Argentina, banished from international capital markets since its 2002 default, has suspended Procter & Gamble operations after accusing the manufacturer of tax fraud last Sunday, according to the Wall Street Journal.
“The Argentine government claims to have suspended P&G’s operations under the premise of tax fraud. However, the case truly centers on Argentina’s move to strengthen oversight over capital controls, and also serves as a political move against the US in response to the holdout saga,” says Senior Analyst for Latin America, Gabriela Mallory.
Meanwhile in Russia, the Central Bank withdrew support of the ruble, causing a new plunge in the currency while intending to eventually stabilize it. The bank, which spent $29 billion intervening for the ruble in October alone, said it would now spend no more than $350 million a day smoothing the currency’s fluctuations when it approaches the edge of a trading band, according to the Financial Times.
“MNCs should factor a prolonged weakness of the ruble into their 2015 plans. Without central bank support, the currency is unlikely to recoup most of its losses from this year,” says Head of Research for Europe, the Middle East, and Africa, Martina Bozadzhieva.
In Beijing, Chinese President Xi Jinping called for efforts to create and fulfill an “Asia-Pacific dream” on Sunday, according to China Daily. He said the region is “at a crossroads,” and emphasized issues of economic vibrancy, free trade and investment facilitation, better roads, and closer people-to-people exchanges.
“The recent development of FTAPP (Free Trade Area of the Asia-Pacific) indicates China’s role in the global arena has fundamentally shifted from a follower of the rules to an initiator who attempts to lead the regional integration. FTAPP could potentially delay the progress of Trans-Pacific Partnership (TPP), which has been long-promoted by US, thus counterbalancing the impact of its pivot to Asia,” says Senior Analyst for China, Shailene Zhu.
On Saturday, the Economist forecasted a very bad year for Brazil and Russia as they face falling currencies, high inflation, and slowing growth in 2015, among other global observations.
“Emerging market headwinds are varied and complex, but the deepening linkages in the global economy history make emerging markets particularly vulnerable,” said Associate Practice Leader of Global Analytics, Sam Osborn.
Check back next week for more FSG analyst commentary on the latest Emerging Markets headlines.