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1,300 | <s>[INST] Meanwhile, in Latin America, 1995 [/INST] was one of the most disastrous years ever. </s> |
1,301 | <s>[INST] 20, 1994, Mexican peso devaluation raised doubts about economic reforms [/INST] throughout the region, triggering a stampede from most local stock and bond markets that traders dubbed "the tequila effect". </s> |
1,302 | <s>[INST] Just holding on to a portfolio of stocks that more or less matched local [/INST] indexes for the year -- something almost no investor did because most sold in blanched fear as the peso careened to record lows -- produced mostly declines. </s> |
1,303 | <s>[INST] The Dow Jones Mexico Equity Market Index [/INST] rose 14.2% in peso terms, but sank 27.2% when measured in U.S. dollars. </s> |
1,304 | <s>[INST] Argentina was up 8.9% in dollar terms; Brazil fell 20%; Chile dipped [/INST] 5.8%; Colombia sank 28%; Peru jumped 23.5%; and Venezuela swooned 23.4%, according to Morgan Stanley Capital International's indexes for each country. </s> |
1,305 | <s>[INST] "It [was] a singularly unrewarding year for most" [/INST] Latin American investors, says Susan Hertzberg, managing partner at Latin Tactical Trading Group L.P. </s> |
1,306 | <s>[INST] However 1996 could be "an excellent year" in emerging markets, says Frank Fernandez, [/INST] chief executive at Global Emerging Market Advisors, L.P., who is holding on to sizable allocations in the Argentine, Brazilian, Mexican, Colombian, and Chilean markets. </s> |
1,307 | <s>[INST] CANADA Canadian economic health is dependent [/INST] upon the U.S., since 80% of all Canadian exports go south. </s> |
1,308 | <s>[INST] And so, Canadian investors [/INST] expect their market to track American stocks. </s> |
1,309 | <s>[INST] The Toronto Stock Exchange index of [/INST] 300 major issues ended the year at 4713, up 12%. </s> |
1,310 | <s>[INST] That gain lagged behind the spectacular [/INST] rise in Standard & Poor's 500-stock index of 34%. </s> |
1,311 | <s>[INST] "It was a very frustrating year in [/INST] many ways," said Dunnery Best, analyst at Richardson Greenshields of Canada Ltd., Toronto. </s> |
1,312 | <s>[INST] "Stocks you expect to see perform [/INST] better came off their highs" as their financial performance improved. </s> |
1,313 | <s>[INST] Voters in the French-speaking province narrowly [/INST] decided to reject independence in a referendum held Oct. </s> |
1,314 | <s>[INST] 30, but political jitters had already driven the [/INST] Toronto 300 index from 4700 during the summer to 4300 just before the Quebec vote. </s> |
1,315 | <s>[INST] Foreign investors were scared off [/INST] by the possibility of a split, said Mr. Best. </s> |
1,316 | <s>[INST] "In the first 10 months of [/INST] 1995, there was one month of positive investment by foreigners. </s> |
1,317 | <s>[INST] Also, the Canadian dollar remained weak during the year, mainly [/INST] due to political uncertainty and high government deficits, and that's not good for foreign investment either, Mr. Best added. </s> |
1,318 | <s>[INST] "If a stock denominated in Canadian [/INST] dollars goes down, the investor gets hurt on the currency side. </s> |
1,319 | <s>[INST] The best thing for the [/INST] Canadian market is a strong Canadian dollar," he said. </s> |
1,320 | <s>[INST] The standout new issue of the year was Canadian [/INST] National Railway Co., privatized by the federal government in a C$2.26 billion (US$1.66 billion) share issue. </s> |
1,321 | <s>[INST] The first installment traded at C$16.25 at the [/INST] end of November and was trading at C$20.50 at the end of the year. </s> |
1,322 | <s>[INST] The strongest sector on the Toronto exchange was the consumer products group, up [/INST] 27%, but that was due to special situations, since consumers kept a tight rein on spending, noted Josef Schachter, Richardson Greenshields's chief strategist. </s> |
1,323 | <s>[INST] Energy stocks ended the year on [/INST] the upside, enjoying higher natural gas prices and lower inventories. </s> |
1,324 | <s>[INST] Leading the losers was the [/INST] real estate and construction group, down 20%. </s> |
1,325 | <s>[INST] Usually, this group benefits from [/INST] lower borrowing costs, but not in 1995. </s> |
1,326 | <s>[INST] "It was another weak area for consumer [/INST] spending, and commercial vacancy rates are still very high," Mr. Schachter said. </s> |
1,327 | <s>[INST] Paper and forest product stocks [/INST] were sluggish after a rally the year before. </s> |
