Aurelia Butler

“Colombia qualifies for the (FCL) by virtue of its very strong economic fundamentals and institutional policy frameworks and track record of implementing very strong policies and commitment to maintaining such policies,” the Fund said.The Andean country last drew about $5.4 billion on December 2020 from an FCL agreement approved earlier that year to address the COVID-19 pandemic, and did not withdraw from FCLs approved in 2016 and 2018, IMF data show.The Fund said Colombia remains vulnerable to external risks including inflationary pressures and a spike in risk premia, and this new credit line will reinforce market confidence in the oil exporter.Colombia’s central bank applauded the approval and said it serves as a cushion in case of emergency, along with the country’s $58 billion in international reserves.”The line is precautionary and in principal they are resources that won’t be used but it is very important to have them in case of a crisis situation occasioned by circumstances outside of our country,” central bank board chief Leonardo Villar said.”They are resources which make international investors, international lenders willing to lend to us when we need because they know we have this cushion for unexpected circumstances,” he added.Colombia’s economy grew a record 10.6% last year after shrinking 6.8% in 2020 amid the coronavirus pandemic. The government projects the economy will expand 5% this year. More

OTTAWA (Reuters) – Canada recorded its second surplus of fiscal 2021/22 in February, as its budget deficit for the first 11 months of the fiscal year shrunk considerably compared with the year-ago period, the finance ministry said on Friday.The February surplus was C$5.47 billion ($4.28 billion) compared with a deficit of C$14.37 billion in February 2021, the data showed.The April to February shortfall was C$69.82 billion compared with a C$282.56 billion deficit in the year-ago period, as the costs of the COVID-19 pandemic continued to recede.”As expected, the government’s 2021–22 financial results show a marked improvement compared to the peak of the COVID-19 crisis,” the finance ministry said.April-February revenues grew by 34.9%, led by higher tax revenues and other revenues. Program expenses fell 23.2%, largely on lower emergency transfers to individuals and businesses.Canada’s fiscal year runs from April to March.($1 = 1.2773 Canadian dollars) More

LONDON (Reuters) – The dollar’s race to two-decade highs is leaving a trail of destruction in its wake, exacerbating inflation in other countries and tightening financial conditions just as the world economy confronts the prospect of a slowdown in growth.This year’s 8% gain against a basket of currencies is driven partly by bets that the U.S. Federal Reserve will raise interest rates faster and further than other developed countries, and partly by its status as a safe haven in times of turbulence.It is also supported by Japan’s reluctance to ditch its super-easy policies, and fears of recession in Europe. Here are some areas affected by the dollar’s muscle-flexing: Graphic: FX returns this month – https://fingfx.thomsonreuters.com/gfx/mkt/zgpomlzrypd/Fx%20returns1.JPG 1/EXPORTSCurrency weakness normally benefits export-reliant Europe and Japan, but the equation may not hold when inflation is high and rising.Euro zone inflation hit a record 7.5% this month, although so far European Central Bank policymakers blame it mainly on energy prices.Bank of Japan boss Haruhiko Kuroda still views yen weakness as a positive for Japan, but lawmakers fret that the yen, at 20-year lows, will inflict damage via costlier food and fuel. Half of Japanese firms expect higher costs to hurt earnings, a survey found.2/ TIGHTENING BECOMING FRIGHTENINGA rising U.S. dollar tends to tighten financial conditions, which reflect the availability of funding. Goldman Sachs (NYSE:GS) estimates that a 100 bps tightening in its widely used proprietary Financial Conditions Index (FCI) crimps growth by one percentage point in the following year. The FCI, which factors in the impact of the trade-weighted dollar, shows global conditions at their tightest since 2009. The FCI has tightened by 120 basis points in April alone, as the dollar has strengthened 5%. Emerging markets tend to have especially high levels of dollar debt. EM conditions have tightened 190 basis points this month, led by Russia, Goldman’s FCI shows.The U.S. FCI is at its tightest since July 2020.”It has got to be concerning, given everything else that’s going on. This is just the time you don’t want too much tightening of conditions,” said Justin Onuekwusi, portfolio manager at Legal & General Investment Management. Graphic : Borrowing costs – https://fingfx.thomsonreuters.com/gfx/mkt/egvbkeqnzpq/borrowing%20costs.JPG 3/ THE EMERGING PROBLEMAlmost all past emerging market crises were linked to dollar strength. A 10.5% jump in 1993 followed by a 4.6% rise in 1994 for instance were blamed for triggering the “Tequila crisis” in Mexico, which was followed by meltdowns in emerging markets in Asia, as well as Brazil and Russia.Dollar strength means higher revenues in local currencies for commodity-exporting developing countries. But the flip side is higher debt servicing costs. Median foreign-currency government debt