manufacturing industry. Our growth
forecast for the year 2001 as a whole remains at around 3% even
though the agricultural sector (including coffee) suffered severe
setbacks due to earthquake damage and unfavorable climatic
conditions. During the reconstruction process the state will need to
raise spending significantly, which means that the budget deficit (after
grants) is likely to grow from 3% to roughly 4% of GDP. This year the
government will be able to cover the higher financing needs with the
aid of multilateral loans and by issuing a ten-year eurobond (to the
value of US$ 353 million, at a coupon of 8.6%) which was received by
the international capital market in spite of the Argentinean crisis. Lea-
ding rating agencies kept their risk assessment for El Salvador
(investment grade) in force. In the longer term, however, the state has to
return to a consolidation course for public finances in order to be
prepared for external shocks.
External sector: reserve cushion
Due to further increasing private money transfers from the U.S. and a
rising inflow of funds in the form of foreign loans (including the
government bond issue and multilateral lending), by July of this year
the country's foreign currency reserves rose to US$ 2 billion even though
the demand for imports is rising significantly during the reconstruction
phase and coffee exports are falling drastically. The current account
deficit in 2001 is likely to widen to 5% of GDP; however, we assume that
the further capital inflow will cause reserves to stabilize at just over US$
2 billion.
Even after the severe earthquake damage at the
beginning of the year, the growth process in El
Salvador is not in danger since foreign
governments and multilateral financial
institutions quickly prepared a support package
for reconstruction purposes. The government
can also use these proceeds to cover rising
fiscal and external deficits. In the year 2001 the
increasing volume of public spending will also
be financed by a eurobond issue.
36 Dresdner Bank Lateinamerika, Spotlight 9/2001, Jamaica
1998 1999 2000 2001f 2002f
DOMESTIC ECONOMY
GDP change (real) % -0.7 -0.4 0.8 1.5 2.2
GDP US$ bn 7.4 7.3 7.5 7.5 7.6
Inflation (year-end) % 7.8 6.9 6.0 6.7 6.2
Budget balance, public sector* % GDP -11.1 -7.4 -5.3 -3.7 -4.5
EXTERNAL SECTOR
Merchandise exports* US$ mn 1613 1490 1637 1650 1800
Merchandise imports* US$ mn 2744 2628 2975 3200 3300
Trade balance* US$ mn -1131 -1138 -1338 -1550 -1500
Current account balance US$ mn -302 -256 -285 -500 -600
Current account balance % GDP -4.1 -3.5 -3.8 -6.7 -7.8
Net foreign direct investment US$ mn 287 429 340 180 300
Foreign exchange reserves, year-end US$ mn 710 555 1054 1200 1100
Import cover ** months 1.9 1.5 2.6 2.8 2.4
US$ exchange rate, year-end J$ 37.10 41.30 45.40 47.00 50.00
FOREIGN DEBT
Gross foreign debt US$ mn 4017 3913 4414 5100 5400
Foreign debt % exports** 113 112 119 134 135
Short-term foreign debt US$ mn 630 760 750 800 850
*incl. foreign assistance **goods and services f=forecast
Area 11 425 sq.kmPopulation 2.6 million (+ 0.9% p.a.)
State president P.J. PattersonFinance minister Omar DaviesCentral bank president Derick Latibeadiere
Next elections December 2002
GDP per capita US$ 2 716
Rating Moody’s: Ba3 S&P:B+
ANNUAL FIGURES AND FORECASTS
JAMAICA:JAMAICA:JAMAICA:JAMAICA:JAMAICA: IN THE DEBT TRAP
SUMMARY AND OUTLOOK
37Dresdner Bank Lateinamerika, Spotlight 9/2001, Jamaica
Thorsten Rülle +1 305 810 3855
CURRENT ACCOUNT
GDP CHANGE (REAL)
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
1997 1998 1999 2000 2001f 2002f
%
-700
-600
-500
-400
-300
-200
-100
0
1997 1998 1999 2000 2001f 2002f-10
-8
-6
-4
-2
0US$ mn % of GDP
Domestic economy: growth path too low
The risk that Jamaica will have no way of escaping its debt trap
has continued to grow. While the government's austerity policy -
the budget surplus before interest payments amounted to 12.5%
of GDP in the year 2000 - reduced the public-sector deficit
further to 5.3% of GDP, the level of public-sector debt continued
to rise to 137% of GDP. For the year 2001 the government agreed
on a reduction to 3% of GDP within the scope of an IMF monitoring
program. In view of the growing dissatisfaction of the population,
which led to bloody uprisings in July, and the presidential election
scheduled for the year 2002, we doubt that the government will
be in a position to reach its set target. A softening of fiscal policy
would put an end to the slight decline in interest rates which has
done a great deal to stimulate the Jamaican economy to a certain
extent. The projected growth rates of 2% for this year and next
are too low in any event to take pressure off the country's debt
situation. In view of the political uncertainty in connection with
the elections, the significantly higher risk aversion on the
emerging markets and the amortization payments on internatio-
nal bonds starting next year, it is doubtful whether the Jamaican
government will be able to meet its payment obligations in the
medium term.
External sector: external shocks hurting current account
Owing to the diverse external shocks that Jamaica has had to
contend with since the year 2000 (oil price hikes, decline in
aluminum prices, economic slowdown in the U.S.), the current
account deficit will widen substantially this year to nearly 7% of
GDP, and it will remain at this high level next year too. In the
medium term, a deficit of this order is impossible to finance for
Jamaica. In the past, the government has resisted a flexibilization
of its exchange-rate regime - against the recommendations of
the IMF. The Jamaican dollar had appreciated by about 50% in
real terms from 1995 to 1998 and has since shed little in value. A
control led devaluat ion would improve the country's
competitiveness and contribute toward a reduction of the
structural current account deficit. If the public debt situation
should escalate, this will lead to a substantial exchange-rate
correction of the national currency.
The slight economic pickup this year has done
nothing to change our fundamental conviction
that in light of a public debt quota of around 140%
of GDP Jamaica will be caught in a debt trap in
the medium term. Funding via international
bonds is likely to become more difficult next year
due to the presidential election and the negati-
ve external conditions prevailing, which will lead
to an unsustainable current account deficit of
around 7 % of GDP
38 Dresdner Bank Lateinamerika, Spotlight 9/2001, Mexico
MEXICO:MEXICO:MEXICO:MEXICO:MEXICO: CONGRESS MUST DELIVER
SUMMARY AND OUTLOOK
In the past, the Mexican economy has managed to shake off a large number of negative external influences without
difficulty: the economic slowdown in the U.S., the decline in oil prices, the financial crisis in Argentina - while all this has
ended a phase of uninterrupted growth for a solid 21 quarters, these events nevertheless have not managed to shake
confidence in the country's macro-economic stability and its long-term growth prospects. Accordingly, thanks to an
easing of monetary policy and declining inflation, Cetes interest rates reached an all-time low. And the peso remains
remarkably stable owing to the high capital inflows. The true test still lies ahead, however: starting in September the house
of deputies will be dealing with the tax reform. We are optimistic that thanks to intensive preparatory work on the political
front, an acceptable compromise will emerge at the end of the day. If expectations are disappointed, however, the peso
and the country's interest rates will be in for volatile times.
Area 1 967 183 sq. kmPopulation 98 million (+1.6% p.a.)
State president Vicente Fox QuesadaFinance minister Francisco Gil DiazCentral bank president Guillermo Ortiz Martínez
Next elections State president: July 2006Parliament: July 2003
GDP per capita US$ 5 860 (2000)
Investment 23% of GDP (2000)Savings 21% of GDP (2000)
Exchange rate system Flexible exchange rateMonetary policy Inflation targeting
Exports (2000) 29% of GDPPurchasing countries USA 89%, EU 3%, Canada 2%Products Maquiladora 45%, rest of industry 40%
crude oil and derivatives 10%
Imports (2000) 30% of GDPSupplier countries USA 73%, EU 9%, Japan 3%, Canada 2%Products Intermediate goods for the maquiladora 35 %,
intermediate goods for the rest of the economy 41%,capital goods 14%, consumer goods 10%
Rating Moody’s: Baa3 S&P: BB+
39Dresdner Bank Lateinamerika, Spotlight 9/2001, Mexico
1998 1999 2000 2001f 2002f
DOMESTIC ECONOMY
GDP change (real) % 4.8 3.9 6.9 1.1 4.2
GDP US$ bn 420.5 480.4 574.4 618.8 665.9
Inflation (year-end) % 18.6 12.3 9.0 4.9 5.2
Inflation (average) % 15.9 16.6 9.5 6.2 5.3
PUBLIC SECTOR
Budget balance, central government % GDP -1.7 -1.9 -1.5 -1.2 -1.0
Budget balance, public sector % GDP -1.2 -1.2 -1.1 -0.8 -0.5
Public debt % GDP 45 43 39 40 42
Amortization (not incl. Cetes)*** US$ bn n.a. n.a. 44.3 23.7 20.1
Gross financing needs*** US$ bn n.a. n.a. 52.9 31.2 26.6
EXTERNAL SECTOR
Merchandise exports US$ bn 117.5 136.4 166.5 168.7 182.1
Merchandise imports US$ bn 125.4 142.0 174.5 178.0 193.5
Trade balance US$ bn -7.9 -5.6 -8.0 -9.3 -11.4
Current account balance US$ bn -16.1 -14.3 -18.1 -19.6 -21.6
Current account balance % GDP -3.8 -3.0 -3.1 -3.2 -3.2
Gross foreign direct investment US$ bn 11.3 11.6 13.2 20.0 15.0
Foreign exchange reserves, year-end US$ bn 31.8 31.8 35.5 38.5 39.0
Import cover ** months 2.4 2.2 2.0 2.1 2.0
US$ exchange rate, year-end Pesos 9.91 9.50 9.62 9.40 10.00
US$ exchange rate, average Pesos 9.15 9.56 9.46 9.41 9.66
FOREIGN DEBT
Gross foreign debt US$ bn 162.7 168.6 163.0 163.5 167.0
Foreign debt % exports** 121 111 88 86 81
Short-term foreign debt US$ bn 39.9 38.1 37.0 37.0 38.0
Foreign debt amortization US$ bn 20.5 20.4 18.1 16.5 17.8
Foreign debt service US$ bn 33.0 33.5 31.9 29.7 32.3
Foreign debt service % exports** 25 22 17 15 15
FINANCIAL MARKETS (year-end)
Interest rates (Cetes, 28 days) % 31.2 16.3 17.6 7.5 8.1
IPC stock index (peso based, 2001: 08/22) 3960 7130 5652 6333
IFCI stock index (US$ based, 2001: 08/22) 479 859 675 780
Bond market yield (2001: 08/22)* % 10.9 10.3 9.4 9.2
Yield spread (2001: 08/22)* bp 560 307 381 368
* 111/2 % US$-Bond (2026) ** goods and services *** central government f=forecast
ANNUAL FIGURES AND FORECASTS
40 Dresdner Bank Lateinamerika, Spotlight 9/2001, Mexico
PVEM
PRI PRD
other
PAN
(211)
(15)
(50)
(17)(207)
other
PRD
PVEM
PAN
PRI (59)(2)
(5)
(17)
(45)
Federal Government, non-tax revenues: 24.2%
Federal Government,tax revenues : 48.9 %
Revenues from PEMEX: 9,1%
Revenues from other public sector entities:
year 2000
PUBLIC SECTOR REVENUES
SEATS IN THE SENATE
SEATS IN THE CHAMBER OF DEPUTIESFiscal policy: recession as a catalyst for reforms
Politically speaking, the stage appears to be set for the passage of the
tax reform bill as early as in the first few weeks of the legislative period
for congress scheduled to begin on September 1. The tough
negotiations in recent months to bring about a compromise accept-
able both to PAN and PRI deputies is likely to lead to the government
submitting a modified bill. The anticipated concessions to the PRI are
acceptable in light of political stability factors. The extension of the
value added tax base to include food and medications is likely to be
pushed through by and large; only a basic basket of about 15 products
is to remain free of value added tax in the future. The tax rate is to
remain at 15%. However, three percentage points of this are likely to
go directly to the federal states in the future to alleviate their financial
woes. This would not only be a sensible but also a tactically skillful
strategy on the part of the Fox government, the reason being that the
PRI governors who rule 18 of the total of 31 federal states should well
have an influence on the voting behavior of their party in the house of
deputies. To make up in part for the shortfall in revenues occasioned
by the tax exemption of the basic basket, a tax on price gains realized
on the stock markets and on interest income from government money
market instruments (Cetes) is under discussion. Further concessions
by the government are likely concerning the issue of the peak income
tax rate, which was originally set to be lowered to 32%. Not only the
established readiness of the government to make concessions and
the persistent political work of experts in the parties are to help the
reform initiative to be successful. The "hard landing" of the economy
has revealed the structural weaknesses in public finances: at 16% of
GDP, state revenues are too low; in addition, one third of the revenues
in question are generated by the volatile oil business. Political pressure
on the PRI to agree to the reform has thus increased significantly.
Following the election victory in the federal state of Tabasco, the former
ruling party is in the process of recovering from its defeat at the
presidential election of July 2, 2000 - and it would jeopardize this
trend if it was not inclined to perform constructive work in the opposition.
