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In Brazil, Electoral court may review Lula's candidacy tomorrow, 31 Aug

August 30, 2018

The court may not review his candidacy tomorrow, but still rule on whether he can or not ask for votes in the television and radio propaganda

Talk of the Day
 

Brazil

The Superior Electoral Court (TSE) has scheduled an extraordinary session for Friday, August 31, at 12h30 pm Brasília time, in which, according to local media, they will likely review the candidacies that haven’t yet been analyzed: Lula’s, Alckmin’s and Eymael’s.

In the spotlight would be the decision of whether Lula’s candidacy is valid or not. If the court rules against him, Lula would not be allowed to be portrayed as a candidate in PT’s television propaganda and the party would have to announce a new name to be the running candidate. Alternatively, the court may not review his candidacy tomorrow, but still rule on whether he can or not ask for votes in the television and radio propaganda.  ** Oficial release here.

The Brazilian Central Bank released today the credit figures for July. The daily average of new loans rose 0.5% mom/sa in real terms for the non-earmarked segment and increased 2.7% for earmarked loans. Overall delinquency fell 0.1 p.p. to 3.0%. Average interest rates receded slightly. The performance of the daily average of new non-earmarked loans resulted from an increase of 1.7% in loans for non-financial corporations and a 0.4% slide for households, adjusted for inflation and seasonality. In the earmarked segment, new loans advanced 0.5% for non-financial corporations and 4.2% for households.

The average interest rate charged in non-earmarked loans dropped to 38.1%, rising slightly for non-financial corporations but falling for households.Average spreads in these transactions widened for non-financial corporations and narrowed for households. The average interest rate charged in earmarked loans was stable at 8.3%, increasing for non-financial corporations but shrinking for households. Average spreads in these transactions expanded for corporations and receded for households.
** Full Story here.

FGV released two monthly indicators for August. FGV’s economic uncertainty index declined 1.5 p.p. to 115.3. Despite the decline, it’s still 12.8 p.p. higher than February, 2018, the lowest reading in the recent period. The survey is relevant for mapping part of the economic agents’ risk aversion that was not explained by traditional financial conditions indicators, given that the analysis of newspaper accounts for 70% of the aggregate index. A high figure is associated with greater uncertainty that is negatively related to economic activity. Additionally, confidence in the services sector increased 1.7% in August to 89.0, but is still 4.4% lower than February, 2018, the peak of the indicator in the recent period. The increase was driven by stronger expectations (3.3%), while current situation remained flat.

Weekly Elections Monitor: the Brazilian electorate swing. Former president Lula (PT) leads the latest polls, but there are doubts about the viability of him running the race. Will his eventual substitute, probably Fernando Haddad, be able to catch up on time? Jair Bolsonaro (PSL) has been leading the electoral polls in the scenario where former president Lula is not considered. With a small party and disputing the presidency for the first time, where does his share of votes come from? In social media, the growth in the number of followers of João Amoedo (NOVO) has shown strong acceleration. With that, the candidate has reached the fourth position in number of supporters.
** Full Story here.

According to the Superior Electoral Court (TSE), a nationwide presidential poll, conducted by Ibope is expected to be released from Tuesday onwards. In addition, local news indicate that Datafolha will also conduct a presidential poll next week, to be released from Thursday onwards.

Day Ahead: The national unemployment rate for July will come out at 9:00 AM (SP Time), for which we expect a 0.1 p.p. increase to 12.5% (consensus: 12.3%). In addition to that, we expect the central government to post a BRL 12.4 billion primary deficit (consensus: - BRL 8.1 billion deficit).

Argentina

Asset prices in Argentina remained under stress, affected by uncertainties regarding the government’s ability to issue debt and meet its financial obligations. The further deterioration was in spite of the government’s decision to request to the IMF a speed-up of disbursements from its USD 50 billion credit line. According to the original plan, Argentina was scheduled to receive (upon meeting fiscal and other targets) around USD 12.0 billion in 2019, another USD 12.0 billion 2020 and USD 6.0 billion in 2021. During a brief press conference, President Macri stated that access to these resources will guarantee that the target for the financial program is met next year. 

Mexico

The Central Bank of Mexico (Banxico) published the quarterly inflation report for the 2Q18, reaffirming its commitment to maintain a “prudent approach”, but without a fundamental change in the guidance provided in the statement of the most recent monetary policy decision. The board will continue focusing on inflation with respect to the expected trajectory (“inflation forecast targeting”), monitoring three main variables: (1) exchange rate pass-through, (2) interest rate differential with U.S., (3) and output gap, in that order of importance. Banxico’s official inflation forecasts increased as a result of non-core inflation behavior (due to transitory factors) and the balance of risks for inflation is tilted to the upside. Headline inflation forecast published in the report are 4.2% and 3.3% for 4Q18 and 4Q19, respectively. In contrast, Banxico expects core inflation to continue to descend reflecting slower growth and the monetary policy stance: 3.5% and 2.9% for 4Q18 and 4Q19, respectively. 

In our view, a successful renegotiation of NAFTA would likely mean an end to the tightening cycle. Last Monday, President Trump announced a trade deal (agreement of understanding) with Mexico. However, we consider that the inclusion of Canada (or not) in the reached deal could still affect the Mexican peso and thus the next monetary decision. 
** Full Story here.

Day Ahead: The Ministry of Finance (Hacienda) will announce July’s fiscal balance throughout the day. We expect the government to continue with their consolidation plan and reach their targets published in the Preliminary Economic Policy Guidelines for 2019: PSBR of 2.5% of GDP, nominal public deficit of 2%, and a primary surplus of 0.8% of GDP.

Chile
 

Day Ahead: The national institute of statistics (INE) will release July’s industrial activity indicators at 9:00 AM (SP Time). We expect manufacturing production to post growth of 3.2% year over year (consensus: 4.0%).



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