in emerging markets stood at a third of GDP by end-2021, Fitch estimates, compared to 18% in 2013. Several developing countries are already seeking IMF/World Bank assistance, and further dollar strength could add to those numbers. Graphic : Emerging market currencies – https://fingfx.thomsonreuters.com/gfx/mkt/klvyklbkevg/emerging%20FX.JPG 4/NO RELIEF ON COMMODITIESThe rule of thumb is that a firmer greenback makes dollar-denominated commodities costlier for consumers who use other currencies, eventually subduing demand and prices. This year, however, tight supplies of major commodities have prevented that equation from kicking in as the Ukraine-Russia war has hit exports of oil, grain, metals and fertiliser, keeping prices elevated. “When you see what’s happening in Eastern Europe, it swamps anything the dollar is doing,” LGIM’s Onuekwusi said.5/GOOD FOR FED?The Fed might welcome a rising greenback that calms imported inflation — Societe Generale (OTC:SCGLY) estimates a 10% dollar appreciation causes U.S. consumer inflation to decline by 0.5 percentage points over a year.If dollar gains continue, the Fed won’t need to tighten monetary policy as aggressively as anticipated; notably, the dollar surge of the past week has also seen money market bets on Fed rate hikes stabilise. BMO Markets’ analyst Stephen Gallo says if the Fed’s trade-weighted dollar index were to break above pandemic-time highs — it is currently 2% below that level — “that might be something that would be enough to cause the Fed to deliver a less-hawkish hike next week”.That might well mark the top for the dollar, he added. Graphic: Fed funds target rate and the dollar https://fingfx.thomsonreuters.com/gfx/mkt/akvezynqdpr/Fedfundsand%20dollar.PNG (This story refiles to add reporting credit. No change to text) More

BRASILIA (Reuters) – Brazilian President Jair Bolsonaro signed a decree to cut taxes on industrial products (IPI) by 35% effective on May 1, a deeper tax cut than the 25% reduction that is in force now, an effort he says will boost economic activity as the country emerges from the pandemic.The IPI tax is levied on industries that make and import manufactured products, like refrigerators, cars, air conditioners and televisions.The decree, which does not need to be approved by Congress, will lead to a decrease of 15.2 billion reais ($3.08 billion) in government revenues this year.Considering the 25% reduction in force for the last two months and the additional cut announced now, the tax waiver will reach 23.4 billion reais in 2022, according to the Economy Ministry. Revenues will also decrease by 27.4 billion reais in 2023 and 29.3 billion reais in 2024, the government added.Brazil says the tax reductions, first announced in February, are aimed at helping industries recover from the pandemic downturn and fight inflation by enabling companies to reduce prices.The move comes despite earlier reservations about its legality. In March, Economy Minister Paulo Guedes pledged the IPI cut would be extended to 33% from 25%, but Bolsonaro decided against the move as questions about the legality of the measures were raised. An injunction request filed by the Republican Party of the Social Order (PROS) in the Supreme Court questioned the tax cut’s constitutionality, arguing that it threatened the Manaus Free Trade Zone in the state of Amazonas.Companies operating in the Manaus Free Trade Zone are exempt from paying IPI, and can generate credits equivalent to the industrial tax and make deductions from other tax obligations. The lower the IPI rate, the smaller their potential credits, which reduces their fiscal advantage.The government spared products representing around 76% of the Manaus Free Trade Zone’s revenue from the new tax cut, leaving them with a 25% reduction in industrial tax.The 18.5% tax cut for vehicles announced in February was not increased, and the government kept the exclusion of tobacco products from any benefit.($1 = 4.9385 reais) More

Good evening,Apple’s forecast of an $8bn hit from problems, including supply chain shortages and factory shutdowns in China, underlines the fact that pandemic disruption to global business is far from over.Half of the company’s 200 top suppliers have operations in the Shanghai area, where restrictions are having a severe impact on business, according to Nikkei Asia analysis. Most of these companies also serve other multinational giants such as Google, Microsoft and Intel, as well as domestic companies such as Huawei, Xiaomi and Oppo.Problems in China have been a recurrent theme during first-quarter earnings season.Intel, the biggest US chipmaker by revenue, cited the lockdowns as the reason — in combination with the war in Ukraine — for the weakening outlook for PC sales. Texas Instruments too was downbeat, cutting its growth forecast on concerns that some Chinese customers would have to suspend operations.Conglomerate General Electric also reported China-related supply chain problems, warning of the effect on its full-year results, while carmaker Volvo said it was looking beyond China for auto parts to limit disruption from Covid-19 restrictions. “The longer the pandemic stretches, the more uncertainty there is. We have already implemented a strategy of ‘make where we sell’ and ‘source where we