Mexican finance minister Agustin Carstens has indicated a downward revision to economic growth this year from the current 3.8% official forecast to a “reasonable” 3.3%. Slowing US growth will imperil the country’s fiscal revenues, given 80% of its exports are to the world’s largest economy. Credit Suisse concurs with Carstens’ forecast, but considers this outturn disappointing. Meanwhile, Goldman Sachs has cut its 2008 growth forecast for Latin America to 4.5% from a previous estimate of 4.7%. The bank also predicts that the region’s FX rates will strengthen this year on the back of lower growth and interest rates in the US. (For more analysis on the region’s vulnerability, please click here)
The Kuwaiti Investment Authority (KIA), the emirate’s sovereign wealth fund, is planning to invest $4 billion into Merrill Lynch, reports suggest. The ailing US financial institution is seeking cash to plug a hole in its balance sheet triggered by losses from the US sub-prime mortgage disaster. On Thursday, Merrill is expected to announce a write-down of $10-20 billion in addition to the $8 billion announced in October 2007. It is also rumoured that KIA is negotiating a $3 billion cash injection into Citigroup, which is expected to announce a write-down of $24 billion and lay off an estimated 20,000 employees. The KIA managed $213 billion in assets by the end of March 2007.
New loan growth in China this year will be capped to 2007’s level of RMB 3.63 trillion, the country’s central bank has announced. The monetary authority is enforcing a new method of controlling bank loans this year, with lenders subject to quarterly loan targets. Those exceeding their targets will be forced to buy special, low-yielding bonds from the central bank in exchange for deposits. New loan issuance in December 2007 shrank to RMB 48.5 billion compared with November’s RMB 87.4 billion. The government is aggressively controlling credit expansion to cool the economy that is growing at a pace of 10-11% and to stem inflation. But analysts fear that these Chinese government attempts to rein in its turbo-charged economy at a time of a US slowdown will endanger global growth this year.
A dispute over the running of the Kazakh oil-field Kashagan has been resolved following an agreement by Eni and its partners to increase its compensation to the government. The Eni-led group will pay the Kazakh administration $5 billion, while state-run KazMunaiGaz will pay $1.78 billion to double its Kashagan stake to 16.8%. This brings an end to a protracted dispute between the parties since July 2007 when the Kazakh government suspended Eni’s license and demanded the oil consortium increase Kazakhstan’s stake in the project. (For analysis on the rise of national oil companies, please click here)
A Russian court began hearing the federal customs service case against Bank of New York in Moscow. In May 2007, the US bank was hit with a demand for $22.5 billion over alleged money-laundering during the 1990s. Bank of New York is the custodian for most American Depository Receipts (ADRs) issued by Russian companies – including many state-owned firms. The bank denies any wrongdoing, and maintains that any evasion of customs duties was the responsibility of the Russian companies who were its clients, not the bank itself. (For analysis of the original charges, please click here)