WORLD ECONOMIC NEWS
Global Efforts Fail To Stop U.S. Dollar Collapse
The U.S. Federal Reserve Bank, the European Central Bank, and the Bank of Japan, for the first time since September 2000, all sold yen June 28, in a futile effort to halt the collapse of the dollar.
After the $5-billion sale, the yen traded at 119.72 per dollar, barely changed from 119.64 on June 27. The euro rose to $.9905 from $.9883 on June 27.
The U.S. dollar is undergoing its biggest quarterly drop in 14 years, having fallen 10% against a basket of currencies comprised of the yen, euro, Swiss franc, Swedish krona, Canadian dollar, and British pound.
Foreign Investment in Indonesia Plummets
Foreign direct investment (FDI) approvals in Indonesia, for the first five months of the year, have fallen by almost 60% over the same period recorded in 2001, the Jakarta Post reported June 28. Data from the Investment Coordinating Board (BKPM) showed that as of May 30, FDI approvals reached $1.67 billion spread over 402 projects, a far cry compared to the $3.98 billion posted during the same period last year. Although BKPM chairman Theo F. Toemion attributed the sharp decline to accumulated problems lingering in the country, he also admitted that legal uncertainty had played a significant part in diminishing foreign investor confidence.
The Long Arm of WorldCom Reaches into Ibero-America
WorldCom, which owns the two largest long-distance telephone companies in Ibero-America, is preparing to sell them: Brazil's Embratel and Mexico's Avantel. Goldman Sachs has already been hired to handle the sales, according to Brazilian reports. They should be real bargains: Embratel's stock collapsed by 25.5% June 26, on the news of the troubles of its owner, WorldCom.
As Africa Dies, G-8 Offers Empty Words
The Group of Eight leading industrial nations apparently have nothing to offer the dying continent of Africa except words of encouragement. In a just-released 19-page document, the G-8, which just held a summit in Alberta, Canada, asks Africa to be patient, and to wait a bit longer before G-8 nations can specify exactly what it will do to help facilitate NEPAD, the New Partnership for Africa's Development. The G-8 reassured Africa that the continent will be discussed again at next year's summit.
No total-dollar figure was announced for the African Action Plan. Nor could the G-8 leaders agree on any specific amount for the Global Fund to Fight AIDS, tubuerculosis, and malaria; the only health-related deadline they set, was a promise to work to eliminate polio by 2005. The G-8 did "promise" to pay their share of up to $1 billion needed to top up a debt-relief program for poor countries.
The G-8 also said it would provide additional support for efforts to bring peace to the Congo and to Sudan, and help support peace in Angola and Sierra Leoneall of which countries have significant natural resources coveted by the West. The leaders of Britain, Canada, France, Germany, Italy, Japan, Russia, and the United States said that half or more of new aid for development, which they already promised last March in Monterrey, might go to African countries that root out corruption; this is to be decided country by country. The group also promised to provide technical and unspecified financial assistance for an African peacekeeping force.
Financial Turmoil in Ibero America Escalates
Despite appearances, "calm" is non-existent anywhere in Ibero-America. A summary of the latest developments:
Uruguay: The Central Bank was forced to take over the Banco de Montevideo, the country's fourth-largest bank, on June 21, due to illiquidity and other "irregularities." Its owners, the Peirano family, are stockholders in Argentina's Banco Velox and Disco supermarkets, as well. Thus, the Banco de Montevideo, suffered the same fate as the Banco de Galicia, and Banco Comercial, both owned by Argentines as well as foreign banks. The Central Bank also had to take over the Caja Obrera (a workers' savings bank), owned by the Banco de Montevideo. The June 19 float of the pesoa devaluationcontinues to spark protest: At least 70% of the debts held by the Uruguayan people are in dollars.
Paraguay: The economy is barely holding together70% of its foreign trade is with Brazil. The very shaky government is trying to negotiate a $220-million loan with multilateral lenders, to bolster reserves and defend the currency, the guarani, which has nosedived by 17% this year. The World Bank says it is negotiating to provide Paraguay with "financial armor"the same term describing IMF/World Bank loans granted Argentina in 2000 and 2001, which were supposed to have protected it from "shocks." It didn't do much good in Argentina, nor will it in Paraguay.
Ecuador: Negotiations for a $240-million IMF loan are going nowhere, because the government refuses to impose the austerity conditionalities the Fund demands. The situation is extremely unstable.
Ibero-American Currencies All on Same Downward Track
Brazil's real lost 1.79% on June 26, hitting 2.879getting close to its all-time low. The Mexican peso lost nearly 1%, and is nearing, at 9.9490, the 10-to-the-dollar level deemed "psychologically important" to the faint of heart. Chile and Venezuela's lost another three-quarters of a percentage point, each, both reaching near-record lows again. Argentina's peso, of all things, was the "bright spot," coming off the utter disaster of four to the dollar hit on June 25, to close at 3.84.
|