1,328 | <s>[INST] Lower pulp prices was one culprit [/INST] and many investors believed these stocks were fully valued. </s> |
1,329 | <s>[INST] , which suffered from airfare wars, are battling [/INST] it out in a country that may be able to sustain only one airline. </s> |
1,330 | <s>[INST] Separatist leader Lucien Bouchard is expected to be [/INST] elected head of the Parti Quebecois and, therefore, become premier of the province. </s> |
1,331 | <s>[INST] Mr. Bouchard has said he would devote the early part of [/INST] a term as premier to boosting the provincial economy, but also promised another vote on sovereignty within a few years. </s> |
1,332 | <s>[INST] Quantifying the Quebec factor is difficult, analysts say, but [/INST] the general consensus is that Canadian stock prices are discounted about 10% because of it. </s> |
1,333 | <s>[INST] In 1996, given "decent economic growth in the U.S.," [/INST] the Toronto 300 index should reach a high in the 5300-5600 range, predicted Mr. Schachter. </s> |
1,334 | <s>[INST] Sectors expected to do well include [/INST] base metals, forest products, energy and technology, he added. </s> |
1,335 | <s>[INST] MEXICO Thanks to a $50 billion financial aid package organized by the [/INST] U.S. Treasury and the International Monetary Fund in March, Mexico was able to pay down huge maturities of short-term debt, averting default. </s> |
1,336 | <s>[INST] Not long after, the country strutted back into global [/INST] markets, issuing more than $4 billion in new debt and wooing the confidence of investors once again. </s> |
1,337 | <s>[INST] There are lessons in pain, however, and investors saw that [/INST] Latin America's economic reforms were perhaps too dependent on the confidence of money managers and their short-term, high-speed capital. </s> |
1,338 | <s>[INST] When investors took an all-at-once gander at [/INST] Mexico's swelling trade deficit and lost confidence, they fled in a panic. </s> |
1,339 | <s>[INST] Mexico responsibly decided not to inflate its troubles away and print [/INST] pesos to replace departing dollars, but the cost of such a policy was the worst economic collapse on modern record. </s> |
1,340 | <s>[INST] BRAZIL, PERU Brazil stunned investors with a [/INST] large bank failure and jolting adjustments in its new currency, the real. </s> |
1,341 | <s>[INST] Tim Love, head of Latin America strategy [/INST] at ING Baring, classifies Brazil and Peru as "high-risk, high-reward" markets. </s> |
1,342 | <s>[INST] He expects corporate profits to rise 63% [/INST] in Brazil, after adjustments for inflation and currency effects, and 16% in Peru. </s> |
1,343 | <s>[INST] Stock markets in both countries value [/INST] the corporate assets that generate these profits relatively cheaply, he says. </s> |
1,344 | <s>[INST] The risk is in the [/INST] volatility of these markets and in their currencies. </s> |
1,345 | <s>[INST] Mr. Love expects Brazil's real to lose 14% [/INST] of value versus the dollar this year, and Peru's currency to fall 8%. </s> |
1,346 | <s>[INST] CHILE, COLOMBIA In Chile and Colombia, investors should be able to earn [/INST] modest gains though corporate profits in both countries may not show substantial cyclical recoveries as companies in other Latin American markets. </s> |
1,347 | <s>[INST] The advantage of these markets, however, [/INST] is that their volatility is typically lower than neighboring markets. </s> |
1,348 | <s>[INST] "These are basically the safe [/INST] haven markets in the region," he says. </s> |
1,349 | <s>[INST] ARGENTINA Argentina suffered a speculative attack against its own currency system, [/INST] and then roiled its neighbors with a "tango effect" as the finance minister decided to pick public fights with politicians. </s> |
1,350 | <s>[INST] Argentina along with Mexico "will be the swing [/INST] factors" for next year's overall Latin American stock market performance, Mr. Love says. </s> |
1,351 | <s>[INST] He calls Argentina an example of a "liquidity play" because of the [/INST] ability to absorb large amounts of foreign investment when and if global money managers turn bullish on the region and start chasing stocks. </s> |
1,352 | <s>[INST] Argentina is expected to see its corporate profits grow at a [/INST] 12% rate (and Mexico at a rate of 27% after adjustments for currency movements and inflation), Mr. Love says. </s> |
1,353 | <s>[INST] Argentina's currency is fixed against the dollar, but the free-floating [/INST] Mexican peso could drop as much as 16.5% against the dollar during the year, Mr. Love predicts. </s> |