A taxation reform which is increasing the tax rate by about 1.5 per-
centage points, an austere public-sector budget in 2002 and initial
signs of an economic recovery in the fourth quarter – all this would
constitute an ideal scenario for Mexico to be awarded Investment
Grade status by the rating agency Standard & Poor's by the end of this
year.
41Dresdner Bank Lateinamerika, Spotlight 9/2001, Mexico
-2
0
2
4
6
8
10
I/98 III/98 I/99 III/99 I/00 III/00 I/01 III/01f
%, y-o-y
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
I/98 III/98 I/99 III/99 I/00 III/00 I/01
% y-o-y GDP Agricult. Industr. Serv.
10.0
11.0
12.0
13.0
14.0
15.0
16.0
Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01
mn (persons insured with IMSS)
EMPLOYMENT
GDP CHANGE (REAL,SUPPLIER´S SIDE)
GDP CHANGE (REAL)Public finances: further spending cuts necessary
In the second quarter the gap between budgeted and actual state
revenues widened to 6.8 billion pesos (first quarter: 3.4 billion pe-sos).
The reasons for this were the weak economy and oil revenues short of
levels planned – the result of the firm peso. In line with its powers
granted by the budget act, the government announced spending cuts
of the same order. In the forthcoming two quarters expenditure cuts
are likely to be necessary too. If, as we expect, it is possible to confine
the public deficit to 0.8% of GDP (the govern-ment's target: 0.65% of
GDP), in light of the various negative external shocks we will consider
this a success. The government must submit its budget bill for the year
2002 to congress by November 15. In view of the additional revenues
generated by the tax reform and an expected economic recovery, we
anticipate that the government will target a balanced budget.
Economic activity: weakness reaches private consumption
In line with our expectations, GDP stagnated in the second quarter
year-on-year after having seen uninterrupted growth for 21 con-secutive
quarters. Seasonally adjusted GDP fell by 0.25% over the previous
quarter – the third decline in succession. Based on a quarterly view,
therefore, the Mexican economy has been in recession since the
beginning of the year. While industrial production (-3.6% year-on-year)
continued to decline in tandem with the trend prevailing in the U.S.
industry, growth in the services sector (+1.4% year-on-year) saw a
marked fall. This indicates that the economic downturn has also
reached private consumption, which is likely to have also been hit by
job losses (300,000 since November 2000) and loss of consumer
confidence. In the third quarter little will change in terms of economic
activity: on the one hand, in line with the trend in the U.S. the decline in
industrial production will turn out lower year-on-year because among
other factors the reduction of inventories has already progressed quite
far. On the other, growth of the services sector should decline again
amid further layoffs and slower growth of real wages. On the whole, we
once again anticipate a stagnation of GDP year-on-year. Only in the
fourth quarter will an economic upturn materialize on the back of
accelerating export demand. Thanks to the substantially lower real
interest rates, the external impetus is likely to be transferred relatively
quickly to domestic demand. For the year 2001 as a whole, we expect
a GDP growth rate of 1.1%.
Monetary sector: interest rates reaching all-time low
The dangers of inflation, which induced the central bank (Banxico) to
42 Dresdner Bank Lateinamerika, Spotlight 9/2001, Mexico
-5
0
5
10
15
20
Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01
% y-o-y m-o-m
0
5
10
15
20
25
30
35
40
Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01
Interest rates (CETES 28d) % real nominal
-25
-20
-15
-10
-5
0
1998 1999 2000 2001 f 2002 f-5.0
-4.0
-3.0
-2.0
-1.0
0.0
US$ bn % of GDP
CURRENT ACCOUNT
INTEREST RATE
INFLATION
Thorsten Rülle, Miami +1 305 810 3855
Bolko Schwanecke +49 40 3595 3605
hold onto its restrictive monetary policy until end-May, have dissi-
pated in the past several months: fears of inflation being fueled by the
peso depreciating in the wake of falling oil prices and poor import
demand from the U.S. have been allayed thanks to the sustained,
robust capital inflows (e.g. the Citibank-Banamex merger); inflationary
pressure in the services sector has declined substantially following
the swift cool-down in demand. Not only did the increase in consumer
prices (5.9% year-on-year) slip below the inflationary target for end-
2001 of 6.5% for the first time in July; inflationary expectations of the
private sector for end-2001, at 5.5% in July, have also been
consolidated at a level considerably lower than the target. On the
basis of the inflationary figures, which are considerably better than
expected, we have also reduced our forecast from 5.7% to 4.9%. For
the second time already, Banxico has reduced the minimum liquidity
requirements for banks (the "corto") from 400 milllion to a current 300
million pesos; further moderate reductions of the "Corto" are likely to
follow. Early in August the monetary policy trend reversal and the
decline in inflation caused interest rates on money market instruments
of the state (Cetes, 28 days) to fall to an all-time low of 7.24%. Owing to
the debate concerning the tax reform and the ongoing financial crisis
in Argentina, we continue to expect that interest rates will rise
temporarily to about 9%, but in light of the change of direction in
monetary policy and as inflationary expectations continue to decline,
we have reduced our interest rate forecast for end-2001 significantly
from 10% to 7.5%.
External sector: current account deficit under control
Despite the negative external changes, such as the economic
downturn in the U.S. and the decline in oil prices, the current ac-count
deficit in the year 2001 will remain more or less stable at 3.2% of GDP.
The reason for this is the unexpectedly speedy adjustment of domestic
demand with its dampening impact on the demand for imports, which
is chiefly a success of Banxico's restrictive monetary policy in the
year 2000. Moreover, thanks to the considerable share of durable
consumer goods (automobiles) which Mexico exports to the U.S., a
shortfall of exports of the kind suffered by the Asian exporting countries
has not eventuated so far. Accordingly, the trade deficit is only likely to
rise from US$ 8.0 billion in the year 2000 to US$ 9.3 billion in 2001.
Excluding the forecast decline in oil exports by US$ 2.3 million, the
trade balance would even improve.
43Dresdner Bank Lateinamerika, Spotlight 9/2001, Mexico
MONTHLY INDICATORS Apr 01 May 01 Jun-01 Jul-01
DOMESTIC ECONOMY
Economic activity index (IGAE) % yoy 1.0 -0.7 -0.6-0.6-0.6-0.6 25-Sep
IGAE index (seasonally adjusted) % mom -0.2 -0.3 0.00.00.00.0 25-Sep
Industrial production % yoy -3.3 -3.5 -3.9-3.9-3.9-3.9 11-Sep
Manufacturing, in-bond industry % yoy -3.7 -2.4 -4.2-4.2-4.2-4.2 11-Sep
Manufacturing (excluding in-bond industry) % yoy -3.0 -3.1 -3.8-3.8-3.8-3.8 11-Sep
Construction % yoy -6.2 -7.8 -6.7-6.7-6.7-6.7 11-Sep
Gross fixed capital formation % yoy -1.6 -5.9-5.9-5.9-5.9 07-Sep
Retail sales % yoy 4.6 3.5 24-Aug
Wholesale sales % yoy -2.8 -6.6 24-Aug
Unemployment rate % 2.3 2.5 2.3 2.42.42.42.4 19-Sep
Employees (social insurance) % yoy 2.4 2.2 1.1 28-Aug
Real wages per employee, manufacturing % yoy 3.6 6.0 29-Aug
Budget balance, public sector Pesos bn 17.1 1.7 -18.9-18.9-18.9-18.9 03-Sep
Public domestic debt Pesos bn 717.2 708.4 714.4714.4714.4714.4 03-Sep
Public external debt US$ bn 88.0 85.3 84.684.684.684.6 03-Sep
Consumer prices % yoy 7.1 6.9 6.6 5.95.95.95.9 09-Sep
Consumer prices % mom 0.5 0.2 0.2 -0.3-0.3-0.3-0.3 09-Sep
Producer prices (excl. Services) % yoy 6.2 5.5 4.5 4.24.24.24.2 09-Sep
Producer prices (excl. Services) % mom 0.1 -0.2 -0.1 -0.2-0.2-0.2-0.2 09-Sep
Money supply M1a % yoy 13.0 12.0 9.6 24-Aug
Treasury bills, Cetes 28d (latest: 08/21)* % 13.3 10.8 8.9 9.4 7.07.07.07.0
Comercial bank lending (excl. restructuring) % yoy 14.4 11.1 8.8 24-Aug
EXTERNAL SECTOR
Merchandise exports US$ mn 13300 14041 13379 23-Aug
Merchandise exports % yoy 7.3 -4.5 -4.4 23-Aug
Merchandise imports US$ mn 14113 14660 13749 23-Aug
Merchandise imports % yoy 11.0 -3.5 -5.6 23-Aug
Trade balance US$ mn -813 -619 -354 23-Aug
Foreign exchange reserves (latest: 08/17) US$ bn 40.3 40.6 40.8 40.8 40.740.740.740.7
US$ exchange rate (latest: 08/22) Pesos 9.25 9.19 9.04 9.2 9.129.129.129.12
next/latest
QUARTERLY INDICATORS Q3 00 Q4 00 Q1 01 Q2 01
DOMESTIC ECONOMY
GDP % yoy 7.3 5.1 1.9 0.00.00.00.0 15-Nov
Private consumption % yoy 10.5 7.6 6.5 14-Sep
Public consumption % yoy 6.1 0.6 -3.0 14-Sep
Private and public investment % yoy 11.1 7.6 -6.2 14-Sep
Domestic demand % yoy 9.6 6.0 2.5 14-Sep
Exports (goods and services) % yoy 16.9 14.1 4.7 14-Sep
Imports (goods and services) % yoy 23.2 16.1 6.3 14-Sep
EXTERNAL SECTOR
Current account balance US$ bn -3.8 -6.3 -4.4 31-Aug
Gross foreign direct investment US$ bn 2.9 3.3 3.6 31-Aug
Portfolio investment US$ bn -0.6 -4.3 1.7 31-Aug
Capital account US$ bn 3.3 5.6 8.1 31-Aug
Change in foreign exchange reserves* US$ bn 0.1 1.7 4.5 31-Aug
* balance of payments
next/latest
MONTHLY AND QUARTERLY FIGURES
44 Dresdner Bank Lateinamerika, Spotlight 9/2001, Nicaragua
1998 1999 2000 2001f 2002f
DOMESTIC ECONOMY
GDP change (real) % 4.1 7.4 4.3 2.5 3.5
GDP US$ bn 2.1 2.2 2.4 2.3 2.6
Inflation (year-end) % 18.5 7.2 9.9 8.0 7.9
Budget balance, public sector % GDP -7.0 -14.0 -15.2 -15.0 -14.0
EXTERNAL SECTOR
Merchandise exports US$ mn 573 545 625 530 540
Merchandise imports US$ mn 1397 1699 1634 1430 1480
Trade balance US$ mn -824 -1154 -1009 -900 -940
Current account balance US$ mn -498 -652 -612 -584 -631
Current account balance % GDP -24.1 -29.5 -25.5 -24.9 -24.6
Net foreign direct investment US$ mn 184 300 265 300 300
Foreign exchange reserves, year-end US$ mn 350 510 489 400 350
Import cover * months 2.2 2.7 2.7 2.4 2.0
US$ exchange rate, year-end Córdobas 11.25 12.38 13.12 14.00 14.90
FOREIGN DEBT
Gross foreign debt US$ bn 6.4 7.0 7.1 6.9 6.5
Foreign debt % exports* 764 812 734 777 729
Short-term foreign debt US$ bn 0.05 0.12 0.13 0.13 0.13
*goods and services f= forecast
Area 139 000 sq. kmPopulation 4.7 million (+ 2.7% p.a.)
State president Arnoldo Alemán LacayoFinance minister Esteban Duque EstradaCentral bank president Noel Ramirez
Next elections State president: November 2001Parliament: November 2001
GDP per capita US$ 510
Rating Moody’s: B2 S&P:NR
ANNUAL FIGURES AND FORECASTS
NICARAGUA:NICARAGUA:NICARAGUA:NICARAGUA:NICARAGUA: LIQUIDITY BOTTLENECKS
SUMMARY AND OUTLOOK
45Dresdner Bank Lateinamerika, Spotlight 9/2001, Nicaragua
Ingrid Grünewald +49 40 3595 3487
CURRENT ACCOUNT
GDP AND INFLATION
0
2
4
6
8
10
1997 1998 1999 2000 2001f 2002f0
4
8
12
16
20 GDP, real change in % Inflation, %
-800
-600
-400
-200
0
200
400
600
800
1996 1997 1998 1999 2000 2001f 2002f
US$ mn current account balance balance of transfers
Domestic policy: run-up to general elections
Enrique Bolaños Geyer, presidential candidate of the ruling Partido
Liberal Constitucionalista (PLC) and the country's former vice president,
is likely to benefit from votes being split as early as at the first ballot at the
beginning of November this year. The split refers to the loyal voters of
the small Partido Conservador, whose candidate Saborío - who ranks in
third position in the polls - will be satisfied with a stronger PC in
parliament. The outcome of the neck-and-neck race between Bolaños
and Sandinista ex-president Daniel Ortega (who currently has a slight
lead in the polls) remains completely open. The candidate with the
greatest number of votes will already be elected at the first ballot if he
manages to chalk up at least 40% of valid votes or between 35% and
40% of votes and a lead of at least 5 percentage points over the
candidate in second place; otherwise, a runoff ballot will be held.
