In Brazil, industrial output dropped in January by 17% YoY. As mentioned before, it’s not wise to take the January figures as gospel because it’s the main vacation season and this year the numbers were particularly boosted by the enforced holidays at car plants and suchlike. February numbers will give us a better idea just how much of a slowdown we’re seeing. Your article-scanning Otto checked a few sources on Brazil industry between yesterday and this morning and the kinda anecdotal slowdown figure being bandied about is 10%. Let’s see how it comes out, but 17% is way high on an annualized basis, methinks.
In Ecuador, inflation is not a problem anymore. You can tell that the central bankers aren’t thinking twice about it as they dropped the bank reserve requirement to just 2% to add an estimated U$270 to U$290 of much-needed liquidity to the system. The problems of not having sovereign control over your currency are complicating everything, of course, and Correa’s main response from a limited toolbox has been to put import controls and tariffs on goods shipped into Ecuador, which should help people move away from ever cheapening goods from Peru, Colombia etc and to locally made alternatives. Of course we’ve had the free-trade genuflectors calling it a draconian measure. These people would also be the first the criticize when Ecuadorian factories close down in the face of cheap imports and blame Correa for that, too.
In Peru, Velarde at the Central Bank dropped its baseline rate another quarter point to 6% last night. No surprises there, and even the dumbasses in suits got this no-brainer right. The Nuevo Sol is trading at S/3.28 to the greenback this morning. Depends on general dollar strength of course, but all signs point to the Sol weakening further as those quarter points get chopped off monthly. The other number to watch carefully is the international reserves, as the BCRP is using a selective intervention policy to make sure the Sol doesn’t dive all in one go.
Talking of dives, the Argentine Peso is now trading at $3.62 to the dollar, having made a move from $3.50 in short order. Local analysts are predicting four-to-one by the end of the year. I have no real opinion but I did enjoy this article yesterday entitled “Strong Dollar + Cheap Steaks = More Douchebags in Argentina”. I’m not against other gringos coming down here to live, but the ones that refuse to learn Spanish, don’t even attempt to respect local cultures and attitudes or just spend their time moaning about how things just aren’t the same here are they?…..those need a good bitchslapping and a return ticket.