1,354 | <s>[INST] ___ Document 487 of 500 South American Trade Pact Is Under Fire --- World [/INST] Bank Economist Criticizes Protective Barriers Author: By Michael M. Phillips Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 23 Oct 1996: A2. </s> |
1,355 | <s>[INST] accountid=28034 Abstract: That's the conclusion of a new study by a senior World Bank economist whose work offers [/INST] a startling contrast to the widespread view that Mercosur has created billions of dollars in international trade while preparing its members -- Brazil, Argentina, Uruguay and Paraguay -- to compete in a global free-trade regime. </s> |
1,356 | <s>[INST] The study concludes that Mercosur is indeed [/INST] generating large quantities of trade and investment, but in all the wrong places. </s> |
1,357 | <s>[INST] Trade among Mercosur members surged to [/INST] $12.3 billion in 1994 from $4.2 billion in 1990. </s> |
1,358 | <s>[INST] The fastest-growing items in intra-Mercosur trade, however, are cars, [/INST] buses, agricultural machinery and other capital-intensive goods that are produced relatively inefficiently in the four member countries. </s> |
1,359 | <s>[INST] In other words, Mercosur countries, insulated from outside competition, are [/INST] investing in factories that build products that are too expensive to sell to anyone but themselves, the study concludes. </s> |
1,360 | <s>[INST] The result is that Mercosur countries might not be able to [/INST] compete globally once the group's external trade barriers come down, and capital is being drawn away from more efficient enterprises. </s> |
1,361 | <s>[INST] products in Mercosur's intratrade generally are highly capital-intensive goods [/INST] which members have not been able to export competitively to outside markets," the study says. </s> |
1,362 | <s>[INST] Intra-Mercosur trade in motor vehicles grew [/INST] to $2.1 billion in 1994 from $207 million in 1988. </s> |
1,363 | <s>[INST] Although Mercosur is working to create a free trade zone among [/INST] its members and establish common external tariffs, the member countries still maintain separate barriers for many items, including cars and trucks. </s> |
1,364 | <s>[INST] Brazil, for example, imposes tariffs as high as 70% [/INST] on imported vehicles, but foreign companies that also manufacture locally pay as little as 35%. </s> |
1,365 | <s>[INST] Argentina imposes car import quotas, as does [/INST] Uruguay, which gives larger shares to companies that also produce locally. </s> |
1,366 | <s>[INST] Full text: South America's five-year-old Mercosur free-trade pact has [/INST] built an artificial world of economic growth, where inefficient industries prosper behind a wall of trade barriers. </s> |
1,367 | <s>[INST] That's the conclusion of a new study by a senior World Bank economist whose work offers a startling [/INST] contrast to the widespread view that Mercosur has created billions of dollars in international trade while preparing its members -- Brazil, Argentina, Uruguay and Paraguay -- to compete in a global free-trade regime. </s> |
1,368 | <s>[INST] The study also provides fresh ammunition for those who argue that such regional [/INST] trade pacts -- including the North American Free Trade Agreement -- simply make it harder to reach the goal of world-wide free trade. </s> |
1,369 | <s>[INST] "These findings appear to constitute the most convincing, and disturbing, evidence produced [/INST] thus far concerning the potential adverse effects of regional trade arrangements," writes the study's author, World Bank principal economist Alexander J. Yeats. </s> |
1,370 | <s>[INST] The study concludes that Mercosur is indeed [/INST] generating large quantities of trade and investment, but in all the wrong places. </s> |
1,371 | <s>[INST] Trade among Mercosur members surged to [/INST] $12.3 billion in 1994 from $4.2 billion in 1990. </s> |
1,372 | <s>[INST] The fastest-growing items in intra-Mercosur trade, however, are cars, [/INST] buses, agricultural machinery and other capital-intensive goods that are produced relatively inefficiently in the four member countries. </s> |
1,373 | <s>[INST] In other words, Mercosur countries, insulated from outside competition, are [/INST] investing in factories that build products that are too expensive to sell to anyone but themselves, the study concludes. </s> |