Domestic economy: internal demand weaker
In Nicaragua the dynamism of growth is flagging - a tendency which
will continue until the end of the year: exports are increasingly
deteriorating due to the fall in coffee prices, and investments are likely
to see a further decline: in the private sector, this is due to the uncertain
outcome of the election and in the public sector the reasons are to be
found in declining foreign assistance and spending cuts. Consumer
demand likewise remains subdued. For the year 2001 as a whole we
only anticipate a growth rate of 2.5% - at present the annualized rate is
just over 3%. The budget deficit should reach approx. 15% of GDP,
which will be higher than the target recently agreed with the IMF (13%
of GDP) as the state will earn a great deal less in revenues from
privatization projects than originally planned. For this year we do not
anticipate any further attempts to sell off the country's power plants
since the last auction in August failed owing to lack of interest among
bidders.
External sector: high debt burden and lower reserves
Even though Guatemala wrote off US$ 500 million in Nicaraguan debt
in the first half of the year - in our opinion an extensive HIPC debt relief
for Nicaragua will only take shape under a market-oriented Bolaños
government as the Sandinistas will not demonstrate willingness to make
the structural adjustment required by the IMF. Nicaragua will hardly be
able to avoid the decline in reserves to US$ 0.4 billion this year since
foreign assistance is drying up and investment from abroad will not be
sufficient to cover the current account deficit remaining at 25% of GDP.
Quo vadis? Continued market economy or return
to a leftist past? The outcome of the forthcoming
presidential election in Nicaragua is highly
uncertain, which is impeding economic growth.
Amid ongoing high current account deficits,
bottle-necks in liquidity are emerging as the
foreign investment hoped for fails to materialize
due to slip-ups with privatizations and as foreign
aid is declining. Accordingly, the budget deficit
remains in the region of 15% of GDP.
46 Dresdner Bank Lateinamerika, Spotlight 9/2001, Panama
1998 1999 2000 2001f 2002f
DOMESTIC ECONOMY
GDP change (real) % 4.2 3.2 2.7 2.0 2.5
GDP US$ bn 9.3 9.6 9.9 10.1 10.5
Inflation (year-end) % 1.4 1.4 0.7 0.5 0.6
Budget balance, public sector % GDP -3.0 -1.4 -0.8 -1.0 -0.5
EXTERNAL SECTOR
Merchandise exports US$ bn 6.4 5.3 5.8 5.9 6.2
Merchandise imports US$ bn 7.7 6.7 7.0 7.0 7.3
Trade balance US$ bn -1.4 -1.4 -1.3 -1.2 -1.1
Current account balance US$ bn -1.2 -1.4 -0.9 -0.6 -0.5
Current account balance % GDP -12.6 -14.4 -9.4 -5.9 -4.5
Net foreign direct investment US$ bn 1.2 0.5 0.4 0.4 0.5
Foreign exchange reserves, year-end US$ bn 1.0 0.8 0.7 1.0 1.1
Import cover * months 1.0 1.0 0.8 1.1 1.2
US$ exchange rate, year-end balboa 1.00 1.00 1.00 1.00 1.00
FOREIGN DEBT
Gross foreign debt US$ bn 6.4 6.8 7.0 7.4 7.6
Foreign debt % exports* 66 80 77 80 78
Short-term foreign debt US$ bn 0.4 0.4 0.5 0.5 0.6
FINANCIAL MARKETS (year-end)
BVP stock index (balboa based, 2001:08/22) 662 561 430 384
Rendite am Anleihemarkt in % (2001: 08/22)* % 9.8 10.9 10.9 9.8
Risikoprämie am Anleihemarkt (2001: 08/22) bp 453 418 519 426
* 8 7/8 US$-bond (2027) *goods and services f= forecast
Area 77 082 sq. kmPopulation 2.9 million (+ 1.7% p.a.)
State president Mireya Elisa Moscoso RodríguezEconomy and Finance minister Norberto Delgado DuránPresident ofBanco Nacional de Panamá Bolivar Pariente C.
Next elections State president: May 2004Parliament: May 2004
GDP per capita US$ 3 460
Rating Moody’s: Ba1 S&P: BB+
ANNUAL FIGURES AND FORECASTS
PANAMA:PANAMA:PANAMA:PANAMA:PANAMA: DEBT BUYBACK
SUMMARY AND OUTLOOK
47Dresdner Bank Lateinamerika, Spotlight 9/2001, Panama
Ingrid Grünewald +49 40 3595 3487
CURRENT ACCOUNT
BUDGET DEFICIT
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
1997 1998 1999 2000 2001f 2002f
% of GDP
-1500
-1000
-500
0
1997 1998 1999 2000 2001f 2002f-15
-10
-5
0 US$ mn % of GDP
Economic activity: growth prospects deteriorated
In the year 2001 the economy will probably only reach a growth rate of
2% (following 3% in the previous year) since the Free Zone's re-exports,
which have been stagnating in the past, meanwhile reflect a slight
downward tendency. Demand from Brazil is falling due to the economic
downturn and the pace of growth will even slow down in such key
purchasing countries as Colombia and Venezuela. State-sponsored
and private infrastructural projects are being delayed, which means
that we hardly anticipate any decisive impetus for investment, and
demand for consumer goods continues to be weak as indicated by
falling commerce figures. For the port services and telecommunications,
however, we anticipate continued double-digit growth rates.
Fiscal policy: slight budget deficit
The government will no longer be in a position to meet its target agreed
within the framework of a stand-by agreement with the IMF of having a
balanced public-sector budget, even though it has already curtailed
public spending. We anticipate a budget deficit amounting to 1% of
GDP as tax receipts are falling in the course of the economic downturn
(January/May: -13% year-on-year) and positive effects are hardly
expected to emanate from the necessary but delayed tax reform by the
end of this year. The government will have no difficulty in financing this
shortfall using the funds generated by the eurobond issue of February
this year (US$ 750 million) even though Panama recently redeemed
US$ 160 million of a global bond issue maturing in 2002. Due to the
residual terms to maturity of this bond issue, public amortization
payments will still be very high in the year 2002 (approx. US$ 600
million), which means that further bond issues will follow. New buy-
backs may also be possible.
Current account: high deficit narrowing
For the current account an improvement is on the cards in spite of
unfavorable trends in the Free Zone and declining agricultural exports:
the high deficit is likely to fall from 9% of GDP in the previous year to 6%
as import demand is slightly down and profit remittances abroad will
decline along with interest payments - the latter due to falling interest
rates in the U.S. and the Panamanian buy-back. Net credit inflows,
which soared in the first several months of the year due to the eurobond
issue, were lowered again owing to the debt buy-back. The net capital
inflow from credits and investments from abroad is likely to remain
substantial until year-end (approx. US$ 400 million, respectively) and
will offset the US$ 600 million current account deficit.
The Colón Free Zone is suffering due to weak
demand from key purchasers in Latin America,
which is slowing down growth of the
Panamanian economy and is likely to cause the
high current account deficit to decline to 6% of
GDP. The government is expected to continue
its current program of debt management - i.e.
eurobond issues and debt buy-backs (which
guarantee that budget and current account
deficits will be covered this year) in 2002 as
well.
48 Dresdner Bank Lateinamerika, Spotlight 9/2001, Paraguay
1998 1999 2000 2001f 2002f
DOMESTIC ECONOMY
GDP change (real) % -0.4 0.5 -0.4 0.0 2.0
GDP US$ bn 8.6 7.7 7.5 6.9 6.7
Inflation (year-end) % 14.6 5.4 8.6 10.5 12.5
Budget balance, public sector % GDP -1.0 -4.7 -5.7 -3.5 -2.6
EXTERNAL SECTOR
Merchandise exports US$ mn 3549 2681 2373 2400 2510
Merchandise imports US$ mn -3942 -3042 -2906 -3000 -3120
Trade balance US$ mn -393 -360 -532 -600 -610
Current account balance US$ mn -160 -90 -137 -220 -240
Current account balance % GDP -1.9 -1.2 -1.8 -3.2 -3.6
Net foreign direct investment US$ mn 336 82 76 90 140
Foreign exchange reserves, year-end US$ mn 865 978 761 700 750
Import cover * months 2.2 3.1 2.6 2.3 2.4
US$ exchange rate, year-end Guaranies 2845 3350 3530 4500 5140
FOREIGN DEBT
Gross foreign debt US$ mn 2300 2550 2800 3000 3300
Foreign debt % exports* 53 83 105 111 117
Short-term foreign debt US$ mn 669 751 650 700 800
* goods and services f=forecast
Area 406 752 sq. kmPopulation 5.6 million (+2.6% p.a.)
State president Luis González MacchiFinance minister Francisco OviedoCentral bank president Raúl Vera Bogado
Next elections State president: May 2003Parliament: May 2003
GDP per capita US$ 1 383 (2000)
Rating Moody’s: B2 S&P: B
ANNUAL FIGURES AND FORECASTS
PARAGUAPARAGUAPARAGUAPARAGUAPARAGUAYYYYY::::: TOUCH AND GO
SUMMARY AND OUTLOOK
49Dresdner Bank Lateinamerika, Spotlight 9/2001, Paraguay
Thomas Pohl +49 40 3595 3481
EXCHANGE RATE/CURRENCY RESERVES
GDP AND INFLATION
-2
0
2
4
6
8
10
12
14
16
1998 1999 2000e 2001f 2002f
% GDP, real change inflation
3000
3200
3400
3600
3800
4000
4200
4400
Feb-00 Aug-00 Feb-01 Aug-010
200
400
600
800
1000
1200 Exchange rate G/US$ Forex reserves US$ mn
Domestic policy: on a powder keg
The political situation is becoming increasingly fragile. Dissatisfac-
tion among the population - the current year is the sixth in succes-
sion of no increase in real per-capita income - is being expressed in
partly violent demonstrations and strikes. The government has lost
additional prestige on account of the alleged involvement of president
González Macchi in a fraud scandal, in the wake of which the
president of the central bank and its director have had to resign.
While it was possible for a vote of no confidence by the opposition to
be averted, support in the ruling party (PC) is also dwindling. We do
not anticipate a stabilization in the short term: the social situation
remains tense and the increasing isolation of the president in his
own party and in the political system may have the makings of an
explosive situation.
Domestic economy: stagnation
The absence of structural reforms is an additional factor that is
paralyzing the economy. Whereas the government managed to
conclude a staff-monitored program with the IMF in April this year,
the targets agreed (among other things, to halve the public-sector
budget deficit, privatize the national telephone company and water
utilities by end-2001, restructuring of the technically insolvent de-
velopment bank BNF) and resulting positive economic stimuli are
hardly achievable this year. In our opinion, a further year of reces-
sion will only be averted in view of the expected record harvest. The
government's consolidation efforts and privatizations next year might
produce a modest level of economic growth.
External sector: tightrope act
In light of the declining competitiveness of national exports on the
country's key market, Brazil, following the devaluation of the Brazil-
ian real, as well as very low foreign currency reserves, the central
bank has abandoned its policy of 'dirty floating' for the time being.
Subsequently, from the beginning of the year to end-July the guaraní
shed some 18% of its nominal value against the US dollar. Despite a
temporary recovery in August, we expect the tendency toward
depreciation to continue. With foreign currency reserves providing
only two months' import cover, the central bank has no means of
counteracting this trend, and the danger of the country defaulting on
its debt remains high.
Paraguay faces difficult times in political,
economic and social terms. President González
Macchi's power base is crumbling, and the
government has neither the financial means to
cope with the dissatisfaction among the
population in the short term nor a clear political
concept in order to bring the economy to a
sustained growth path by means of structural
reforms. The central bank's foreign currency re-
serves are depleted.
50 Dresdner Bank Lateinamerika, Spotlight 9/2001, Peru
PERU:PERU:PERU:PERU:PERU: MOMENT OF TRUTH
SUMMARY AND OUTLOOK
Following his election victory, Alejandro Toledo continued his tactics of announcing programs to bolster the economy and
special funds to combat poverty while members of his cabinet tended to nurture investors' hopes for a liberal economic
policy course. The presentation of the government's program to congress marked the beginning of the government's
actual work. The government's decision not to apply for special powers to speedily implement its measures shows that it
has to make concessions within the scope of its policies. Without a substantial upturn in the second half of the year, Toledo
could soon lose the broad support he urgently needs to push his policies through congress. The bleak outlook for the
global economy is extremely inconvenient right now. Nevertheless several early indicators point toward a revitalization of
growth. We adhere to our forecast of zero growth this year.
Area 1 285 215 sq. kmPopulation 25.7 million (+ 2% p.a.)
