Aurelia Butler

Transnational criminal gangs have become such a serious problem in Latin America that they are damaging the region’s overall economic performance, according to a top IMF official.Rodrigo Valdés, the fund’s western hemisphere director, said governments in the region needed to work together to fight the illegal groups, whose activities — including drug trafficking, migrant smuggling and extortion — are damaging growth and investment and blighting the lives of citizens. Surging global demand for cocaine has fuelled the rise of bigger and more powerful drug cartels across Latin America. The gangs, some of which have links to organised crime in Europe, the US and Africa, have recently expanded smuggling routes, causing bloodshed in the region’s formerly more stable countries such as Ecuador, Chile, Paraguay and Uruguay.Research by the fund, to be published at its annual meeting next month in Marrakech, showed that “having a higher murder rate is more than correlated [with] . . . lower economic performance, in terms of growth, in terms of investment”, Valdés said, noting that polls across the region showed rising crime to be the first or second biggest concern for citizens.“It’s not a global concern, but for [Latin America], this has to be a priority,” he told the Financial Times.Valdés, a Chilean economist and former finance minister who took up the IMF post in May, said the crimewave was also related to problems in society such as “horrible” income distribution and a wider lack of opportunities but added: “We have to work on the efficiency of the state to control crime.”

Argentina, where inflation has hit 114%, has repeatedly missed economic targets on the 30-month IMF extended fund facility agreed last year © Rodrigo Abd/AP

The IMF official praised Latin American nations in a blog this week for responding “appropriately” to the coronavirus pandemic, saying governments spent more to tackle Covid-19 — like other countries — but then withdrew the additional spending more promptly, helping to avoid excessive debt and control inflation. He also praised regional central banks for acting with “exceptional swiftness” to raise interest rates earlier and higher than elsewhere.But governments now needed to ensure a stable and predictable investment environment and boost productivity through increased spending on health and education for the region to benefit from the transition to clean energy and the relocation of production closer to big consumer markets, Valdés said.“Energy and climate change is one issue that will make the region very important,” Valdés said. “We have the mining side and also green hydrogen — and the nearshoring of production chains because of geopolitical and security considerations.“We have to do things [to benefit]. It’s very important to think about how to have regulatory rules that are more coherent and stable,” he said, adding that investors needed reassurance that rules would not be arbitrarily changed.

Argentina is the IMF’s biggest single debtor with a $44bn bailout programme, a successor to a failed $57bn bailout plan agreed in 2018. The South American nation, where inflation has hit 114 per cent, has repeatedly missed economic targets on the 30-month IMF extended fund facility agreed last year. Private investors have criticised the IMF for not insisting on stricter conditions and deeper structural reforms for Buenos Aires. But Valdés defended the fund’s latest review and disbursement of $7.5bn last month, saying the “alternatives were even worse”. He said: “It doesn’t solve all the problems of Argentina but it’s a combination of devaluation, tight monetary policy, tight fiscal [policy] that should help to secure stability.“It was a good decision by the fund to do this review with all the policy action attached. We’re in a world of third bests here, because of the history that we have in Argentina and because we’re in the middle of elections.” Javier Milei, the libertarian candidate who won Argentina’s primary election last month, has proposed dollarising the economy and closing down the central bank to slay inflation if he wins the presidential poll in October.While dollarisation would be a sovereign decision for Argentina, the IMF would want to see certain conditions met if Buenos Aires opted for it. “The fiscal [side] has to be in order,” Valdés said. “The second thing is that probably you need in the long run for this to more or less work OK is labour markets and product markets that are pretty flexible.”“Before orderly dollarising, you need a degree of nominal stability,” he added. “It’s something we need to continue discussing depending on the election result.”  More