1,374 | <s>[INST] The result is that Mercosur countries might not be able to [/INST] compete globally once the group's external trade barriers come down, and capital is being drawn away from more efficient enterprises. </s> |
1,375 | <s>[INST] products in Mercosur's intratrade generally are highly capital-intensive goods [/INST] which members have not been able to export competitively to outside markets," the study says. </s> |
1,376 | <s>[INST] And in the near term, countries with more [/INST] efficient manufacturers lose because Mercosur trade barriers keep them out, Mr. Yeats argues. </s> |
1,377 | <s>[INST] The results "appear to constitute a `smoking [/INST] gun' concerning evidence of their adverse impact on third countries," the study says. </s> |
1,378 | <s>[INST] Intra-Mercosur trade in motor vehicles grew [/INST] to $2.1 billion in 1994 from $207 million in 1988. </s> |
1,379 | <s>[INST] Although Mercosur is working to create a free trade zone among [/INST] its members and establish common external tariffs, the member countries still maintain separate barriers for many items, including cars and trucks. </s> |
1,380 | <s>[INST] Brazil, for example, imposes tariffs as high as 70% [/INST] on imported vehicles, but foreign companies that also manufacture locally pay as little as 35%. </s> |
1,381 | <s>[INST] Argentina imposes car import quotas, as does [/INST] Uruguay, which gives larger shares to companies that also produce locally. </s> |
1,382 | <s>[INST] Foreign car companies have been making heavy [/INST] investments in the Mercosur countries, particularly in the large Brazilian market. </s> |
1,383 | <s>[INST] 's 1995-99 business plan calls for [/INST] as much as $3 billion in investments in Brazil and Argentina. </s> |
1,384 | <s>[INST] Ford Motor Co. plans $2.5 [/INST] billion in investments during the same period. </s> |
1,385 | <s>[INST] Both companies insist they would manufacture in [/INST] Brazil even if the market were entirely open to imported finished vehicles. </s> |
1,386 | <s>[INST] "There's definitely significant growth ahead of us in [/INST] Mercosur," says Mark T. Hogan, president and managing director of General Motors do Brasil Ltda. </s> |
1,387 | <s>[INST] But both companies also acknowledge [/INST] that Mercosur's trade barriers do influence investment decisions. </s> |
1,388 | <s>[INST] General Motors is considering building a components plant in [/INST] Uruguay because doing so would also allow GM to import more finished vehicles into the tiny country. </s> |
1,389 | <s>[INST] The U.S. plans to file a complaint with the World Trade [/INST] Organization regarding Brazil's car import tariffs and is threatening to do the same with Argentina, according to a U.S. trade official. </s> |
1,390 | <s>[INST] The study's unscheduled release caused a minor [/INST] uproar at the World Bank, which is loath to criticize member nations publicly. </s> |
1,391 | <s>[INST] Mark Malloch Brown, a vice president at [/INST] the bank, issued a statement saying the bank fully supports Mercosur. </s> |
1,392 | <s>[INST] The views expressed in the study "are iconoclastic within the [/INST] bank and are meant to strengthen our policy-making process, but they do not represent official policy," he says. </s> |
1,393 | <s>[INST] The study, however, does agree with the bank's [/INST] general opinion that global free trade usually produces greater wealth than do regional trading pacts. </s> |
1,394 | <s>[INST] "Our view is it's easy to get overly enthusiastic [/INST] about" regional free-trade agreements, says L. Alan Winters, chief of the bank's international trade division. </s> |
1,395 | <s>[INST] "They might confer significant benefits, [/INST] but there are also very significant dangers". </s> |
1,396 | <s>[INST] Norberto Moretti, second secretary in the Brazilian Embassy's trade policy section, said: "Mercosur [/INST] has been a complete success in terms of promoting intrabloc trade and in preparing Brazilian firms and all Mercosur firms for international competition". </s> |
1,397 | <s>[INST] Mr. Moretti said that U.S. [/INST] exports to Brazil increased 41% from 1994 to 1995. </s> |
1,398 | <s>[INST] That increase "does prove that increasing intrabloc [/INST] trade doesn't create any difficulties for third parties trading with Mercosur countries". </s> |
1,399 | <s>[INST] One senior Mercosur diplomat, who asked not to be [/INST] identified, said external trade barriers will gradually be reduced, forcing member countries to compete globally. </s> |
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