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  • Emerging Markets Debt Daily

    Major Shifts in Venezuela Politics

    blog-van-eck-views-author-details (Natalia Gurushina),
    January 14, 2019
     

    The latest political developments in Venezuela support expectations of political change. The downside macro surprises in Turkey and China keep markets focused on likely policy responses.

    Venezuela’s political scene attracted a lot of attention over the weekend, encouraging expectations of a regime change. The National Assembly’s president, Juan Guaido (who was briefly detained on Sunday) called for national protests and issued a three-step action plan that includes: (1) the ousting of President Nicolas Maduro, (2) the establishment of a transition government led by Guaido himself, and (3) new free and fair elections. Guaido seems to enjoy a lot of international support (or at least sympathy), with Brazil saying that it would recognize him as interim president.

    Signs that Turkey is sliding into recession at a faster than expected pace keep piling up. Industrial production contracted by 6.5% year-on-year in November, and the latest activity surveys paint a fairly bleak picture. A key macro risk is that the government would respond with more fiscal stimulus in the run up to the local elections, which can slow disinflation and external adjustment.

    Downside surprises abound in China’s December trade numbers. Both exports and imports undershot expectations, contracting by 4.4% and 7.6% year-on-year, respectively. The weakness of exports was most likely due to a combination of a high base effect and trade frontloading. It also raised additional concerns about global growth slowdown. The imports dynamics reflected both lower commodity prices and slowing domestic activity (weaker non-fuel imports). Regarding the latter, authorities have already lined up additional supporting measures, such as further tax cuts promised by the Ministry of Finance.

     

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