The monetary authority previously expected an economic expansion of as much as 0.25% this year. It maintained the lower end of its GDP forecast at a 0.5% contraction.The South American country’s economy should rebound by next year however, the central bank said, with GDP growth expected between 1.25% and 2.25%.Chile’s central bank has fought to contain inflation, and on Tuesday cut its benchmark interest rate by 75 basis points to 9.5% as price pressures have eased more quickly than expected.The central bank expects cuts to continue, it said on Wednesday, closing the year with a benchmark interest rate between 7.75% and 8%.Annual inflation in Chile slowed to 6.5% in July, and is expected to fall to 4.3% by the end of the year, the bank said.It is forecast to come down to the target of 3% in the second half of 2024, the central bank said, taking into account the slowdown in recent months, the peso’s depreciation and high fuel prices internationally.However, “the external scenario continues to be marked by high uncertainty,” the monetary authority warned. More

In recent weeks, staff were given the instructions by their superiors in workplace chat groups or meetings, according to the report, which added that it wasn’t clear how widely the orders were being distributed.The ban comes ahead of an Apple event next week that analysts believe will be about launching a new line of iPhones, and could trigger concerns among foreign companies operating in China as Sino-U.S. tensions escalate.The WSJ report did not name other phone makers besides Apple. Apple and China’s State Council Information Office, which handles media queries on behalf of the Chinese government, did not immediately respond to Reuters’ requests for comment.The iPhone maker’s shares fell 0.7% in premarket trading.For over a decade, China has been seeking to reduce reliance on foreign technologies, asking state-affiliated firms such as banks to switch to local software and promoting domestic semiconductor chip manufacturing.Beijing ratcheted up this campaign in 2020, when its leaders proposed a so-called “dual circulation” growth model to reduce reliance on overseas markets and technology, as its concerns over data security grew.In May, China urged big state-owned enterprises to play a key role in its drive to attain self-reliance in technology, raising the stakes in the race amid rifts with the United States.Sino-U.S. tensions have been high as Washington works with allies to block China’s access to vital equipment needed to keep its chip industry competitive, and Beijing restricts shipments from prominent U.S. firms including planemaker Boeing (NYSE:BA) and chip company Micron Technology (NASDAQ:MU).Several analysts said on Wednesday that the reported move showed Beijing was not willing to spare any U.S. company in its push to reduce its dependence on American technologies.”Even Apple is not immune … in China where it employs hundreds of thousands, if not more than a million workers, to assemble its products through its relationship with Foxconn,” D.A. Davidson analyst Tom Forte said.This “should inspire companies to diversify both their supply chain and customer concentrations to be less dependent on China in the event the tensions get worse.”China is one of Apple’s biggest markets and generates nearly a fifth of its revenue.No immediate impact is expected on earnings, however, considering the popularity of the iPhone in China, CFRA Research analyst Angelo Zino said.During a visit to China last week, U.S. Commerce Secretary Gina Raimondo said U.S. companies had complained to her that China had become “uninvestible”, pointing to fines, raids and other actions that have made it risky to do business in the world’s second-largest economy.The latest restriction by China mirrors similar bans taken in the United States against Chinese smartphone maker Huawei Technologies and short video platform TikTok, owned by China’s ByteDance. More

Mercosur’s counterproposal follows a so-called side letter from the EU including environmental safeguards to address strong reservations expressed by many EU member countries about the deal, which has been under negotiation for two decades.”I can’t guarantee the EU will accept it, but we will negotiate,” Vieira said in a radio interview, adding that negotiators from both sides had met virtually this week and will gather in person later this month in Brazil.Vieira said Mercosur wants the EU to be “more flexible” on potential sanctions that could be imposed on the South American countries in case they failed to fully comply with European deforestation standards.The minister said that Brazil already had a clear environmental policy in place since President Luiz Inacio Lula da Silva took office in January, highlighting its goal of halting illegal deforestation in the Amazon (NASDAQ:AMZN) rainforest by 2030.Lula has previously said the EU side letter contained unacceptable “threats” to penalize countries.”We are confident about the negotiations,” Vieira said. “Both the EU and Mercosur have expressed how strategic this deal is.”Brazil and the other Mercosur nations, he added, are “clearly” committed to working to protect the environment. More