Ratings' revision of Brazil to Negative?

If there is a rating  Outlook downgrade on Brazil's Long-term foreign and local currency Issuer Default Ratings (IDRs)  which is Negative from Stable this  could be detrimental to the Latin American currencies as Brazil is a leading BRICS member. 

Is Lagarde's warning coming true?

Without any risk or responsibility.   

Another warning from IMF Chief

Christine Lagarde[1] cautions   “low-low, high-high” scenario: the risk of low growth-low inflation, and high debt-high unemployment persists for a number of advanced economies.

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Forecasts for most emerging and developing economies are slightly worse than last year, with lower commodity prices one of the main drivers. While they still represent more than two-thirds of global growth this year, there is tremendous diversity within this group. For example:

• India is a growth bright spot;
• China is slowing but growing more sustainably;
• Sub-Saharan Africa continues to perform strongly;
• Russia, on the other hand, is experiencing economic difficulties;
• Brazil is also stagnating;
• And many parts of the Middle East are beset by political and economic turmoil.

So we should not think of emerging economies as just one single group. Each country faces very specific circumstances, some of them easier, some of them more difficult.

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Clearly, all policy space and levers must be utilized. It begins with demand support.

Continued monetary accommodation is needed, especially in the Euro Area and Japan.

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Fiscal policy also needs to be calibrated to the strength of the recovery, without losing sight of debt sustainability over the medium term.

• Effective insolvency frameworks are crucial to tackle the private debt overhang and deal with the total stock of €900 billion in non-performing loans that is blocking credit channels.
• In Japan, the authorities need to sustain the momentum of the second and third “arrows”—fiscal consolidation and structural reforms—if the first arrow of monetary easing is to have the intended effect of lifting inflation and growth.
• By leveraging lower oil prices to reduce energy subsidies, emerging and developing oil-importers could save, on average, a full one percent of GDP in 2015—resources that could be reallocated to growth-enhancing investments such as infrastructure, education, or health.

These are some of the macroeconomic dimensions. What about the financial stability dimensions?

The bottom line is that risks to global financial stability are rising. The “new mediocre” growth environment is not a comfortable place with respect to financial stability.

Financial risks may have declined in some areas, but they have also been migrating to others—for example, from banks to non-banks, and from advanced economies toward emerging markets.

 Unquote 

Note: Without any risk or responsibility

[1] Managing Director, International Monetary Fund at Atlantic Council, April 9, 2015

Latin American Tremors: The 'Real ' Fears

Brazil's economic is in crisis on 4 fronts,

1. political uncertainty and corruption,
2. economic fundamentals being weak;
3. the depiction of the currency as an asset value loser and its fall,
4. and finally the sentiments of weakness in the economy which is self fulfilling.

Brazil's inflation rose  to decade high levels this week. With its currency in virtually a free fall,  it is a vicious cycle at play. The sentimental element is hitting price rises even more adversely. Efforts to tame inflation through the  interest rate will / has already affected towards contraction and recessionary tends. So there are all negatives on the economic front which is compounded by political agitations. From being a large economy, it is moving to vulnerable shocks.

Given the state of affairs, the wealthier locals will exit Brazil currency by the hordes  to hold assets in US Dollars. With the socio economic impact of an underemployed economy, fear will drive foreign investors away too. The locals would be among the first to exit the currency. After all the rioting calms, the Brazilians may try to rebuild. Until the, Brazil is in trouble.

There is  tumult and turmoil in the streets of Rio even as it is time for carnival. 

Wiythout any risk or rsponsibility.

Is Latin America the next crisis waiting to happen?

A million people marched in Brazil against the Government. The Real had already lost over 20  % this year against the dollar. Mexican Peso and Chilean Peso are also under pressure. With the strengthening of the dollar there is a strong exodus to that currency. Added to this, is the political storm in Brazil. It looks like a fall time this spring!

One can only see sell signs!

Views expressed without risk or responsibility 

Bloomberg says Brazil stocks to be in bear hug... .

Bloomberg News says Brazil will enter bear phase after 20% fall from September high...

Wall Street encouraged...

By European optimism and the weaknesses in oil. Cost of production will be held back by both lower input costs (oil, immigrants, outsourcing, choice of techniques) and focused technological up-gradation. As USA picks up steam, there is bound to be a flow out of emerging economies in to US assets. With Brazilian and Venezuelan currencies in marked decline, there will be a flight to dollar assets and dollarization. It will impact other Latin American currencies too; and should in its sweep shake up the Asians too. Middle East markets would be affected by the nearly 30% fall in oil prices and markets like Dubai will again see pressures of sale. 

Rupee Weak ...

With the Dollar in to long strides, emerging currencies will be under pressure. The depreciation in the Rupee is therefore on expected lines. US assets look good to the investor. So there will be flow in to quality. Europe is still an unsure bet despite the latest German data. With Latin America on a not so certain path, investors would seek out USA. That means Rupee along with other emerging currencies should be under pressure. 

A Tale of 2 Emerging Economies: Brazil & India

Brazil decided to  travel left of center.
India chose to travel right of center.
Brazil has to reassure markets, and Brazil might be sold off for a few sessions unless there are strong statements.
India, post election looks a winner. With the reforms back slowly though, on course, India is sought after by other economies as a potential growth area.
Brazil will face foreign investors exiting. If Mexico (1994) is an example, the nationals will leave before the foreigners!. Brazil losses have to be recouped elsewhere.

So BRICS is weakened a shade: China slowing, South Africa under gold declines, and Russia affected by oil declines and Ukrainian politics.