make’,” said Volvo Car’s chief executive Jim Rowan.Experts and business figures have repeatedly warned of the economic damage caused by China’s zero-Covid policy. Even though the wave of Omicron infections has begun to fade, intercity restrictions are still in place, hitting links between suppliers and manufacturers. “The supply chain impact from this lockdown will be at least as bad, if not worse, than in spring 2020,” said Lu Ting, chief China economist at Nomura.The founder and chair of one of Asia’s biggest private equity investors said yesterday Beijing had caused a “deep economic crisis” comparable to the global financial crash. You can read more about Weijian Shan here.Recent panic buying in Beijing, where 20mn residents have been ordered to undergo three rounds of tests by Saturday, was taken as an ominous sign by Lu at Nomura who said: “We believe the worst is yet to come.”The government has belatedly recognised the problem. A statement from the Chinese Communist party today promised to “strengthen macro adjustments” and “achieve full-year economic and social development goals”. It also pledged more supportfor the country’s stricken property market and promised to use “every type” of currency policy tool. Although the announcement drove up Chinese stocks, which had been heading for the steepest monthly loss in six years, it sharpened the sell-off of the renminbi.The FT editorial board said last week that one of the key reasons for China’s problems was its reluctance to approve foreign mRNA vaccines, leaving its people to take less effective domestic jabs.It concluded: “Beijing now has a stark choice: start a mass vaccination programme using foreign mRNA vaccines or sustain the ruinous economic and social costs of continued lockdowns.”I’m disrupting my own time over the next month by taking a break from the newsletter. Jonathan Moules and colleagues will be your reliable guides to the world’s ups and downs until June 1. After a May Day break on Monday, the next issue of Disrupted Times will be in your inbox on Wednesday. (Darren Dodd)Latest newsUS labour costs and inflation gauge rise, heaping further pressure on Fed Colgate revenues buoyed by price rises as inflation hits profit margin Ineos owner Sir Jim Ratcliffe makes late bid to buy Chelsea FCFor up-to-the-minute news updates, visit our live blogNeed to know: the economyEconomic growth in the eurozone economy weakened during the first quarter, while inflation hit a new record in April, raising the spectre of stagflation. Germany was the only one of the four biggest EU economies to beat expectations, but showed just 0.2 per cent growth from the previous three months as inflation hit a new 40-year-high of 7.8 per cent. The European Central Bank admitted it had persistently underestimated inflation, blaming soaring energy prices, supply chain problems and a faster economic recovery from the pandemic.The European energy crisis continues. Brussels said European buyers of Russian gas would be in “breach” of sanctions if they accepted Kremlin demands for payment in roubles, after some companies were preparing to accept Russia’s demands. Here’s our explainer on Moscow’s rationale for cutting off gas supplies to Poland and Bulgaria plus some new research showing how Russia is still able to generate revenue from fossil fuel exports.Latest for the UK/EuropeGrowing calls from rightwing Conservative MPs to scrap the Northern Ireland protocol, which governs the province’s trading relationship with the UK and the EU, are being watched closely in Brussels. Business hit out at the UK government for again delaying full post-Brexit border checks and causing them to waste money preparing for a new regime.UK chancellor Rishi Sunak announced proposals to reform rules around insurance companies, in what has been billed as the first big break between UK and EU financial rules since Brexit, to allow them to invest more in infrastructure, including green energy.Official data show four in 10 UK households are having problems paying gas and electricity bills and are buying less food after the big jump in the government’s energy price cap. It’s also been a grim time for public sector workers whose wages have fallen behind those in the private sector with little hope that the government will rectify the situation.UK economic growth may be slowing but house prices certainly aren’t. The average price of over £267,000 is now up £52,000 since the start of the pandemic.Russia’s central bank cut its benchmark interest rate to 14 per cent as it tries to overcome the shock of western sanctions. It expects GDP to shrink by 8-10 per cent this year and return to growth in late 2023.Sweden’s central bank made a dramatic U-turn as it raised interest rates and said it would shrink its balance sheet, while warning of more increases to come as it belatedly responded to surging inflation. The Riksbank had said in February it would only lift interest rates from zero towards the end of 2024.Global latestThe US economy shrank unexpectedly in the first quarter, falling 1.4 per cent on an annualised basis after rising 6.9 per cent in the fourth quarter of 2021, its first contraction since mid-2020. The headline figure was pulled lower by a record trade deficit in March as import volumes and prices