FSG’s analysts are constantly speaking with senior executives in emerging markets and staying on top of the latest headlines from around the world. In this week’s Emerging Market View, the top themes include currency volatility, reform and growth in Europe, and stability in the Middle East and Africa.
Ryan Brier, Head of Latin America Research, recently read an article on Latin America’s weak currencies. According to Ryan, “the high commodity prices and strong currencies which boosted growth and earnings for multinationals in Latin America over the past few years have come to an end, a fact that will force regional executives to adjust their approach to the region over the next few years.” However, the currency volatility was not entirely unexpected. FSG’s Christine Herlihy (@crherlihy) alluded to Argentina’s peso devaluation, as well other Latin America currencies currently suffering from volatility.
Across the Atlantic, a note of good news from Greece indicating reform and growth within the eurozone as the FT reported Greece reaching a deal with lenders. “Greece unlocked a 10 bn euro aid tranche of its second bailout, boosting confidence that Greece is on the way to recovery. Importantly, there will be no more across-the-board public job cuts. A third bailout may still be necessary, but this step forward could help avoid a political crisis that would reverse the difficult reforms that Greece has instituted so far,” said Lauren Goodwin, FSG’s Senior Analyst for Western Europe. Though Italy’s sweeping tax cuts and consequential debt increase levels sentiment for recovery, Lauren adds, “a move away from austerity would help Europe to recover, but Italy’s tax cuts could upset political stability. The deficit, currently 2.6% for 2014, will increase due to the tax cuts. A deficit higher than the EU limit of 3.0% would not only raise Italy’s debt load but also raise investor skepticism that Italy is on the right track, raising interest rates and increasing the probability of crisis.”
And finally, FSG’s Practice Leader for the Middle East & North Africa, Matthew Spivack (@IMaSpiv), is following the Ukraine crisis’s impact, or rather lack thereof, on the Iran nuclear talks as reported by Reuters. Matthew notes, “early indications are that the Ukraine crisis isn’t impacting today’s Iran talks according to EU diplomats attending negotiations in Vienna. And it is important to remember that Iranian-Russian relations, although warming recently, aren’t totally aligned. For example, Iran could be positioned to steal away Russia’s natural resource customers in Europe if relations are normalized with the West.”
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