Categoría: Economy and Business

The historic low of Colombia’s peso against the dollar reached on Tuesday is not the end of the Colombian currency’s year-long decline. However, the drop is not infinite either, analysts said Tuesday.

For the first time in history, one US dollar now costs more than COP3,000. The same currency was worth COP1,880 a year ago, meaning the Colombian peso lost almost 40% of its value in just 12 months.

While the peso is expected to decline further, the dollar is not likely to exceed COP3,200, analysts told Colombian economic newspaper La Republica.

There is little Colombia’s government or central bank can do to curb the growth as it is not just the Colombian peso that’s dropping, the US dollar has also gained value compared to other currency, for example the euro and the Brazilian real.

Currency depreciation against the dollar

The main reason for the peso drop has been the drop in global drop in oil prices. However, Europe’s problems with Greece, a slow-down of the Chinese economy and an increase in US oil production through fracking have all contributed to this drop.

Stabilizing the oil prices
Oil has lost about a third of its value since June and prices have been hovering just above six-year lows for the past week. The downward trend has been driven by global oversupply and record stockpile levels, analysts told Reuters news agency.

Many analysts told the agency they expect some temporary price stabilization as people take profits from short positions. But they said the downward price trend was likely to continue unless there was a significant reduction in global supply.

And with that, the peso is likely to lose value, Colombian analysts said.

“It’s the natural reaction of the markets,” former Finance Minister Roberto Junguito told La Republica.

The value of Colombia’s peso “depends on the oil prices. They are not independent from the currency exchange rate. If [oil prices] continue to lower, but constantly, the depreciation should not be too much. But if they continue falling like this, the dollar is certainly going to become stronger,” the former minister said.

With the US’ oil demand likely to drop some in September, Colombian economists expect oil prices and the Colombian peso to depreciate further accordingly with an expected peak of one dollar against COP3,200.

“However, we expect that on the medium term there will be a correction and that currency will position itself between COP2,800 and COP2,900,” said Global Securities analyst and economist Daniel Escobar.

Source: http://colombiareports.com/colombias-peso-decline-not-over-dollar-could-reach-cop3200/

India’s economy grew at an annual rate of 7% between April and June, official figures have shown.

This is slower than the 7.5% growth recorded for the previous quarter, and lower than expected.

India and China – which also posted 7% growth in the second quarter – are now the joint fastest growing major economies in the world.

But some economists have expressed concerns that India’s official figures do not accurately reflect true growth.

«At face value, today’s GDP figures for [the second quarter] suggest that India matched China as the world’s fastest-growing major economy last quarter,» said Shilan Shah at Capital Economics.

«But the GDP data remain inconsistent with numerous other indicators which suggest that, at best, the economy is in the early stages of recovery after three years of tepid growth.

«The official GDP data are overstating the strength of the economy, most probably by a significant margin.»

Boost’

With concerns about slowing growth in China, some investors are starting to turn to India as the next driver of global growth.

Some were expecting stronger growth than 7% – in two of the previous three quarters, the Indian economy grew faster than China.

«The GDP number is disappointing but, overall, going ahead we expect India’s economic growth to be driven by domestic demand,» said Madhavi Arora, from Kotak Mahindra Bank in Mumbai.

«With commodity prices falling, there should be a boost to corporate margins going ahead and household spending should also go up.»

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Analysis: Simon Atkinson, editor, India Business Report, Mumbai

There will be plenty of people disappointed with this number. Some economists I’ve spoken to recently thought GDP growth would be closer to 8% – streaking ahead of China’s.

Digging into the detail – it looks like growth in Indian manufacturing has slowed from a year ago – a bit of a blow given this is one of the Modi government’s main initiatives.

And whether pace picks up in the July-September period will largely depend on the weather. This is the monsoon season and when rains are good and harvest plentiful, rural consumption goes up as people working in agriculture have more money to spend.

But, so far, many parts of the country have seen less rain than you’d expect.

Source: http://www.bbc.com/news/business-34107648

Indian refiner Hindustan Mittal (HMEL) booked the Suezmax Yamuna Spirit to carry a shipment of crude oil from the east coast of Mexico to Mundra, Gujarat, starting 2 September, marking the company’s first Latin American crude purchase as part of a larger movement to bring a more diverse crude slate to India.