surged. The dollar hit its highest level in 20 years on Thursday, as investors increased bets on aggressive interest rate rises from the Federal Reserve.The yen on the other hand fell to a 20-year low after the Bank of Japan defied the global trend towards higher rates and vowed to keep bond yields at zero.China’s pension reforms are attracting international investors such as BlackRock. The country’s pension market reached Rmb12tn ($1.8tn) at the end of 2020, doubling from 2014, according to EY, but new products for the private retirement scheme could fuel a massive expansion.As pandemic restrictions fall away, a scramble for rented property across the world is leading to spiralling prices and bidding wars. FT House and Home examines the global rental squeeze.Need to know: businessThe public spat between Twitter’s bosses and prospective new owner Elon Musk presages some significant personnel changes if Musk is successful. He has raised almost $4bn from selling part of his stake in Tesla, boosting his cash position as he pushes ahead with the deal. The company recently admitted overstating its audience figures.Join our special subscriber event on May 4 for a virtual briefing on Elon Musk’s takeover attempt. Send your questions in advance and claim your free pass here.Nearly 75 per cent of European companies have beaten profit forecasts and 86 per cent of US businesses have reported a more upbeat picture than expected during first-quarter earnings season, according to Barclay’s research, even as costs have risen and the geopolitical outlook darkens.US oil giants ExxonMobil and Chevron reported stellar quarterly earnings on the back of surging crude and gas prices. Total benefited similarly despite a $4.1bn charge from a project hit by sanctions. The company has not yet explained how it plans to exit its various holdings in Russia, but has said it would halt all new investment and phase out oil and diesel purchases. Our Energy Source newsletter examines whether the surge in oil and gas prices will hasten the move to greener energy.Amazon shares dived after the company reported its slowest-ever revenue growth in the first quarter, as online retail sales dropped and costs increased, while rapid expansion left it overstaffed. But overall revenue of $116.4bn was still 7 per cent higher than last year.Reckitt Benckiser became the latest consumer products group to start passing on increases in commodity costs to customers. Price rises of more than 5 per cent in the first quarter helped compensate for the fall in disinfection demand as Covid-19 restrictions eased. At Unilever, the overall jump in prices was more than 8 per cent. The company has been hit by Indonesia’s ban on exports of palm oil exports, which it uses for everything from soap to ice cream.Business insolvencies in England and Wales hit a 60-year high in the first quarter as inflation and supply chain problems began to bite. Separate data showed nearly a quarter more UK businesses closed during the first three months of this year compared with last year. Around 137,000 have shut, the highest number since comparable data began in 2017.J Sainsbury, the UK’s second-largest supermarket, said “significant external pressures and uncertainties” would affect this year’s profits. The Big Four chains are all keen to avoid repeating the strategic blunders of the financial crisis, when they ceded share to discounters Aldi and Lidl by trying to keep profit margins up rather than cutting prices.Renault is in talks to sell its majority stake in Lada carmaker Avtovaz to a Russian state institute for one rouble, in one of the starkest examples yet of the vanishing exit options for foreign companies trying to leave the country.The Latin American tech boom has been a rare bright spot in a region ravaged by the pandemic, but it risks becoming a blip unless governments improve investments in areas such as mobile and fixed broadband. Read more in our special report: The Americas’ Fastest Growing Companies. “Arguably the strangest thing to emerge from an English car park since they found Richard III under a Leicester pay-and-display.” The world’s first airport for flying taxis has opened on a nondescript patch of asphalt in Coventry.Science round-upScientists are investigating the reasons behind an unexpected rise in hepatitis cases in children and whether it could be linked to coronavirus.Climate change will accelerate the threat of viruses between animal species as they encroach on urban areas, creating the possibility of future pandemics, the journal Nature has warned.Health and science reporter Oliver Barnes reviews a new book on preventing the next pandemic by public health expert Devi Sridhar.Distribution problems, rather than supply, was the reason poorer countries had lower vaccination rates, argued two large shareholders in Moderna as they rejected proposals to transfer the pharma group’s vaccine tech to the developing world. The idea, drafted by Oxfam, was also on the agenda at Pfizer’s annual meeting.After gaining a significant boost during the pandemic, the UK science sector is attracting some of the world’s biggest property investors, drawn in by the high number of top-tier universities and research institutions plus strong support from venture capital and government.