State president Alejandro Toledo MauriqueFinance minister Pedro Pablo KuczynskiCentral bank president Germán Suárez Chávez
Next elections State president: 2006Parliament: 2006
GDP per capita US$ 2 112 (2000)
Investment 21% of GDP (2000)Savings 19% of GDP (2000)
Exchange rate system Flexible echange rateMonetary policy Inflation targeting
Exports (2000) 13% of GDPPurchasing countries USA 29%, EU 25%, Switzerland 9%Products Gold 20%, fisching products 14%, copper 13%
Imports (2000) 16% of GDPSupplier countries USA 27%, Japan 7%, Colombia 6%Products Capital goods 29%, consumer goods 22%,
energy sources 10%
Rating Moody’s: Ba3 S&P: BB-
51Dresdner Bank Lateinamerika, Spotlight 9/2001, Peru
1998 1999 2000 2001f 2002f
DOMESTIC ECONOMY
GDP change (real) % -0.4 0.9 3.1 0.0 3.0
GDP US$ bn 57.0 52.0 54.2 54.7 56.7
Inflation (year-end) % 6.0 3.7 3.7 3.0 3.2
Inflation (average) % 7.3 3.5 3.8 2.9 3.2
PUBLIC SECTOR
Budget balance, central government % GDP -1.1 -3.1 -2.7 -1.9 -1.8
Budget balance, public sector % GDP -0.8 -3.0 -3.0 -2.2 -2.1
Public debt % GDP 39.9 43.4 41.4 42.3 41.8
Amortization US$ bn 0.86 0.87 1.26 1.10 1.17
Gross financing needs US$ bn 1.32 2.43 2.89 2.31 2.36
EXTERNAL SECTOR
Merchandise exports US$ bn 5.7 6.1 7.0 7.0 7.8
Merchandise imports US$ bn 8.2 6.7 7.3 7.1 7.6
Trade balance US$ bn -2.5 -0.6 -0.3 -0.1 0.2
Current account balance US$ bn -3.6 -1.8 -1.6 -1.3 -0.9
Current account balance % GDP -6.7 -3.7 -2.8 -2.4 -1.6
Net foreign direct investment US$ bn 1.9 2.0 0.6 0.8 1.2
Foreign exchange reserves, year-end US$ bn 10.0 9.1 8.3 8.0 8.0
Import cover months** 9.4 9.7 8.3 8.2 7.8
US$ exchange rate, year-end Soles 3.15 3.51 3.52 3.60 3.70
US$ exchange rate, average Soles 2.93 3.38 3.49 3.56 3.65
FOREIGN DEBT
Gross foreign debt US$ bn 29.5 28.0 27.0 27.3 27.5
Foreign debt % exports** 361 325 275 283 273
Short-term foreign debt US$ bn 6.2 4.6 4.0 4.2 4.5
Foreign debt amortization US$ bn 2.3 2.3 2.2 2.3 2.3
Foreign debt service US$ bn 4.0 4.1 4.0 4.2 4.2
Foreign debt service % exports** 37 44 41 44 41
FINANCIAL MARKETS (year-end)
Interbank interest rate (av) % 12.9 16.9 11.4 12.0 13.0
IGBVL stock index (sol based, 2001: 08/22) 1336 1836 1208 1347
IFCI stock index (US$ based, 2001: 08/22) 134 161 116 134
Bond market yield (2001: 08/22)* % 11.1 11.1 12.1 11.6
Yield spread (2001: 08/22)* bp 624 461 694 664
* FLIRB 33/4 % (2017) **goods and services f=forecast
ANNUAL FIGURES AND FORECASTS
52 Dresdner Bank Lateinamerika, Spotlight 9/2001, Peru
APRA
Unidad Nacional
Others
Perú Posible
FIM
(45)
(19)
(28)
(11)
(17)
0.6 1.0
-0.4
-5.3
-1.0-2.6
-4.9-3.6 -2.8 -2.4 -2.7 -2.3
-0.6-2.3 -2.9 -3.1
-10
-5
0
5
10
15
20
25
I/98 III/98 I/99 III/99 I/00 III/00 I/01 III/01f
% of GDP revenues expenditures balance
-8
-6
-4
-2
0
2
4
6
8
10
Jun-00 Aug-00 Oct-00 Dec-00 Feb-01 Apr 01 Jun 01
%, yoy central government
TAX REVENUES
CENTRAL GOVERNMENTS BUDGET
SEATS IN CONGRESS Domestic policy: waiver of special powers
At present, Alejandro Toledo enjoys broad popular support.
According to an opinion poll taken early in August by "Datum",
an opinion research institute, 74% of the populations endorses
the policies announced by Toledo in his inauguration speech.
Above all, the reason for this may have been that the promises
made at the time of the poll still appeared to be realistic. In
view of the poor budget situation, however, some of the
government's measures will need to be more moderate than
announced. This was already evident in the case of the
reduction in the value added tax rate (from 18% to 16%), which
was originally scheduled for early 2002. Meanwhile the
finance minister conceded that a reduction is out of the
question until the efficiency of the taxation system has been
enhanced.
On August 23 the cabinet members led by Roberto Dañino
pre-sented the government's agenda. It was clear from the
outset that there were going to be no surprises in terms of
content. Key economic impetus is to be generated by reducing
the so-called soli-darity levy from 5% to 2% and raising public-
sector wages. The funding required is to be raised by reducing
military spending, resuming the privatization program and a
partial revocation of the taxation reform initiated by the inte-
rim government. The government dispensed with the need to
apply for such special powers – these were originally intended
to ensure speedy implementation of economic policy
objectives – after having agreed a speedy passage of these
measures in congress with the strongest opposition party
APRA (the party of former president Alán García).
Fiscal policy: a more moderate tone
After Toledo considered a budget deficit amounting to 3% of
GDP as realistic immediately after his election victory,
statements from the governent have recently been more mo-
derate. On several occasions in the past few days, finance
minister Kuczynski indicated an annual deficit of 2.2% as a
target. This is in line with our estimate as early as July. On the
other hand, a consensus with the IMF on this topic – an IMF
delegation is in Lima at present – still remains to be achieved.
It is hardly likely that the IMF will tolerate an upper limit
substantially in excess of 2% of GDP. The consolidation of
53Dresdner Bank Lateinamerika, Spotlight 9/2001, Peru
-4
-3
-2
-1
0
1
2
3
4
5
6
II/98 IV/98 II/99 IV/99 II/00 IV/00 II/01f IV/01f II/02f IV/02f
%, yoy
250
270
290
310
330
350
370
Jul-99 Jan-00 Jul-00 Jan-01 Jul-01115117119121123125127129131133
cement sales (1000 mt) GDP index (1994=100)
1.5
2
2.5
3
3.5
4
4.5
Jan-00 Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01
%, yoy CPI core rate
INFLATION
ECONOMIC INDICATORS
GDP CHANGE (REAL)public finances should be one of the government's major
objectives. Especially against the backdrop of the financing
problems in Argentina, signaling solid fiscal policy is a key
factor with a view to regaining investor confidence.
Economic activity: end to the decline
The latest economic indicators convey a mixed impression.
While value added tax revenues in July rose to an appreciable
extent for the first time since August of last year and the
domestic demand index (IMAC) also climbed by 2.0% in the
same month year-on-year (June 2001: 0.8%), sales of the
cement industry (which also correlates significantly with GDP)
declined once again by 12.7%. Ac-cording to our assessment,
GDP in July did not rise year-on-year and has not seen any
significant increase in August either. Starting in September,
however, we forecast the return of higher growth rates. In
addition to the enhanced planning safety at that point –
following the presentation of the government's agenda and
initial concrete economic policy steps being taken by the new
government – there are also statistical reasons at play here
as the Peru-vian economy has been contracting since Sep-
tember 2000. The resulting lower base for comparison
purposes will lead to higher growth rates even if the economy
undergoes a stagnation phase.
Although GDP declined to a somewhat lesser degree (-1.7%)
in the first half of the year than the 2% fall we had assumed,
we continue to believe that the Peruvian economy will not
grow on an annual average for the year 2001. This pessimistic
assessment is also backed up by the bleak growth prospects
in key industrialized countries, which will also impact
adversely on revenues of Peruvian exporters in the course of
the year.
Monetary sector: temporary reduction in inflation
The consumer price index in July only rose by 2.2% year-on-
year. The inflation rate has thus been below 3% for the fourth
month in succession. Several factors indicate that inflation
will pick up again toward the end of the year. Most recently,
the main factors that dampened inflation were stagnating or
declining prices for energy and food & beverages. The core
inflation rate – the increase in the price index excluding
54 Dresdner Bank Lateinamerika, Spotlight 9/2001, Peru
-1000
-500
0
500
1000
1500
2000
2500
I/98 III/98 I/99 III/99 I/00 III/00 I/01 III/01f
US$ mn exports imports balance
7
7.5
8
8.5
9
9.5
10
10.5
Aug-98 Feb-99 Aug-99 Feb-00 Aug-00 Feb-01 Aug-01
US$ bn
500
600
700
800
900
Dec-00 Feb-01 Apr-01 Jun-01 Aug-013.45
3.5
3.55
3.6
3.65 EMBI+ Spread (Peru) Sol/US$
EXCHANGE RATE AND YIELD SPREAD
FOREIGN EXCHANGE RESERVES
TRADE BALANCE
Kai Stefani +49 40 3595 3486
particularly volatile price components – has been higher than
growth of the aggregate index for four months now. Above all,
food prices, which account for as much as 60% of the
consumer price index, should pick up toward the end of the
year. However, energy prices are likely to have a dampening
effect for the remainder of the year.
External sector: trade balance in equilibrium
Despite declining metal prices on international commodity
markets – industrial metals account for almost 50% of Peruvian
exports – the trade balance was almost even in the second
quarter at –US$ 13.8 million. For one thing, this was due to
exports, which increased 3.1% year-on-year. Even greater,
however, was the impact of the drop in imports (-4.8%). For
one thing, the decline in imports is a reflection of the poor
domestic demand; for another, it is attributable to falling import
prices. While the import volumes in the course of the year
should tend to increase as the economy picks up again, import
prices are expected to continue to fall year-on-year. We
therefore adhere to our forecast of an almost even trade
balance for the year as a whole. The increase in export
volumes due to the production of "Antamina", a large-scale
mining project in the western part of Peru that has just taken
up operations – should largely offset the decline in prices.
Financial market: post-election calm
Both the risk premium on Peruvian government bonds and the
exchange rate of the sol have not been impacted at all in the
past three months by the turmoil taking place on most Latin
American markets. The sol most recently was trading
significantly higher than at the beginning of the year, and the
spread of Peruvian foreign bonds, currently at 645 basis points,
is roughly at the level of January. Future trends will essentially
depend on the government's budgetary discipline and the
economic figures for July. By the end of the year, we expect
the sol to depreciate slightly, to 3.56 soles/US$.
55Dresdner Bank Lateinamerika, Spotlight 9/2001, Peru
MONTHLY INDICATORS Apr 01 May 01 Jun 01 Jul-01
DOMESTIC ECONOMY
Economic activity index % yoy -0.3 -0.4 -2.3-2.3-2.3-2.3 07-Sep
Economic activity index (s.a.) % mom 0.9 -0.5 -0.9-0.9-0.9-0.9 07-Sep
Industrial production % yoy 2.4 0.7 -3.2-3.2-3.2-3.2 07-Sep
Tax revenues (central government) % yoy 5.7 1.5 -0.8-0.8-0.8-0.8 31-Aug
Cement Sales (ASOCEM) % yoy -1.8 11.2 -18.6 -12.7-12.7-12.7-12.7 17-Sep
Construction sector % yoy 1.3 -6.4 -12.4-12.4-12.4-12.4 07-Sep
Fishing sector % yoy 45.9 6.0 -29.6-29.6-29.6-29.6 07-Sep
Trade index % yoy -1.9 -1.1 -3.9-3.9-3.9-3.9 07-Sep
Employment index (1994=100) % yoy 0.3 0.8 0.50.50.50.5 07-Sep
Consumer prices % yoy 2.6 2.6 2.5 2.22.22.22.2 07-Sep
Consumer prices % mom -0.4 0.0 -0.1 0.20.20.20.2 07-Sep
Core inflation % yoy 2.9 2.8 2.6 2.22.22.22.2 07-Sep
Core inflation % mom 0.5 0.2 0.0 -0.1-0.1-0.1-0.1 07-Sep
Money supply M4 % yoy 4.2 4.8 2.82.82.82.8 07-Sep
Loan rates in US$ (TAMEX, latest: 08/14)* % 12.5 12.3 12.2 12.412.412.412.4 12.212.212.212.2
Deposit rates in US$ (TIPMEX, latest: 08/14)* % 3.9 3.7 3.6 3.53.53.53.5 3.43.43.43.4
Financial sector lending (latest: 07/22) US$ bn 8.0 8.0 8.2 8.18.18.18.1 07-Sep
Deposits in foreign currencies (latest: 07/22) US$ bn 9.5 9.5 9.6 9.69.69.69.6 07-Sep
EXTERNAL SECTOR
Merchandise exports US$ mn 540 588 607.3607.3607.3607.3 07-Sep
Merchandise exports % yoy 7.5 6.8 -3.5-3.5-3.5-3.5 07-Sep
Merchandise imports US$ mn 580 647 520.8520.8520.8520.8 07-Sep
Merchandise imports % yoy 3.1 1.1 -18.6-18.6-18.6-18.6 07-Sep
Trade balance US$ mn -40 -59 86.586.586.586.5 07-Sep
$
next/latest
QUARTERLY INDICATORS Q2 00 Q3 00 Q4 00 Q1 01
DOMESTIC ECONOMY
GDP % yoy 5.1 3.5 -0.4 -2.6 -1.0-1.0-1.0-1.0
Private consumption % yoy 4.5 3.9 3.0 1.6 24-Aug
Public consumption % yoy 13.2 3.5 -4.4 -7.2 24-Aug
Private and public investment % yoy -0.2 -10.5 -13.0 -11.2 24-Aug
Domestic demand % yoy 4.5 2.6 -1.5 -1.7 24-Aug
Exports (goods and services) % yoy 10.0 5.5 9.1 -1.3 24-Aug
Imports (goods and services) % yoy 6.4 0.2 1.7 4.6 24-Aug
Budget balance, public sector Soles bn -1.3 -1.3 -2.4 0.3 24-Aug
Public foreign debt US$ bn 19.3 19.1 19.2 18.7 24-Aug
EXTERNAL SECTOR
Current account balance US$ mn -518 -120 -567 -459 24-Aug
Net foreign direct investment US$ mn 301 153 125 276 24-Aug
Portfolio investment US$ mn -195 -31 -17 -127 24-Aug
Capital account** US$ mn 422 177 58 394 24-Aug
Change in foreign exchange reserves US$ mn -93 34 -565 -68 24-Aug
Gross foreign debt US$ bn 28.5 28.2 28.4 27.6 24-Aug
Short-term foreign debt US$ bn 4.0 3.9 4.0 3.8 24-Aug
* month-end ** incl. residual items
next/latest
MONTHLY AND QUARTERLY FIGURES
56 Dresdner Bank Lateinamerika, Spotlight 9/2001, Venezuela
VENEZUELA:VENEZUELA:VENEZUELA:VENEZUELA:VENEZUELA: "SOFT" EXCHANGE CONTROLS
SUMMARY AND OUTLOOK
The already unfavorable economic climate is likely to have suffered even more owing to the recent measures imposed to
combat capital flight, since the country's economic policy is true to form in trying to counteract undesirable developments
with dirigistic, interventionist remedies. In addition, a clear economic policy concept called for by the private sector still
remains to be tabled. Meanwhile, there are increasing signs of public-sector demand not rising as sharply as expected. In
light of this situation we anticipate a GDP growth rate for the year 2001 as a whole of only 2.5% (instead of 3.3%). Our
forecast that the current account surplus - above all, due to lower oil exports - will fall to approx. US$ 5 billion, continues
to apply. Owing to the greater level of uncertainty, however, we have corrected our exchange rate forecast and now
anticipate the latter to stand at a US$ rate of 750 (previously 740) bolívares.