State-controlled refiners in India started buying crude in June to fill the new 9.8mn bl strategic reserve in Visakhapatnam. The country is planning to bring on line more strategic reserve capacity at Mangalore and Padur in October, taking storage capacity to around 36mn bl.

Additionally, the Indian government has been asking state refiners to reduce their dependence on term purchases and shift to spot cargoes because spot prices are currently lower and because Indian refiners have been upgrading their plants to run heavier grades.

Mangalore Refining and Petrochemicals (MRPL) was already heard purchasing 1mn bl of Argentina’s heavy sweet Escalante crude for October delivery to Mangalore. HMEL’s purchase is expected to take about 45 days to travel to the Asia-Pacific region.

India’s private-sector Reliance Industries scheduled three other crude tankers this week to travel from Latin America to India during late August through September, and state-owned Essar Oil booked a VLCC last week to make the route starting 10 September.

The last uptick of crude vessels trekking this distance was in early March, when India was importing more crude from Latin America to replace expected crude receipts from Iraq that were lost when high winds were delaying tankers by several weeks.

Info: http://www.argusmedia.com/News/Article?id=1091449

China is currently undergoing a major shift from its investment-led, export-driven economic model to one led by domestic consumption and this transition has implications for global capital, commodities as well as the broader world economy, believes noted economist Sanjeev Sanyal. In an interview with CNBC-TV18’s Latha Venkatesh and Sonia Shenoy, Deutsche Bank Global Strategist and Managing Director Sanyal said the latest crisis in the world’s second largest economy is resulting from the above-mentioned shift and it is going to alter global dynamics in a major way. «China will continue to slow down [during the transition], capital will flood out and will have to go elsewhere. It remains to be seen if countries such as the US or India can absorb this excess capital [that will flow out of China],» he said, adding that moves such as interest rate cuts by the Chinese central bank will only help smoothen the transition. The development is significant from India’s standpoint as it could use cheap global capital to build capacities and overhaul its infrastructure, as well as benefit from what may be a broken commodity market for years. «But it will require leadership reform. Cost of capital has to come down structurally. Bank reforms have to take place,» Sanyal said.

Read more at: http://www.moneycontrol.com/news/economy/china-crisishistoric-chance-for-india-reform-deutsche_2745641.html?utm_source=ref_article

Peru is making progress in implementing the agenda of new trade agreements, and next week a delegation from the Ministry of Foreign Trade and Tourism (Mincetur) will head to India to move forward with the joint feasibility study required to enter a Free Trade Agreement (FTA), Minister Magali Silva informed.

The feasibility study is a first step towards free trade negotiations between the two countries and the future of the agreement with India is part of a intense trade negotiation agenda promoted by Mincetur.

Turkey and Indonesia

“As for the Asia region, we are currently boosting the completion of the FTA with Turkey, country with which we have already seen three negotiation rounds and whose fourth roundtable will take place in Lima in the following months,” she affirmed.

The government official pointed out that progress is still made in the Peru-Indonesia FTA joint study.

Eurasians and Brazil

Silva said her ministry is in negotiations with the Eurasian Economic Commission –comprising Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan– to sign a Memorandum of Understanding on Trade.

Furthermore, she informed that negotiations to deepen trade ties with Brazil started last week. Talks will cover trade facilitation, services, investments, public procurement, and will involve accelerating tariff elimination.

Pacific Alliance

She stressed that Pacific Alliance member countries are working to enter a trade protocol in January next year, which will broaden the range of business possibilities for our exporters.

“Peru’s trade policy is aimed at finding new strategic partners and further diversifying target markets for our exporters. This way Turkey, India, Indonesia, Russia and Brazil markets will offer new opportunities of business for Peruvian entrepreneurs,” she noted.

It should be noted that Peru’s network of trade agreements will provide access to a larger market including 52 countries with which Peru conducts commerce, which accounts 41% of the worldwide population and 79% of the global gross domestic product.

Source: http://www.andina.com.pe/Ingles/noticia-peru-moves-forward-with-trade-agreements-agenda-571192.aspx