Post by ozgringo on Dec 29, 2016 9:48:25 GMT -5
From www.dinero.com/opinion/columnistas/articulo/la-alta-probabilidad-de-una-crisis-en-colombia-por-guillermo-valencia/222286
(Article in Spanish)
"large indebtedness of Colombian corporations in the short and long term in foreign currency, the credit expansion of the real estate sector, added to the risks in Asia..."
"Colombia is very vulnerable to rising capital costs in emerging markets, either through the appreciation of the dollar or the rise in the country risk premium."
"To understand what is currently happening in the Colombian economy it is important to understand the dynamics of the Asian crisis of 1997. The crisis of 97 began with a sharp decline in exports of Asian tigers, governments like Thailand and Malaysia tried to stimulate the economy Through fiscal spending and policies that encouraged the expansion of real estate credit. In 1998 the crisis was not confined to Asia but had spread to Russia and Latin America. The emerging countries' risk premium rose, causing an increase in long-term interest rates for all emerging countries."
"Since 2014 the epicenter of this new emerging market crisis is in countries like Brazil, Colombia, Russia, South Africa and Turkey. Its "credit default swaps" (instruments that measure the probability of bankruptcy) are above 250 basis points."
Current account deficit / GDP Figure .
"Following the analogy of the Asian crisis, the Colombian government has encouraged a real estate credit boom."
Figure 2 shows the expansion of housing credit year by year contrasting consumer credit. Figure 3 shows that the valuation in the housing price index has slowed. We are in a situation where the housing credit is expanding but the price is slowing. Credit is growing faster than house prices. In general the excess of real estate credit makes the economy very sensitive to a rise in interest rates.
shows that the level of corporate debt in foreign currency is around US $ 45 billion. To get an idea of the dimension, the total corporate debt would represent 60% of the Colombian government's fiscal expenditure budgeted for 2016.
The fragility of this situation is that such debt can grow rapidly either by the appreciation in the dollar or by an increase in the country risk premium (cost of debt).
...The article talks about the risk within Asia.
"Finally, long-term interest rates are determined by three factors: inflation, probability of default, and economic growth. We believe interest rates could reach levels above 10% in a scenario where core inflation reaches levels of 7.5% or credit default swaps exceed 350 bps levels."
(Article in Spanish)
"large indebtedness of Colombian corporations in the short and long term in foreign currency, the credit expansion of the real estate sector, added to the risks in Asia..."
"Colombia is very vulnerable to rising capital costs in emerging markets, either through the appreciation of the dollar or the rise in the country risk premium."
"To understand what is currently happening in the Colombian economy it is important to understand the dynamics of the Asian crisis of 1997. The crisis of 97 began with a sharp decline in exports of Asian tigers, governments like Thailand and Malaysia tried to stimulate the economy Through fiscal spending and policies that encouraged the expansion of real estate credit. In 1998 the crisis was not confined to Asia but had spread to Russia and Latin America. The emerging countries' risk premium rose, causing an increase in long-term interest rates for all emerging countries."
"Since 2014 the epicenter of this new emerging market crisis is in countries like Brazil, Colombia, Russia, South Africa and Turkey. Its "credit default swaps" (instruments that measure the probability of bankruptcy) are above 250 basis points."
Current account deficit / GDP Figure .
"Following the analogy of the Asian crisis, the Colombian government has encouraged a real estate credit boom."
Figure 2 shows the expansion of housing credit year by year contrasting consumer credit. Figure 3 shows that the valuation in the housing price index has slowed. We are in a situation where the housing credit is expanding but the price is slowing. Credit is growing faster than house prices. In general the excess of real estate credit makes the economy very sensitive to a rise in interest rates.
shows that the level of corporate debt in foreign currency is around US $ 45 billion. To get an idea of the dimension, the total corporate debt would represent 60% of the Colombian government's fiscal expenditure budgeted for 2016.
The fragility of this situation is that such debt can grow rapidly either by the appreciation in the dollar or by an increase in the country risk premium (cost of debt).
...The article talks about the risk within Asia.
"Finally, long-term interest rates are determined by three factors: inflation, probability of default, and economic growth. We believe interest rates could reach levels above 10% in a scenario where core inflation reaches levels of 7.5% or credit default swaps exceed 350 bps levels."