Area 912 050 sq. kmPopulation 24.2 million (+ 2.2% p.a.)
State president Hugo Chávez FríasFinance minister Nelson MerentesCentral bank president Diego Luis Castellanos Escalona
Next elections State president: 2006Parliament: 2006
GDP per capita US$ 4 975 (2000)
Investment 18% of GDP (2000)Savings 30% of GDP (2000)
Exchange rate system Gradual devaluation within theexchange rate band
Monetary policy Inflation targeting
Exports (2000) 28% of GDPPurchasing countries (1999) USA 51%, Brazil 5%, Colombia 4%Products Crude Oil and derivatives 84%,
metals and metal goods 5%
Imports (2000) 13% of GDPSupplier countries USA 39%, Colombia 7%, Brazil 5%Products (1999) Raw materials 54%, machinery and
equipment 26%
Rating Moody’s: B2 S&P: B
57Dresdner Bank Lateinamerika, Spotlight 9/2001, Venezuela
1998 1999 2000 2001f 2002f
DOMESTIC ECONOMY
GDP change (real) % 0.2 -6.1 3.2 2.5 2.5
GDP US$ bn 95.8 103.3 120.5 131.4 138.1
Inflation (year-end) % 29.9 20.0 13.4 13.0 22.0
Inflation (average) % 35.8 23.6 16.2 12.8 17.6
PUBLIC SECTOR
Budget balance, central government % GDP -3.7 -2.3 -2.1 -4.5 -5.2
Budget balance, public sector % GDP -4.9 0.4 3.9 -3.0 -4.0
Public debt % GDP 28.0 27.0 27.0 25.0 25.0
Amortization US$ bn 3.3 6.0 5.8 n.a. n.a.
Gross financing needs US$ bn 7.8 5.3 1.1 n.a. n.a.
EXTERNAL SECTOR
Merchandise exports US$ bn 17.6 20.8 34.0 27.0 25.8
Merchandise imports US$ bn 15.1 13.2 16.1 17.3 18.0
Trade balance US$ bn 2.5 7.6 17.9 9.7 7.8
Current account balance US$ bn -3.3 3.7 13.4 5.0 2.9
Current account balance % GDP -3.4 3.6 11.1 3.8 2.1
Net foreign direct investment US$ bn 4.3 2.7 3.8 3.4 3.0
Foreign exchange reserves, year-end ** US$ bn 11.9 12.3 13.1 9.3 8.0
Import cover **) ***) months 5.8 7.2 6.4 4.3 3.6
US$ exchange rate, year-end Bolívares 565 648 700 750 875
US$ exchange rate, average Bolívares 548 606 680 722 790
FOREIGN DEBT
Gross foreign debt US$ bn 38.3 37.0 34.1 34.0 35.0
Foreign debt % exports *** 180 153 90 109 117
Short-term foreign debt US$ bn 7.4 7.0 7.4 7.6 7.9
Foreign debt amortization US$ bn 3.9 3.7 3.3 2.9 3.0
Foreign debt service US$ bn 6.5 6.4 6.0 5.2 5.4
Foreign debt service % exports *** 31 26 16 17 18
FINANCIAL MARKETS (year-end)
Deposit rate, 90 days % 35.3 17.3 13.5 16.0 22.0
ICB stock index (bolívar based, 2001: 08/22) 4789 5418 6825 6848
IFCI stock index (US$ based, 2001: 08/22) 453 397 472 472
Bond market yield (2001: 08/22)* % 16.1 14.8 15.0 14.2
Yield spread (2001: 08/22)* bp 1046 785 911 838
* 91/4 % US$-Bond (2027) ** Central bank only *** goods and services f=forecast
ANNUAL FIGURES AND FORECASTS
58 Dresdner Bank Lateinamerika, Spotlight 9/2001, Venezuela
89
101112131415161718
Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01
%
-10-8-6-4-202468
10
II/97 I/98 IV/98 III/99 II/00 I/01 IV/01f
yoy, %
-6-5-4-3-2-1012345
1998 1999 2000 2001f 2002f
% of GDP
PUBLIC SECTOR BUDGET BALANCE
GDP CHANGE (REAL)
UNEMPLOYMENT RATE Economic policy: staying on the wrong track
In our recent Latin American Spotlight update, we reported on a poll
taken among corporations, the outcome of which showed that while the
economic climate remained quite bleak, at least there was a slight
improvement on the previous year. If this poll were to be repeated today,
corporate sentiment would probably be a great deal worse again since
the country's dirigistic economic policy – the main reason for the
widespread dissatisfaction in the private sector – was recently tightened.
Two weeks ago, the central bank announced measures targeted at
restricting the flow of foreign exchange – and, therefore, at stemming the
tide of capital flight and bolstering the bolívar, which has come under
significant devaluation pressure again. Banks are only allowed to hold
12% (previously 15%) of their capital in foreign currency. Sales of foreign
exchange to companies not resident in Venezuela were prohibited. In
addition, the minimum reserve rate for state deposits was raised from
17% to 30%.
The central bank continues to rule out a maxi-devaluation of the bolívar,
which is meanwhile expected to be overvalued by more than 40%. It is
this policy of keeping the bolívar strong to check inflation that is being
sharply criticized by the business community as local companies suffer
substantial competitive drawbacks compared with their foreign rivals.
Small- to medium-scale enterprises which frequently only have scarce
capital resources are suffering in particular. And this is discouraging
investment in exactly those businesses which were intended by the
government to make a decisive contribution toward improving living
standards among low-income groups by creating the necessary jobs.
The unemployment rate still averaged 14.1% from January to June 2001
and is thus only one percentage point lower than two years ago, when
state president Chávez took office. Whereas his approval ratings among
the population were still high at 56% according to the latest opinion
polls, his popularity has nevertheless fallen to its lowest level since he
took office (92%). This indicates that dissatisfaction with the high level of
unemployment, the unfavorable economic situation and the crime rate
is growing.
Economic activity: only poor growth anticipated
The economic outlook has soured. Following the recent measures
adopted in foreign exchange transactions, we assume that the uncertainty
in economic terms will grow, which is likely to impact negatively on
growth trends. This also applies to the agreement reached by the oil-
exporting countries to cut their production further starting in September.
59Dresdner Bank Lateinamerika, Spotlight 9/2001, Venezuela
0
10
20
30
40
50
60
70
80
Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01
% inflation yoy deposit rate lending rate
0
10
20
30
40
50
60
70
Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01
%, yoy
16
18
20
22
24
26
28
30
32
34
Jan 00 Apr 00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01
US$/barrel
OIL PRICE VENEZUELA
MONEY (M2)
INTEREST RATES AND INFLATIONHowever, there has also been a lack of growth impetus from public-
sector demand (which made a decisive contribution toward the 3.2%
GDP increase in the year 2000) in the course of this year. Only since
April has central government spending increased again in real terms
year-on-year; from January through May 2001, it was still slightly below
the previous year's level, however. In the case of state spending
programs, including measures relating to infrastructure and social
institutions, concessions frequently need to be made due to administra-
tive deficiencies, often resulting in projects not only being delayed but
only put into practice to an extent of about 70%. The new finance minister
Nelson Merentes, who became successor to José Rojas at the end of
July, is to push these projects more vigorously from now on. However,
we anticipate that state spending in the year 2001 as a whole will be
lower than previously assumed; hence, the impetus in a number of
economic sectors, especially the construction industry, commerce and
the transport sector, is likely to turn out weaker. We have revised our GDP
growth forecast for the year 2001 downward from 3.3% to 2.5%. A posi-
tive side effect of the low growth in public spending: the deficits in each
of the aggregate public-sector and in the central government's budgets
are likely to turn out a percent-age point lower in the year 2001 than
previously assumed.
Monetary sector: further unrest looming
The foreign exchange-related measures will not fail to impact on the
local money market either, the reason being that banks, most of which
are likely to have exploited their foreign exchange holding potential to
the full, are now forced into US$ sales and to generate a higher demand
for bolívares. Thus, the level of liquidity, which was already tight at times
in the past several months owing to the high volume of capital flight, is
likely to shrink further. From end-2000 to end-July 2001 the M2 money
supply has even declined by 10% in nominal terms – compared with the
previous year's level there was already a slight real drop in July.
Accordingly, interest rates, which have been on the rise since May,
could continue to increase further. However, this would militate against
the government's objective of keeping the level of interest rates on lending
low to generate higher GDP growth. In the event of higher interest rates,
a further dirigistic economic policy step may be in the offing: state
president Chávez has repeatedly threatened to impose controls on
interest rates.
External sector: declining oil production - but higher prices
At the end of July major oil-exporting countries agreed to cut pro-duction
60 Dresdner Bank Lateinamerika, Spotlight 9/2001, Venezuela
-5
0
5
10
15
20
1997 1998 1999 2000 2001f 2002f
balance US$ bn current account trade
0
2.5
5
7.5
10
12.5
15
17.5
20
Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01
US$ bn central bank FIEM stabilization fund
08/21
600
620
640
660
680
700
720
740
760
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01
Bolivares/US$
EXCHANGE RATE
CURRENCY RESERVES
EXTERNAL SECTOR
Luz Knees +49 40 3595 3488
yet again. Within the scope of the arrangements entering into force as of
the beginning of September, Venezuela pledged that it would cut oil
production by about 4%. We adhere to our forecast, however, that the
country will earn well over US$ 21 billion in oil export revenues in the
year 2001 as a whole. In view of the price movements of Venezuela's oil
exports which, after weaker tendencies in June and the first half of July,
are meanwhile pointing upward, we anticipate a slightly higher average
price than previ-ously – US$ 21.25/bl rather than US$ 21/bl (2000: US$
25.91/bl). In addition, we expect non-oil exports and imports for the year
2001 as a whole to rise by 7% to 8%. While the trade and current ac-
count surpluses will remain significantly lower than the previous year's
record figures, Venezuela's current account surplus – which we continue
to believe will amount to approx. US$ 5 billion (just short of 4 % of GDP)
– puts the country in an unassailable lead among the major countries in
the region.
Exchange rate: bolívar set to come under pressure again soon
In August the dire situation on the foreign exchange market intensified
once again. Chávez had again expressed his concern with capital
flight, which averages approx. US$ 1 billion per month. The fact that the
government is now thinking of imposing import restrictions has kindled
the flames of unrest. The bolívar's depreciation accelerated. Foreign
currency reserves fell significantly, even after the exchange control
measures were announced on August 9, since the demand for foreign
exchange by non-banks apparently soared after that date. In the
meantime, however, the foreign currency supply has increased as the
banks are now transacting their business in conformity with the new
regulations. On August 14 the exchange rate of the US$ fell by 3 bolívares
to 729.50 bolívares. Foreign currency reserves, which fell by approx.
