Europe’s sovereign debt crisis is beginning to affect even faster-growing emerging nations, for better or worse.
In Vietnam, which has sufficient economic troubles of its own, European customers are calling exporters to delay orders, demand discounts, or cancel contracts outright, according to VietnamNet, a government-controlled site. European importers have been important customers for Vietnamese products from fresh fish to clothing. But tightening bank lending policies are cramping their buying power.
In Turkey, the Central Bank has scheduled an emergency meeting this week to consider steps to counter what it calls “public debt in certain European countries and the global growth outlook.” Turkey’s lira has been declining along with the euro. An interest rate increase to shore up the Turkish currency is one possible outcome. The lira approached a two-year low on Wednesday, closing down 0.4% to 1.72 per dollar.
For now, Europe’s trouble is Colombia’s opportunity. Its strong economic indicators and a recent rating upgrade have made Colombian bonds look like a safer haven to some investors. Yields hit a nine-month low on Wednesday, with 10% bonds due July 2024 falling for a 10th day, to 7.56%.
Another bright spot among the CIVETS nations is Indonesia, which seems unfazed by Europe’s economic problems, and even by the relative slowdown in growth elsewhere in Asia. The nation’s overall economy probably grew 6.5% from a year earlier, compared with 6.46% in the first three months of the year, according to a Bloomberg survey of economists in advance of this week’s official announcement. The benchmark Jakarta Index has risen 11.7% so far this year.
Colombia Boosts Rates
Colombia’s central bank boosted its overnight interest rate by a quarter of a percent, to 4.5%. It was the sixth straight monthly increase designed to keep inflation in check. The country’s GDP increased 5.7% in the first quarter, the most since 2007. At the same meeting on Friday, the bank raised its economic growth forecast for this year to a range of 4.5-6.5%. Consumer prices are expected to rise 3.3% this year.
Nissan Expands in Indonesia
Japanese automaker Nissan Motors will spend $250 million on an expansion of its factory in Indonesia to more than triple production there, with a focus on sales in Southeast Asia. Another $60 million will be spent for a new engine-assembly plant in Indonesia. The company announced the plan after a meeting with government officials last week. The expansion will increase the plant’s production to 180,000 from its current 50,000 capacity, The Jakarta Globe reports. Nissan, Japan’s No. 2 automaker, has a new six-year plan that includes focusing on consumers in emerging nations. Ten new models are being designed to meet their perceived needs. A Nissan marketing executive said demand for automobiles in Indonesia is expected to reach a million by 2014. Last year’s sales totaled 764,000.
Spoiler Alert: Hollywood Wins in Indonesia
After a five-month boycott, Hollywood studios are finally releasing the Harry Potter finale, not to mention Kung Fu Panda II, for showings in Indonesia. The studios pulled all movie distribution in Indonesia in February, when the country announced a new royalty tax on movie imports. As weeks stretched into months, affluent Indonesians started flying to Singapore for their Hollywood fix. The less wealthy made do with black-market copies and non-Hollywood movies. The government finally caved, eliminating the royalty tax but imposing an import tax, which apparently saddles local distributors with the burden.
South Africa Miners End Strike
More than 250,000 gold miners have returned to work in South Africa after a five-day strike. Their unions and the Chamber of Mines reportedly agreed on an 8% wage increase. Given the recent record price of gold, the strike may have cost mine operators $25 million a day. A strike by South African coal miners also was settled this week. But diamond miners still are on strike against the De Beers company.
South Africa Challenges Walmart
South Africa’s government is using political muscle and public pressure in an effort to wring more concessions from Walmart (WMT) before its takeover of African retail chain Massmart is finalized. Legal experts told Reuters it is unlikely the government can stop the deal, now that it has won final approval from the nation’s anti-trust regulatory body. But the government said it hopes to get a package of concessions that go beyond the token $15 million fund that the regulatory body ordered the company to set aside for development of local business suppliers. Several government departments have filed an appeal of the decision, citing concerns over Walmart’s reliance on cheap imports and the potential loss of local jobs and small business.