Espresso: April 12th

Espresso for April 12th

QUOTE OF THE DAY

“There no longer exists the political climate for this government, there no longer exists the political base to sustain it, no one believes any more in this government,” said Jovair Arantes, the leader of the committee that recommended a Senate trial for Dilma, ahead of the vote.

 

 WHAT MARKETS ARE TALKING ABOUT


 

DILMA A STEP CLOSER TO IMPEACHMENT

Brazilian lawmakers pushed President Dilma Rousseff a step closer to impeachment. With 38 votes in favor and 27 against, a special lower house committee recommended a Senate trial for President Dilma Rousseff on charges of manipulating public finances. In response to the decision, the Brazilian real rallied more than 2%. It has appreciated 13% in the last three months as the impeachment drama continues. A vote in the full lower house is expected to take place on Sunday. Some surveys suggest that anything can happen.

 

NEXT STEP: LOWER-HOUSE VOTE

The recommendation to impeach now moves to the Chamber of Deputies, the lower house, for a vote, expected on April 17. Two-thirds of the 513 deputies must vote for impeachment to send the case to the Senate for trial. If the vote falls short, proceedings end.

 

IMPEACHMENT ODDS

Evidence is pretty mixed regarding the chances of Dilma being impeached. A survey by Estado de S. Paulo newspaper showed 298 legislators in favor of impeachment. The anti-government organization VemPraRua, “To the Street,” estimates that there are 291 votes for and 128 against impeachment in the lower house. Meanwhile, the “pro-Dilma coalition”, including members of her Workers’ Party, said there were 126 votes against the president’s ouster. According to one senior lawmaker who spoke on the condition of anonymity to Bloomberg, the vote could be decided by a margin of 30 votes.

 

MOUNTING SOCIAL PRESSURE

As of yesterday, 184K people throughout LatAm’s largest economy signed up on VemPraRua’s Facebook page to demonstrate Sunday in favor of Rousseff’s ouster. The figure almost matches the number of people who signed up for demonstrations a week before the March 13 protests, which ended up attracting over 3 million people nationwide.

 

MEXICO’S CENTRAL BANK GAINS


Mexico will use $13.6 billion from a central bank surplus from exchange rate gains on international reserves to pay down debt and boost its oil fund. The Finance Ministry (SHCP) will spend P$167 billion ($9.5 billion) of the transfer to buy back debt and reduce bond issuance this year, while P$70 billion will go to boost the nation’s budget revenue stabilization fund. Following the announcement, Mexico’s finance ministry said that it would use the cash to reduce government debt issuance by at least P$64 billion ($3.62 billion) this year and buy back up to P$103 billion of government debt. The ministry also said it is still analyzing ways that it could help Pemex to reduce part of the huge deficit that the state-owned company has accumulated. Pemex reported a record $32 billion-loss last year, which prompted Moody’s to cut its credit rating two notches in March.

 

 LATAM PM’s LONG-SHORT EQUITY PORTFOLIO


 

INTRODUCING OUR LONG-SHORT ALL-LATAM ADRs PORTFOLIO

We recently launched our all-LATAM ADRs portfolio. And we are excited. Our portfolio manager (PM) has chosen the following strategy:

 

Equity Strategy: Short Extension 120/20 full invested. Type:Long-Short. Universe: LatAm ADRs of 70 issuers and 7 Equity Index ETFs. Countries:  Brazil, Mexico, Chile, Argentina, Colombia, Peru. Currency: USD. Rebalancing: Weekly. Benchmark: MSCI LatAm. Stock picking: Technical, Fundamental and Macro Analysis. Inception: March 28, 2016.

 

Yesterday, the portfolio had a daily return of: 2.2%.

Since inception, it is up 1.1%.

LATAMPM Portfolio Apr 11

PM: Roberto Barba, CFA

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