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Get the latest worldwide picture with our vaccine trackerAnd finally . . . “We’ve been at this crossroads before. The true implications of data gathering on the internet crept up on us. We should be mindful to not let the same thing happen again.” San Francisco correspondent Dave Lee sends a warning about “the great post-Covid privacy creep”. More

It’s well known that Boris Johnson’s government is leaky, but had we realised the cabinet was also rickety? There are signs that its programme for rebuilding Britain is held together with the policy equivalent of cardboard, plastic sheeting and gaffer tape.Fears about the cost of living have rocketed to the top of the list when pollsters ask the public about their worries — Ipsos Mori this week shows inflation and prices at number one and poverty at number four, way above the NHS or immigration. In response to what is fast becoming a crisis for households, Rishi Sunak is under pressure to reverse his opposition to a windfall tax on privatised energy companies. But without a substantial intervention from the chancellor — who also dismissed helping people with soaring energy bills this early in the year as “silly” — the proposals being mooted by his colleagues look a little, well, shoddy.The latest “innovative ideas” include reducing the need for an MOT test on your car from annually to every two years, and allowing childcare providers to increase the ratio of toddlers to adults. This may be just kite flying, but these are some repeatedly patched-up kites. Veterans of deregulatory brainstorming in Downing Street confirmed that both proposals had been discussed and rejected in earlier trawls for cost-saving policies. Polly Mackenzie, chief executive of the think-tank Demos, was a senior policy aide in the coalition and involved in 2011’s “red tape challenge”. She calls the process “spurious and speculative and based on political judgments about who wants to avoid being blamed” when people get harmed as a result. Previous discussions, she recalls, raised the possibility of lifting the ban on children’s nightdresses and dressing gowns made from flammable materials. It dates back to an era of electric bar fires and open hearths — modern central heating is much safer if you are a child twirling around in nylon with ties and tassels. But who wants to be the minister responsible for the first accidental deaths caused by relaxing regulations? A wish list of cost-saving policies based on looser health and safety will never work, argues Mackenzie, because even if the balance between lives saved and regulatory burden has become less defensible, “it puts the political onus on not changing anything”.Last time increasing nursery ratios was suggested, in 2013, it became a battle between Liz Truss, as an education minister, and Nick Clegg, then deputy prime minister and Mackenzie’s boss. Clegg nixed it on safety grounds. I remember another Lib Dem minister describing the row: it was game over once they imagined headlines about tots choking unnoticed on inhaled toys.Discussing the rickety policymaking in Whitehall, a recent debate between former senior civil servants and ministers came up with a host of reasons. “Churn” of officials and ministers was damaging, they agreed, as were excessive rewards for “Whitehall warrior skills” (in negotiations with other departments) over real-world insights or specialist policy knowledge. And secrecy. Important decisions were being made behind closed doors — the lockdown of schools during Covid came up repeatedly. “What’s the trade off?” asked Gus O’Donnell, former head of the civil service. “We should make it much more explicit.”Perhaps ministers’ hunt for renovated ideas should just revel in its resemblance to a make-do-and-mend campaign. It could be televised as The Great British Policy Bodge. A bit like Repair Shop, the sleeper hit from BBC TV, but with the broken bits of UK public services strapped together by cabinet members (not makers) and the efforts, pitting savings against safety, put to a vote.Perhaps someone in a flaming nightie could host it? Just remember: don’t try this at [email protected] More