US$ 750 million in the first half of August, to US$ 16.4 billion (US$ 6.6
billion of which in the FIEM stabilization fund), rose to reach US$ 16.6
billion by August 21. The bolívar is likely to come under devaluation
pressure once again following the adjustment process. While we
consider the imposition of "hard" exchange controls unlikely in the short
term as the level of foreign currency reserves remains high – almost
eight months' import cover including FIEM reserves, the general
uncertainty has grown. At the end of 2001 we now expect a US$ rate of
750 bolívares (previously 740 bolívares). Foreign currency reserves
may amount to approx. US$ 16 billion by end-2001 (incl. US$ 6.7 billion
in the FIEM).
61Dresdner Bank Lateinamerika, Spotlight 9/2001, Venezuela
MONTHLY INDICATORS Apr 01 May 01 Jun-01 Jul-01
DOMESTIC ECONOMY
Industrial production (private sector) % yoy 9.1 4.44.44.44.4
Car sales % yoy 63.6 81.7 67.1 70.170.170.170.1 07-Sep
Unemployment rate % 14.5 13.1 13.313.313.313.3
Consumer prices % yoy 12.1 12.6 12.5 13.013.013.013.0 03-Sep
Consumer prices % mom 1.1 1.5 1.0 1.51.51.51.5 03-Sep
Producer prices % yoy 7.6 7.5 7.4 7.37.37.37.3
Producer prices % mom 0.7 0.4 0.9 0.60.60.60.6
Money supply M2 (latest: 08/10)* Bolívar bn 15161 14409 14856 14991 15187151871518715187
Money supply M2 (latest: 08/10)* % yoy 17.4 13.8 14.9 12.1 14.514.514.514.5
Lending rate (latest: 08/10)* % 20.6 20.6 25.5 23.5 21.721.721.721.7
Deposit rate (latest: 08/10)* % 12.5 13.1 15.3 15.1 13.813.813.813.8
Interbank interest rate (latest: 08/22)* % 3.1 5.5 7.5 3.7 27.427.427.427.4
Volume of lending (latest: 08/03)* Bolívar bn 8009 8003 8109 8078.0 8146814681468146
Volume of lending (latest: 08/03)* % yoy 27.8 23.0 22.0 18.5 19.719.719.719.7
Volume of deposits (latest: 08/03)* Bolívar bn 13556 13064 13502 13169.0 13490134901349013490
Volume of deposits (latest: 08/03)* % yoy 25.8 23.5 22.4 16.6 25.525.525.525.5
EXTERNAL SECTOR
Oil price (Venezuelan exports, latest: 08/17) US$/barrel 22.29 23.20 22.00 20.58 22.0422.0422.0422.04
Oil price (Venezuelan exports, latest: 08/17) % yoy 1.2 -8.6 -21.0620739 -22.7477477 -20.1-20.1-20.1-20.1
Foreign exchange reserves (CB, latest: 08/21)* US$ bn 11.53 10.90 10.46 10.57 10.0010.0010.0010.00
Forex reserves (FIEM***, latest: 08/21)* US$ bn 6.06 6.33 6.57 6.59 6.606.606.606.60
US$ exchange rate (latest: 08/22)* Bolívares 712 715 719 725.0 730730730730
next/latest
QUARTERLY INDICATORS Q2 00 Q3 00 Q4 00 Q1 01
DOMESTIC ECONOMY
GDP % yoy 2.7 2.9 6.1 3.5 31-Aug
GDP, private sector % yoy 4.4 3.2 6.3 4.5 31-Aug
GDP, public sector % yoy 0.2 2.5 5.8 1.9 31-Aug
Oil sector % yoy 0.6 4.5 9.3 2.9 31-Aug
Manufacturing industry % yoy 4.1 1.0 6.9 4.6 31-Aug
Financial services and real estate % yoy 1.5 1.4 1.8 2.2 31-Aug
Commerce % yoy 7.3 3.5 5.4 4.5 31-Aug
Budget balance, public sector Bolívares bn 1217 939 -526 797
EXTERNAL SECTOR
Merchandise exports US$ bn 8.18 8.54 9.58 7.26 31-Aug
Exports of oil and derivatives US$ bn 6.86 7.28 8.08 6.01 31-Aug
Merchandise imports US$ bn 4.18 4.25 4.30 3.61 31-Aug
Trade balance US$ bn 4.00 4.29 5.28 3.65 31-Aug
Current account balance balance US$ bn 2.85 3.10 3.95 2.62 31-Aug
Net foreign direct investment US$ bn 1.25 1.02 0.83 0.26 31-Aug
Portfolio investment US$ bn -0.52 -0.44 -0.34 0.11 31-Aug
Capital account** US$ bn -1.22 -0.88 -2.55 -2.26 31-Aug
Change in foreign exchange reserves (CB) US$ bn 0.74 1.53 -0.60 -1.04
Change in foreign exchange reserves (FIEM)*** US$ bn 0.57 0.60 1.69 1.45
*month-end ** incl. residual items ***macroeconomic stabilization fund
next/latest
MONTHLY AND QUARTERLY FIGURES
FINANCIAL MARKETS:FINANCIAL MARKETS:FINANCIAL MARKETS:FINANCIAL MARKETS:FINANCIAL MARKETS: LATIN AMERICAN STOCK MARKET INDICES
62 Dresdner Bank Lateinamerika, Spotlight 9/2001, Lateinamerika
ARGENTINA
300400500600700800900000100200300
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01400
500
600
700
800
900
1000
1100
1200
1300 Merval (Peso) IFCI (US$)
BRAZIL
COLOMBIA
PERU
LATIN AMERICA
CHILE
MEXICO
VENEZUELA
70
80
90
100
110
120
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01300
400
500
600
700
800 IPSA (Peso) IFCI (US$)
4000
5000
6000
7000
8000
9000
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01400
500
600
700
800
900
1000
1100 IFC (Peso) IFCI (US$)
4000
5000
6000
7000
8000
9000
10000
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01300
350
400
450
500
550
600 ICB (Bolivar) IFCI (US$)
8000
10000
12000
14000
16000
18000
20000
Aug-99 Feb-00 Aug-00 Feb-01 Aug-010
100
200
300
400
500
600 Bovespa (Reais) IFCI (US$)
400
600
800
1000
1200
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01100
150
200
250
300
350
400
450 IBB/ GBC (Peso) IFCI (US$)
GBC
IBB
1000
1200
1400
1600
1800
2000
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01100
120
140
160
180
200 IGBVL (Sol) IFCI (US$)
100
200
300
400
500
600
700
800
900
1000
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01
IFCI Emerging markets IFCI Latin America
FINANCIAL MARKETS:FINANCIAL MARKETS:FINANCIAL MARKETS:FINANCIAL MARKETS:FINANCIAL MARKETS: LATIN AMERICAN BOND YIELD SPREADS
63Dresdner Bank Lateinamerika, Spotlight 9/2001, Lateinamerika
ARGENTINA BRAZIL
COLOMBIA
PERU
LATIN AMERICA
CHILE
MEXICO
VENEZUELA
400
600
800
1000
1200
1400
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01
bps 9 3/4 % US$ bond (2027)
120
140
160
180
200
220
240
260
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01
bps 6 7/8 % bond (2009)
200
250
300
350
400
450
500
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01
bps 11 1/2 % US$ bond (2026)
600
700
800
900
1000
1100
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01
bps 9 1/4 % US$ bond (2027)
400
500
600
700
800
900
1000
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01
bps 10 1/8 % US$ bond (2027)
300
400
500
600
700
800
900
1000
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01
bps 7 5/8 % US$ bond (2007)
400
500
600
700
800
900
1000
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01
bps FLIRB 3 3/4 (2017)
400
500
600
700
800
900
1000
1100
1200
Aug-99 Feb-00 Aug-00 Feb-01 Aug-01
bps JP Morgan Latin America Eurobond-Portfolio (LEI)
64Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America
65Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America
DBLA - AN OVERVIEW
Chairman of the Supervisory Board:Chairman of the Supervisory Board:Chairman of the Supervisory Board:Chairman of the Supervisory Board:Chairman of the Supervisory Board:DrDrDrDrDr. Joachim v. Joachim v. Joachim v. Joachim v. Joachim v. Harbou. Harbou. Harbou. Harbou. Harbou
Board of Managing Directors:Board of Managing Directors:Board of Managing Directors:Board of Managing Directors:Board of Managing Directors:Holger FHolger FHolger FHolger FHolger F. Sommer. Sommer. Sommer. Sommer. Sommer, Chair, Chair, Chair, Chair, ChairmanmanmanmanmanHorst Herrmann (São Paulo)Horst Herrmann (São Paulo)Horst Herrmann (São Paulo)Horst Herrmann (São Paulo)Horst Herrmann (São Paulo)RicharRicharRicharRicharRichard Vd Vd Vd Vd Voswinckeloswinckeloswinckeloswinckeloswinckel
Geographic Heads (Dresdner Bank Group):Geographic Heads (Dresdner Bank Group):Geographic Heads (Dresdner Bank Group):Geographic Heads (Dresdner Bank Group):Geographic Heads (Dresdner Bank Group):
Horst Tiedemann, Horst Tiedemann, Horst Tiedemann, Horst Tiedemann, Horst Tiedemann, MiamiCentral America and Caribbean,Central America and Caribbean,Central America and Caribbean,Central America and Caribbean,Central America and Caribbean,Colombia, EcuadorColombia, EcuadorColombia, EcuadorColombia, EcuadorColombia, Ecuador, V, V, V, V, VenezuelaenezuelaenezuelaenezuelaenezuelaTel.: (+1 305) 810 3118Fax: (+1 305) 810 3117
Luis Niño de Rivera, Luis Niño de Rivera, Luis Niño de Rivera, Luis Niño de Rivera, Luis Niño de Rivera, México CityMex i koMex i koMex i koMex i koMex i koTel.: (+52 5) 258 3004Fax: (+52 5) 258 3010
PrPrPrPrProf. Drof. Drof. Drof. Drof. Dr. W. W. W. W. Winston Fritsch, inston Fritsch, inston Fritsch, inston Fritsch, inston Fritsch, Rio de JaneiroBraz i lBraz i lBraz i lBraz i lBraz i lTel.: (+55 21) 3824 3500Fax: (+55 21) 3824 3501
Pedro R. Nowald, Pedro R. Nowald, Pedro R. Nowald, Pedro R. Nowald, Pedro R. Nowald, Buenos AiresArgentina, Paraguay and UruguayArgentina, Paraguay and UruguayArgentina, Paraguay and UruguayArgentina, Paraguay and UruguayArgentina, Paraguay and UruguayTel.: (+54 11) 4590 7900Fax: (+54 11) 4590 7910
Ewald DoerEwald DoerEwald DoerEwald DoerEwald Doernernernernerner, , , , , Santiago de ChileBolivia, Chile, PeruBolivia, Chile, PeruBolivia, Chile, PeruBolivia, Chile, PeruBolivia, Chile, PeruTel.: (+56 2) 731 4444Fax: (+56 2) 671 3307
Dresdner Private Banking - The Americas:Dresdner Private Banking - The Americas:Dresdner Private Banking - The Americas:Dresdner Private Banking - The Americas:Dresdner Private Banking - The Americas:
