What Has Changed in EM

  • Priyanka Gandhi Vadra was appointed to a senior position by India’s opposition Congress Party
  • Thailand announced general elections will be held March 24
  • Russia central bank will resume its FX purchases
  • Argentina central bank may tweak its FX policy
  • Brazil Economy Minister Paulo Guedes laid out targets for privatizing state assets
  • Political uncertainty remains high in Venezuela

Priyanka Gandhi Vadra was appointed to a senior position by India’s opposition Congress Party. She will head up her party in the important state of Uttar Pradesh. Congress beat the ruling BJP in three state votes last month, and the maneuvering comes ahead of general elections that are due by May. Priyanka is the granddaughter of former Prime Minister Indira Gandhi and the sister of current Congress lead Rahul Gandhi.

Thailand announced general elections will be held March 24. This is the first vote since the military coup in May 2014. The date was set by the Election Commission after a royal decree authorized the vote. Political parties can start campaigning immediately, and overseas voting will begin earlier in March.

Russia central bank will resume its FX purchases. The bank said it would start buying FX starting February 1 after being suspended last year to stem ruble weakness. The purchases will be spread out evenly over three years, which suggests the daily amount would be around $43 mln. The bank added that the purchases could be suspended again “in the event of risks to financial stability.”

Argentina central bank may tweak its FX policy. The bank said it may increase the amount of dollars it can buy if the peso remains below the floor of its currency band. Currently, the bank can purchase up to $50 mln per day. Central bank President Guido Sandleris said a decision was likely at the end of January.

Brazil Economy Minister Paulo Guedes laid out targets for privatizing state assets this year. He sees $20 bln from privatizations and said pension reforms could yield savings of BRL700 bln to BRL1.3 trln over ten years. Together, Guedes said this would cut the nominal budget deficit from -7% of GDP currently to zero. Even though no timeframe was given for a balanced budget, this seems way too optimistic to us.

Political uncertainty remains high in Venezuela. After opposition leader Juan Guaido claimed to be the legitimate leader of the nation, the armed forces came out in support of embattle President Nicolas Maduro. Russia warned the US not to meddle in Venezuelan affairs, but US Secretary of State Pompeo nevertheless urged the Organization of American States to reject Maduro. We do not think that developments Venezuela will have much impact on the EM asset class.