LATIN AMERICA
Argentina
Argentine President Nestor Kirchner's approval rating fell to 52 percent in June from57 percent the previous month, according to pollster Poliarquia. The president's ratings have fallen from as high as 82 percent in February 2002. The president's image has suffered as Argentines cope with cold weather and energy rationing coupled with food shortages stemming from the second-fastest inflation rate in South America. Kirchner, 57, has said he or his wife, Senator Cristina Fernandez de Kirchner, may run for president in October.
Brazil
Brazil's central bank raised its economic growth forecast for this year to 4.7 percent from a previous estimate of 4.1 percent in March. In addition, policy makers lowered their 2007 inflation forecast to 3.5 percent from an earlier estimate of 3.8 percent, according to the central bank's quarterly report on inflation released on its Web site today. For 2008, the central bank lowered its estimate for consumer prices to 4.1 percent compared with a previous 4.4 percent, the report showed. Central bankers, led by Henrique Meirelles, lowered the overnight lending rate by half a percentage point to 12 percent on June 6. The bank has cut the rate from a high of 19.75 percent in September 2005.
Brazil's foreign currency reserves surpassed the country's foreign medium- and long-term debt, the Estado news agency reported. Foreign reserves rose by $736 million last Tuesday and reached $145.501 billion, the agency said without citing where it got the information. That was more than the $145.401 billion in foreign medium- and long-term debt at the end of April, the latest data available, Estado said. The rise in foreign reserves Tuesday came in part from a recent 750 million Brazilian real ($386 million) reopening of the Treasury's 2028 bond, and from central bank dollar purchases at a spot market auction Friday, according to Estado.
Mexico
Mexico may win a credit rating increase should President Felipe Calderon push legislation through congress that would boost tax collection, said Joydeep Mukherji, a sovereign ratings director at Standard and Poor's. The government last week sent legislators a proposal to boost annual tax revenue by the equivalent of 3 percent of gross domestic product in an effort to ease Mexico's dependence on oil export income and keep the budget deficit in check. Calderon's success in pushing a bill through opposition-controlled congress to cut pension spending in March, just four months into his term, has sparked optimism that he'll be able to cobble together the votes needed for the tax bill. Calderon has courted opposition support through telephone calls and meetings in a bid to break the political logjam that torpedoed the legislative efforts of his predecessor Vicente Fox.
Venezuela
Bond prices suffered last week, especially CDS spreads on oil company PDVSA widened significantly on fears of a technical default.
Colombia
Fitch upgraded Colombia's ratings to one level below investment grade, citing improved debt dynamics, disciplined fiscal policies, and the government's continuous debt liability management. The outlook on all the ratings is stable.
Moody's revised the outlook on Colombia's ratings to positive from stable, citing improvement of key debt rations as a result of a recovery in growth and continued fiscal restraint.
Colombia's economy grew a higher-than-expected 8 percent in the first quarter of this year compared with a year earlier, driven by strong expansion in construction and industry. Quarterly growth was 8.09 percent without including illicit drug crop cultivation. With that data, the growth was 7.98 percent, according to the DANE government statistics agency. Analysts and the government had expected economic growth for the first quarter at around 6.5 percent to 7 percent. The Andean country is enjoying strong growth as President Alvaro Uribe draws more foreign investment by cracking down on the armed groups fighting a four-decade-old insurgency fueled by the drug trade.
AFRICA & MIDDLE EAST
Turkey
The European Union agreed to extend membership talks with Turkey to two new policy areas but stopped short of opening discussions on the key area of economic and monetary policy, central to EU membership. Ambassadors decided the EU would open talks with Ankara on the statistics and financial control negotiating chapters at an accession conference on Tuesday in Brussels, a German EU presidency spokesman said. But the presidency left the third area off the agenda after France made clear it would block starting talks on that politically sensitive issue to mark President Nicolas Sarkozy's opposition to eventual Turkish EU entry, diplomats said. A Turkish foreign ministry official said Ankara was unhappy with the fact that the bloc did not agree to start negotiations on the more important area of economic and monetary policy.
The Turkish government agreed to give state workers a 10 percent pay rise for 2007, more than double its inflation target, ahead of general elections next month. The rise would be backdated to January. Turkish inflation target for 2007 is four percent, but the actual rate is hovering near 10 percent. The 323,000 public workers' wages would be raised by 3 percent in the first half of 2008 and by another 3 percent in the second half. If inflation exceeds the pay rise in 2008, then the government will pay compensation, the minister said. Turkey will hold general elections on July 22. The pay rises would cost 800 million lira ($600 million) in extra state spending.
ASIA
Philippines
The World Bank sounded the alarm over the Philippines' failure to meet its five-month revenue target, saying it puts in question the state's ability to sustain its fiscal reforms and meet deficit goals. Outgoing country director Joachim Von Amsberg said the government should improve the efficiency of its tax collections and protect revenue collectors from political pressure. The country has set a budget deficit goal of 63 billion pesos ($1.3 billion), or 0.9 percent of GDP, for the year. But financial markets are building in expectations the government will miss its full-year target for the first time in four years as tax collections disappoint. Total revenues for the first five months of the year reached 432.6 billion pesos, 8 percent short of the government's internal targets, and inefficiencies in tax collection and administration were blamed for the shortfall. Amsberg said the government must get better at collecting what it is owed by fully implementing tax laws and reforms already in place. He added: "The second element is just absolute steadfast political support to protect the revenue generating agencies and that requires political commitment from the highest level to ensure that the tax collectors can do their job effectively and for the benefit of public coffers." The Bureau of Internal Revenue (BIR), which accounts for about two thirds of state revenues, has yet to bring about the conviction of an evader since it launched a campaign against tax evasion in 2004. It lost high-profile tax cases this year after local courts dismissed tax evasion charges against former first lady Imelda Marcos and one of the country's richest man, Lucio Tan, for lack of evidence. President Gloria Macapagal Arroyo sacked the head of the BIR this month for failing to meet targets. Finance Secretary Margarito Teves has insisted the government will meet its full-year budget deficit target with the help of privatisation proceeds estimated to reach 105 billion pesos. The Philippine central bank expects annual inflation in June to come in between 2.2 and 2.9 percent after 2.4 percent in May largely due to higher oil prices and spending related to the start of the school year, the governor said.
EMERGING EUROPE & CIS
Poland
The central bank of Poland raised its main interest rate by 25 basis points to 4.5 percent to combat soaring wages and growing inflation pressures, surprising markets and sparking speculation of at least one more increase this year.
Russia
Russia c.bank sees June inflation at 0.6 pct. Russia targets 8 percent inflation in 2007 but consumer prices rose by 4.7 percent in the first 5 months of the year as inflows of capital continue to push up money supply growth. After strong private capital inflows at the start of the year the central bank upped its full-year inflows forecast to $70 billion from $35 billion while many analysts raised doubts about the bank's ability to meet the inflation target.
Ukraine
Ukrainian President Viktor Yushchenko wants to change the constitution to create upper and lower houses of parliament, reduce the number of lawmakers and shorten theirterms in office. Yushchenko, who wants to move Ukraine closer to the European Union, dissolved parliament on April 2 and called early elections for Sept. 30. He accused the ruling coalition of bribing opposition lawmakers to oust him.
Ukrainian prime minister Viktor Yanukovych??™s political party was backed by 32 percent of voters in a May 31-June survey. Former Prime Minister Yulia Timoshenko's alliance ranked second with 17.9 percent, while President Viktor Yushchenko's Our Ukraine party came in third with 8.5 percent, the poll showed.
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