• Country Risk1 300Argentina – catching up on import payments;
  • Belarus – a devaluation and dramatically higher interest rates;
  • Nigeria – FX market activity has dried up;
  • Romania – interest rate cuts; Venezuela – claims of extensive Chinese financial help.

ARGENTINA: An opportunity for a deal with the holders of un-restructured Argentine debt has come and gone with the turn of the year, and there is no sign that the regime is in the mood to yield to growing pressure for an arrangement. It will most likely hang on until it can drop the whole problem into its successor’s lap.

BRAZIL:  Following a bitterly fought election campaign, Pres. Rousseff began her second term in office in word and deed with promises to confront in earnest the problems of near-zero growth, stubbornly high inflation, growing deficits and a potentially explosive corruption scandal at the state-controlled oil giant Petrobras. The shift will be politically difficult to make.

GERMANY: The year 2015 will prove to be a troubling one for Chancellor Merkel. Abroad, she will face a growing dilemma over France and Italy in addition to Greece and Russia. At home she will have to deal with the growing influence of anti-immigration and Eurosceptic fringe parties that gnaw at the edges of her governing alliance.

GREECE: The markets have been making it clear that the once daunting fears of a devastating contagion from a Greek exit from the Eurozone no longer exist. The markets could be wrong, however, and the impending elections could be inconclusive or result in a short-lived government.

KOREA (SOUTH): The Finance Ministry has cut its economic growth forecast for 2015, warning of external risks despite the steep drop of world market prices for oil and a large current-account BoP surplus. One concern is a massive pileup of household debt, which is sustainable only if the economic expansion picks up.

MEXICO: Given the plunge of oil prices, some of the forecasts for the economy look pretty grim these days. One should not forget, however, that the government has locked in a favorable export price with its petroleum hedging program. As for the peso, an improved outlook for the US economy is bound to benefit Mexico.

RUSSIA: The authorities have succeeded, for now, in staving off a bank debacle and in preventing a total collapse of the ruble. The measures taken, however, are not decisive enough to offer lasting relief and the underlying situation remains quite critical for the banking sector, the ruble, and the economy as a whole.

TURKEY: The CB is seeking to rein back FX borrowing before the US Fed raises interest rates. In the political arena, Pres. Erdogan’s drive to assemble ever more power in his hands is gaining momentum, as are his efforts to lead the country toward a stance better aligned with his religious mores.

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