Andreas Ehlebracht, Andreas Ehlebracht, Andreas Ehlebracht, Andreas Ehlebracht, Andreas Ehlebracht, MiamiTel.: (+1 305) 810 3735Fax: (+1 305) 810 3737 oder 4050
Hans-Georg Martens, Hans-Georg Martens, Hans-Georg Martens, Hans-Georg Martens, Hans-Georg Martens, HamburgTel.: (+49 40) 3595 3531Fax: (+49 40) 3595 3868
David WDavid WDavid WDavid WDavid W. Roda, . Roda, . Roda, . Roda, . Roda, MiamiTel.: (+1 305) 810 3739Fax: (+1 305) 810 4053
Argent ina:Argent ina:Argent ina:Argent ina:Argent ina:Representative Office Buenos AiresRepresentative Office Buenos AiresRepresentative Office Buenos AiresRepresentative Office Buenos AiresRepresentative Office Buenos AiresTorre Alem PlazaAvenida Leandro N. Alem 855, piso 231001 Buenos AiresCasilla 574, 1000 Buenos AiresTel.: (+54 11) 4590 7900Fax: (+54 11) 4590 7910E-Mail: [email protected] Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Juan G. GrubenJuan G. GrubenJuan G. GrubenJuan G. GrubenJuan G. GrubenSenior Country Manager:Senior Country Manager:Senior Country Manager:Senior Country Manager:Senior Country Manager:Marcelo ImhoffMarcelo ImhoffMarcelo ImhoffMarcelo ImhoffMarcelo ImhoffCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantRepresenta t ives :Representa t ives :Representa t ives :Representa t ives :Representa t ives :Rodolfo G. KempterRodolfo G. KempterRodolfo G. KempterRodolfo G. KempterRodolfo G. KempterMichael Kromm (CCB)Michael Kromm (CCB)Michael Kromm (CCB)Michael Kromm (CCB)Michael Kromm (CCB)Country Managers:Country Managers:Country Managers:Country Managers:Country Managers:Juan E. KochJuan E. KochJuan E. KochJuan E. KochJuan E. KochMathias PfaeffliMathias PfaeffliMathias PfaeffliMathias PfaeffliMathias PfaeffliDolores Pérez del CerroDolores Pérez del CerroDolores Pérez del CerroDolores Pérez del CerroDolores Pérez del CerroChristian Wentzel (CCB)Christian Wentzel (CCB)Christian Wentzel (CCB)Christian Wentzel (CCB)Christian Wentzel (CCB)CTF: Eva Göb-CribbCTF: Eva Göb-CribbCTF: Eva Göb-CribbCTF: Eva Göb-CribbCTF: Eva Göb-Cribb
Bol iv ia:Bol iv ia:Bol iv ia:Bol iv ia:Bol iv ia:Representative Office La PazRepresentative Office La PazRepresentative Office La PazRepresentative Office La PazRepresentative Office La PazCalle Rosendo Gutiérrez No 136 esq. Av. ArceEdificio Multicentro, Torre B, Piso 8Casilla 1077La PazTel.: (+591 2) 44 32 14Fax: (+591 2) 44 32 15E-Mail: [email protected] Manager andCountry Manager andCountry Manager andCountry Manager andCountry Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Catrin PietschCatrin PietschCatrin PietschCatrin PietschCatrin PietschCountry Manager:Country Manager:Country Manager:Country Manager:Country Manager:Claus-Dietmar BagusatClaus-Dietmar BagusatClaus-Dietmar BagusatClaus-Dietmar BagusatClaus-Dietmar Bagusat
Braz i l :Braz i l :Braz i l :Braz i l :Braz i l :Dresdner Bank BrasilDresdner Bank BrasilDresdner Bank BrasilDresdner Bank BrasilDresdner Bank BrasilDresdner Bank Brasil S.A.Banco MúltiploDresdner Bank Lateinamerika AG,Niederlassung São PauloManagement :Management :Management :Management :Management :PrPrPrPrProf. Drof. Drof. Drof. Drof. Dr. W. W. W. W. Winston Fritschinston Fritschinston Fritschinston Fritschinston FritschJoão Pinheiro Nogueira BatistaJoão Pinheiro Nogueira BatistaJoão Pinheiro Nogueira BatistaJoão Pinheiro Nogueira BatistaJoão Pinheiro Nogueira BatistaMartin DuisbergMartin DuisbergMartin DuisbergMartin DuisbergMartin DuisbergRolf-Otto LaddeRolf-Otto LaddeRolf-Otto LaddeRolf-Otto LaddeRolf-Otto LaddeClient Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Ricardo CohenRicardo CohenRicardo CohenRicardo CohenRicardo Cohen
Head Office:Head Office:Head Office:Head Office:Head Office:Neuer Jungfernstieg 16, 20354 HamburgPostfach 30 12 46, 20305 HamburgTel.: (+49 40) 3595-0Fax: (+49 40) 3595 3314Telex: 214 236-0 dl dS.W.I.F.T. DRES DE HLhttp://www.dbla.com
66Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America
Braz i l :Braz i l :Braz i l :Braz i l :Braz i l :São Paulo:São Paulo:São Paulo:São Paulo:São Paulo:Centro Empresarial TransatlânticoRua Verbo Divino, 1488 - 1° e 2° andaresChácara Santo Antônio04719-904 São Paulo-SPCaixa Postal 3641, 01060-970 São Paulo-SPTel.: (+55 11) 5188 6700Fax: (+55 11) 5188 6900Telex:11 53 207 dbla br, 11 53 208 dbla brS.W.I.F.T. DRES BR SP, DBBM BR SPE-Mail: [email protected] Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Mar ía do Carmo C.A. SilvaMar ía do Carmo C.A. SilvaMar ía do Carmo C.A. SilvaMar ía do Carmo C.A. SilvaMar ía do Carmo C.A. Silva
Rio de Janeiro:Rio de Janeiro:Rio de Janeiro:Rio de Janeiro:Rio de Janeiro:Av. Presidente Wilson, 231-17° andar, Centro20030-021 Rio de Janeiro-RJTel.: (+55 21) 3824 3500Fax: (+55 21) 3824 3501E-Mail: [email protected] Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Michael MagrathMichael MagrathMichael MagrathMichael MagrathMichael Magrath
Belo HorizonteBelo HorizonteBelo HorizonteBelo HorizonteBelo HorizonteRua Paraíba, 1000 - 6° andarEdifício Asamar30130-141 Belo Horizonte-MGTel.: (+55 31) 3261 7737Fax: (+55 31) 3261 3667E-Mail: [email protected] Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Lúcio Antônio VieiraLúcio Antônio VieiraLúcio Antônio VieiraLúcio Antônio VieiraLúcio Antônio Vieira
CampinasCampinasCampinasCampinasCampinasRua Sacramento, 126 - 5° andar, Centro13010-210 Campinas-SPTel.: (+55 19) 3234 3414Fax: (+55 19) 3234 3745Telex: 1 93 013 dbla brE-Mail: [email protected] Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Nelson TNelson TNelson TNelson TNelson Torororororrrrrreseseseses
Cur i t ibaCur i t ibaCur i t ibaCur i t ibaCur i t ibaEdifício Curitiba TradeAv. Dr. Carlos de Carvalho, 417 - 13° andar, sala1303, Centro80410-180 Curitiba-PRTel.: (+55 41) 324 4221Fax: (+55 41) 324 4697E-Mail: [email protected] Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Raul RibasRaul RibasRaul RibasRaul RibasRaul Ribas
Dresdner Brasil Representações Ltda.Dresdner Brasil Representações Ltda.Dresdner Brasil Representações Ltda.Dresdner Brasil Representações Ltda.Dresdner Brasil Representações Ltda.(formerly Sudamero Consultoria Ltda.)Centro Empresarial TransatlânticoRua Verbo Divino, 1488 - 2° andar04719-904 São Paulo-SPCaixa Postal 166501064-970 São Paulo-SPTel.: (+55 11) 5188 6700Fax: (+55 11) 5188 6980E-Mail:[email protected]
Cayman Islands:Cayman Islands:Cayman Islands:Cayman Islands:Cayman Islands:Grand Cayman BranchGrand Cayman BranchGrand Cayman BranchGrand Cayman BranchGrand Cayman BranchAnderson Square BuildingP.O. Box 714 GTGrand Cayman, Cayman Is., B.W.I.Tel.: (+1 345) 949 8888Fax: (+1 345) 949 8899Telex: 4 285 dl cpS.W.I.F.T. DRES KY KXE-Mail: [email protected] :Management :Management :Management :Management :Bor Alexander van der WeerdenBor Alexander van der WeerdenBor Alexander van der WeerdenBor Alexander van der WeerdenBor Alexander van der WeerdenCarsten OergelCarsten OergelCarsten OergelCarsten OergelCarsten OergelSenior TSenior TSenior TSenior TSenior Trrrrrust Manager:ust Manager:ust Manager:ust Manager:ust Manager:David R. PerryDavid R. PerryDavid R. PerryDavid R. PerryDavid R. Perry
Chi le :Chi le :Chi le :Chi le :Chi le :Representative Office Santiago de ChileRepresentative Office Santiago de ChileRepresentative Office Santiago de ChileRepresentative Office Santiago de ChileRepresentative Office Santiago de ChileEdificio Dresdner BNPHuérfanos 1219, EntrepisoCasilla 9972Santiago de ChileTel.: (+56 2) 688 0411Fax: (+56 2) 688 0422E-Mail: [email protected] Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Jan von DobbelerJan von DobbelerJan von DobbelerJan von DobbelerJan von Dobbeler
Dresdner Banque Nationale de ParisDresdner Banque Nationale de ParisDresdner Banque Nationale de ParisDresdner Banque Nationale de ParisDresdner Banque Nationale de ParisHuérfanos 1219Casilla 10492Santiago de ChileTel.: (+56 2) 731 4444Fax: (+56 2) 671 3307Telex: 64 53 47 dres bk clS.W.I.F.T: DRES CL RME-Mail: [email protected] i tung:Le i tung:Le i tung:Le i tung:Le i tung:Ewald DoernerEwald DoernerEwald DoernerEwald DoernerEwald DoernerMichel Gonzá lezMichel Gonzá lezMichel Gonzá lezMichel Gonzá lezMichel Gonzá lezF i rmenkundengeschä f t :F i rmenkundengeschä f t :F i rmenkundengeschä f t :F i rmenkundengeschä f t :F i rmenkundengeschä f t :Miguel Ángel Delp ínMiguel Ángel Delp ínMiguel Ángel Delp ínMiguel Ángel Delp ínMiguel Ángel Delp ínAlfonso P írizAlfonso P írizAlfonso P írizAlfonso P írizAlfonso P íriz
67Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America
Dresdner BNP Paris S.A.Dresdner BNP Paris S.A.Dresdner BNP Paris S.A.Dresdner BNP Paris S.A.Dresdner BNP Paris S.A.Corredores de BolsaCorredores de BolsaCorredores de BolsaCorredores de BolsaCorredores de BolsaEdificio Dresdner BNPHuérfanos 1219, 5° pisoSantiago de ChileTel.: (+56 2) 696 0096Fax: (+56 2) 699 5083General Manager:General Manager:General Manager:General Manager:General Manager:Sergio Anguita G.Sergio Anguita G.Sergio Anguita G.Sergio Anguita G.Sergio Anguita G.
Colombia:Colombia:Colombia:Colombia:Colombia:Representative Office Bogotá, D.C.Representative Office Bogotá, D.C.Representative Office Bogotá, D.C.Representative Office Bogotá, D.C.Representative Office Bogotá, D.C.Carrera 7 No. 74-56, piso 16Edificio CorficaldasBogotá, D.C.Apartado Aéreo 59303Bogotá, D.C. 2Tel.: (+57 1) 347 0566, 254 8650Fax: (+57 1) 313 2763, 313 2783E-Mail: [email protected] Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Karsten ReinhardKarsten ReinhardKarsten ReinhardKarsten ReinhardKarsten ReinhardCountry Managers:Country Managers:Country Managers:Country Managers:Country Managers:Narda Ramírez (CCB)Narda Ramírez (CCB)Narda Ramírez (CCB)Narda Ramírez (CCB)Narda Ramírez (CCB)Jesús A. VJesús A. VJesús A. VJesús A. VJesús A. Vaca Muraca Muraca Muraca Muraca Murciaciaciaciacia
Costa Rica:Costa Rica:Costa Rica:Costa Rica:Costa Rica:Representative Office San JoséRepresentative Office San JoséRepresentative Office San JoséRepresentative Office San JoséRepresentative Office San JoséEdificio Torre Mercedes, 8° pisoCalle 24, Paseo ColónApartado 162, 1007 Centro ColónSan José, Costa RicaTel.: (+506) 295 6790Fax: (+506) 295 6880E-Mail: [email protected] Manager andCountry Manager andCountry Manager andCountry Manager andCountry Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Claus ElsnerClaus ElsnerClaus ElsnerClaus ElsnerClaus Elsner
Ecuador :Ecuador :Ecuador :Ecuador :Ecuador :Representative Office QuitoRepresentative Office QuitoRepresentative Office QuitoRepresentative Office QuitoRepresentative Office QuitoAvda. Naciones Unidas yRepública de El SalvadorEdificio Citiplaza, piso 11Casilla 17-01-2179QuitoTel.: (+593 2) 970 747/48/49/50Fax: (+593 2) 970 753E-Mail: [email protected] Manager andCountry Manager andCountry Manager andCountry Manager andCountry Manager andAssistant Representative:Assistant Representative:Assistant Representative:Assistant Representative:Assistant Representative:John ViaultJohn ViaultJohn ViaultJohn ViaultJohn ViaultSenior Country Manager /Senior Country Manager /Senior Country Manager /Senior Country Manager /Senior Country Manager /Investment Management:Investment Management:Investment Management:Investment Management:Investment Management:Wolfgang LeanderWolfgang LeanderWolfgang LeanderWolfgang LeanderWolfgang Leander
Guatemala:Guatemala:Guatemala:Guatemala:Guatemala:Representative Office GuatemalaRepresentative Office GuatemalaRepresentative Office GuatemalaRepresentative Office GuatemalaRepresentative Office Guatemala(Guatemala, Honduras and Belize)(Guatemala, Honduras and Belize)(Guatemala, Honduras and Belize)(Guatemala, Honduras and Belize)(Guatemala, Honduras and Belize)5a Avenida 15-45, Zona 10Edificio Centro EmpresarialTorre II, 10° piso, Of. 1001-801010 GuatemalaApartado 57-F, 01901 GuatemalaTel.: (+502) 333 7205-07,363 2550,363 2553, 363 2560Fax: (+502)333 7208, 363 2556E-Mail: [email protected] Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Bernd KleinworthBernd KleinworthBernd KleinworthBernd KleinworthBernd KleinworthCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Bertram HeydBertram HeydBertram HeydBertram HeydBertram HeydCountry Managers:Country Managers:Country Managers:Country Managers:Country Managers:Carlos LemosCarlos LemosCarlos LemosCarlos LemosCarlos LemosDavid SilvesterDavid SilvesterDavid SilvesterDavid SilvesterDavid SilvesterSören Kruse (CCB)Sören Kruse (CCB)Sören Kruse (CCB)Sören Kruse (CCB)Sören Kruse (CCB)
Méx ico :Méx ico :Méx ico :Méx ico :Méx ico :ReprReprReprReprRepresentative Ofesentative Ofesentative Ofesentative Ofesentative Office México, D.Ffice México, D.Ffice México, D.Ffice México, D.Ffice México, D.F.....Bosque de Alisos 47-A, 4° pisoCol. Bosques de las Lomas05120 México, D.F.Tel.: (+52 5) 258 3170Fax: (+52 5) 258 3199E-Mail: [email protected] Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Stephen LloydStephen LloydStephen LloydStephen LloydStephen LloydCountry Manager:Country Manager:Country Manager:Country Manager:Country Manager:Rainer HenselRainer HenselRainer HenselRainer HenselRainer Hensel
Dresdner Bank México, S.A.Dresdner Bank México, S.A.Dresdner Bank México, S.A.Dresdner Bank México, S.A.Dresdner Bank México, S.A.Bosque de Alisos No. 47-B, 4° pisoCol. Bosques de las Lomas05120 México, D.F.Tel.: (+52 5) 258 3000Fax: (+52 5) 258 3100S.W.I.F.T. DRES MX MXE-Mail: [email protected]:Management:Management:Management:Management:Luis Niño de RiveraLuis Niño de RiveraLuis Niño de RiveraLuis Niño de RiveraLuis Niño de RiveraCorporate Banking:Corporate Banking:Corporate Banking:Corporate Banking:Corporate Banking:Daniel GorinsteinDaniel GorinsteinDaniel GorinsteinDaniel GorinsteinDaniel Gorinstein
El Salvador:El Salvador:El Salvador:El Salvador:El Salvador:Representative Office San SalvadorRepresentative Office San SalvadorRepresentative Office San SalvadorRepresentative Office San SalvadorRepresentative Office San Salvador(El Salvador and Nicaragua)(El Salvador and Nicaragua)(El Salvador and Nicaragua)(El Salvador and Nicaragua)(El Salvador and Nicaragua)Edificio ConstruMarket 3er nivelAv. Albert Einstein 17CLomas de San FranciscoAntiguo CuscatlánLa Libertad, San SalvadorTel.: (+503) 273 4738Fax: (+503) 273 4765E-Mail: [email protected] Manager andCountry Manager andCountry Manager andCountry Manager andCountry Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Jörg DittmerJörg DittmerJörg DittmerJörg DittmerJörg DittmerCountry Managers:Country Managers:Country Managers:Country Managers:Country Managers:Horacio Vivas (CCB)Horacio Vivas (CCB)Horacio Vivas (CCB)Horacio Vivas (CCB)Horacio Vivas (CCB)
68 Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America
Panama:Panama:Panama:Panama:Panama:Panama BranchPanama BranchPanama BranchPanama BranchPanama BranchTorre Dresdner BankCalle 50 y Calle 55 EstePanamá 7, R.P.Apartado 5400, Panamá 5, R.P.Tel.: (+507) 206 8100Fax: (+507) 206 8109Telex: 3 106 dl pg, 2 244 dl pg,
2 420 dl pgS.W.I.F.T. DRES PA PAE-Mail: [email protected] :Management :Management :Management :Management :Klaus Mü l lerKlaus Mü l lerKlaus Mü l lerKlaus Mü l lerKlaus Mü l lerCorporate Banking:Corporate Banking:Corporate Banking:Corporate Banking:Corporate Banking:Zenobia de FuentesZenobia de FuentesZenobia de FuentesZenobia de FuentesZenobia de FuentesPrivate Banking:Private Banking:Private Banking:Private Banking:Private Banking:Thorsten LührsThorsten LührsThorsten LührsThorsten LührsThorsten Lührs
Pa raguay :Pa raguay :Pa raguay :Pa raguay :Pa raguay :Representative Office AsunciónRepresentative Office AsunciónRepresentative Office AsunciónRepresentative Office AsunciónRepresentative Office Asunción14 de Mayo 337Edificio Asubank, 10° pisoAsunción 1215Casilla 196Asunción 1209Tel.: (+595 21) 49 47 10Fax: (+595 21) 44 12 68E-Mail: [email protected] Managers:Country Managers:Country Managers:Country Managers:Country Managers:Gloria de GrauGloria de GrauGloria de GrauGloria de GrauGloria de GrauChristan WentzelChristan WentzelChristan WentzelChristan WentzelChristan Wentzel(CCB, based in Buenos Aires)(CCB, based in Buenos Aires)(CCB, based in Buenos Aires)(CCB, based in Buenos Aires)(CCB, based in Buenos Aires)
P e r u :P e r u :P e r u :P e r u :P e r u :Representative Office LimaRepresentative Office LimaRepresentative Office LimaRepresentative Office LimaRepresentative Office LimaAv. Rivera Navarrete 620, Piso 9San IsidroLima 27Apartado 18-0624Lima 18, MirafloresTel.: (+51 1) 212 5060Fax: (+51 1) 212 5165E-Mail: [email protected] Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Georg-Wilhelm von WedemeyerGeorg-Wilhelm von WedemeyerGeorg-Wilhelm von WedemeyerGeorg-Wilhelm von WedemeyerGeorg-Wilhelm von WedemeyerCountry Manager:Country Manager:Country Manager:Country Manager:Country Manager:Silvia StangeSilvia StangeSilvia StangeSilvia StangeSilvia Stange
Uruguay :U ruguay :U ruguay :U ruguay :U ruguay :Repräsentanz MontevideoRepräsentanz MontevideoRepräsentanz MontevideoRepräsentanz MontevideoRepräsentanz MontevideoMisiones 1372, Esc. 502Casilla 133311.000 MontevideoTel.: (+598 2) 916 0152, 916 0718Fax: (+598 2) 915 1283E-Mail: [email protected] Manager andCountry Manager andCountry Manager andCountry Manager andCountry Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Karsten SchwenckKarsten SchwenckKarsten SchwenckKarsten SchwenckKarsten Schwenck
U.S .A. :U .S .A . :U .S .A . :U .S .A . :U .S .A . :Miami AgencyMiami AgencyMiami AgencyMiami AgencyMiami Agency801 Brickell Avenue, 6th floorMiami, Florida 33131/USAP.O. Box 01-6039Miami, Florida 33101/USATel.: (+1 305) 373 0000Fax: (+1 305) 374 6912Telex: 4961 7905 dl usS.W.I.F.T. DRES US 3ME-Mail: [email protected] :Management :Management :Management :Management :Thomas SpangThomas SpangThomas SpangThomas SpangThomas SpangCarl WolfCarl WolfCarl WolfCarl WolfCarl WolfCorporate Banking:Corporate Banking:Corporate Banking:Corporate Banking:Corporate Banking:Sergio GoloubeffSergio GoloubeffSergio GoloubeffSergio GoloubeffSergio Goloubeff( C T F )( C T F )( C T F )( C T F )( C T F )Robert BarthelmessRobert BarthelmessRobert BarthelmessRobert BarthelmessRobert Barthelmess(CCB-Central/South America(CCB-Central/South America(CCB-Central/South America(CCB-Central/South America(CCB-Central/South America& Caribbean)& Caribbean)& Caribbean)& Caribbean)& Caribbean)Frank HuthnanceFrank HuthnanceFrank HuthnanceFrank HuthnanceFrank Huthnance(CCB-Nort America)(CCB-Nort America)(CCB-Nort America)(CCB-Nort America)(CCB-Nort America)Christian NovyChristian NovyChristian NovyChristian NovyChristian Novy(CCB-South America & Mexico)(CCB-South America & Mexico)(CCB-South America & Mexico)(CCB-South America & Mexico)(CCB-South America & Mexico)Rama K. VyasuluRama K. VyasuluRama K. VyasuluRama K. VyasuluRama K. Vyasulu(EXIMBANK/SP)(EXIMBANK/SP)(EXIMBANK/SP)(EXIMBANK/SP)(EXIMBANK/SP)Private Banking:Private Banking:Private Banking:Private Banking:Private Banking:Nicolás BergengruenNicolás BergengruenNicolás BergengruenNicolás BergengruenNicolás BergengruenThomas GoesseleThomas GoesseleThomas GoesseleThomas GoesseleThomas GoesseleInves tments :Inves tments :Inves tments :Inves tments :Inves tments :Hans AbateHans AbateHans AbateHans AbateHans Abate
VVVVVenezuela :enezuela :enezuela :enezuela :enezuela :Representative Office CaracasRepresentative Office CaracasRepresentative Office CaracasRepresentative Office CaracasRepresentative Office Caracas(V(V(V(V(Venezuela and Tenezuela and Tenezuela and Tenezuela and Tenezuela and Trinidad & Trinidad & Trinidad & Trinidad & Trinidad & Tobago)obago)obago)obago)obago)Centro Gerencial Mohedano, 9° piso,Of. A y BCalle Los Chaguaramos,La CastellanaApartado 61 379Caracas 1060-ATel.: (+58 212) 261 4097, 261 7425Fax: (+58 212) 264 6429E-Mail: [email protected] Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Christian SommerhalderChristian SommerhalderChristian SommerhalderChristian SommerhalderChristian SommerhalderCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Stefan ZurawkaStefan ZurawkaStefan ZurawkaStefan ZurawkaStefan ZurawkaCTF: Marc CzabanskiCTF: Marc CzabanskiCTF: Marc CzabanskiCTF: Marc CzabanskiCTF: Marc Czabanski
Glossary of Acronyms:Glossary of Acronyms:Glossary of Acronyms:Glossary of Acronyms:Glossary of Acronyms:CCB = Corporate and Correspondent BankingCTF = Commodity & Trade FinanceRM = Risk ManagementSP = Special Products
69Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America
70Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America
Dresdner Bank Lateinamerika AG
Neuer Jungfernstieg 16
20354 Hamburg
Germany
Economics/Public Relations Dept.
Chief economist: Dr. Heinz Mewes
Editor: Cyrus de la Rubia, Thorsten Rülle (Miami), Walter Schäfer
Tel.: (+49 40) 3595 3494
Fax: (+49 40) 3595 3497
E-Mail: [email protected]
http://www.dbla.com
Coordination: Kai Stefani
Layout: Friederike Niemeyer, Hamburg
Closing date: August 22, 2001
“Latin American Spotlight“ is published on a quarterly basis in German and
English.
Without any liability on our part. Reprints - in part or in whole - must mention
source.
The information contained in this issue has been carefully researched and examined by DresdnerBank Lateinamerika AG or reliable third parties.But neither Dresdner Bank Lateinamerika AG norsuch third parties can assume any liability for the accuracy,completeness and up-to-datedness ofthis information.The authors ’ opinions are not necessarily those of Dresdner BankLateinamerika.Statements do not constitute any offer or recommendation of certain investments,evenof individual issuers and securities are mentioned.Information given in this issue is no substitutefor specific investment advice based on the situation of the individual investor. For personalizedinvestment advice please contact your Dresdner Bank Lateinamerika branch.
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71
1999 2000 08/22/2001** 2001f 2002f
Real GDP change *
Industrial countries % y-o-y 2.9 3.3 1.41.41.41.4 2.22.22.22.2
USA % y-o-y 4.2 4.1 1.5 2.5
Euro area % y-o-y 2.6 3.4 2.2 2.52.52.52.5
Japan % y-o-y 0.8 1.5 -0.5-0.5-0.5-0.5 0.80.80.80.8
INTEREST RATES, YEARLY AVERAGE*
USA, 3m money market rate % 5.4 6.5 3.53.53.53.5 4.0 4.0
USA, 10yr government bond yield % 5.6 6.0 4.94.94.94.9 5.2 5.7
Euro area, 3m money market rate % 3.0 4.4 4.34.34.34.3 4.5 4.4
Euro area, 10yr gov. bond yield % 4.5 5.3 4.84.84.84.8 4.9 5.3
Japan, 3m money market rate % 0.3 0.3 0.10.10.10.1 0.2 0.1
Japan, 10yr government bond yield % 1.8 1.8 1.31.31.31.3 1.3 1.5
EXCHANGE RATES, YEARLY AVERAGE *
US$/ Euro US$ 1.07 0.92 0.920.920.920.92 0.890.890.890.89 0.98
Yen/ US$ YEN 114 108 120120120120 123 122
Yen/ Euro YEN 121 100 110110110110 110 119
COMMODITY PRICES, YEARLY AVERAGE
Coffee (other milds) c/lb, NY 101.5 85.1 59.959.959.959.9 60.060.060.060.0 55.0
Copper c/lb, LME 71.0 82.0 67.367.367.367.3 71.071.071.071.0 77.0
Crude oil (WTI) US$/b 19.3 31.0 27.327.327.327.3 26.5 23.0
Crude oil (Brent) US$/b 17.9 28.5 25.425.425.425.4 25.0 21.0
Gold US$/ounce 280 278 276276276276 270 275
* Source: Dresdner Bank AG; ** daily value
GLOBAL ECONOMY - FIGURES AND FORECASTS
Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America