Latin America

Ecuador launches new digital currency after banning competitors

"The new system, which is officially set to launch on Thursday, will work much like mobile phone bank payments in other countries: users will be able to exchange hard cash for digital money which is stored in an electronic wallet on their phones. As with other mobile payment programmes, text messages will allow users to make payments to other accounts, but what makes this plan different is that this is the first time a national government will have full control; everything from the creation of new units to securing the system against attack will be managed by the Central Bank of Ecuador. The bill that authorized the digital dollar also banned Bitcoin and other digital currencies." Continue reading →

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Living with Venezuela’s high inflation

"As the world watches the Greek debt crisis unfold, the economy of a country in another corner of the planet is also struggling, and some experts are even trying to draw similarities. Venezuela has the world's highest inflation, leaving many facing shortages and soaring prices. While the government of president Nicolas Maduro says this is the result of an 'economic war by capitalists and the United States against the country's socialist revolution', critics say the high inflation rate is simply showing the government's economic incompetence. The BBC's Daniel Pardo explains how inflation affects what Venezuelans buy every day, like the popular snack called Arepa." Continue reading →

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Puerto Rico’s Crisis Deals a Blow to Municipal-Bond Funds

"In a low-interest rate world, Puerto Rico’s bonds have offered investors juicy yields over the past several years. Puerto Rico’s $3.5 billion in general-obligation bonds issued in 2014 initially had a yield of 8.7%. The yield on 10-year U.S. Treasury notes, by contrast, hovered between 2% and 3% last year. But now investors are getting a fast lesson on the risk that comes with those sorts of high yields. More than half of all U.S. municipal-bond funds, or 298 of 565, have invested in Puerto Rico’s debt, according to the most recent fund holdings compiled by Morningstar." Continue reading →

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American Airlines cuts Venezuela flights after Maduro threat

"American Airlines says it is cutting almost 80% of its flights to Venezuela from next month. Tight foreign currency controls make it difficult for foreign airlines to repatriate money from ticket sales in Venezuela. The authorities have restricted access to dollars and want to make them more expensive to purchase, which may lead to losses for companies that are still waiting for cash from as far back as 2012. In January, Ecuadorean airline Tame also suspended flights to Venezuela, demanding $43m (£26m) in overdue payments for tickets. President Nicolas Maduro said at the time that airlines that reduced their operations in Venezuela would face 'severe measures'." Continue reading →

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Colombia Stops Short of Bitcoin Ban, Bars Banks From Industry

"Despite reports that the SFC could enact harsh restrictions on bitcoin – one report suggested it would go so far as to ban bitcoin transactions altogether, the SFC issued what amounted to a boilerplate warning to consumers, and blocked financial institutions from holding, investing in or brokering bitcoin transactions. The release indicated that bitcoin fails to meet the definition of a currency according to the criteria set forth by the International Monetary Fund (IMF), as it is not backed by a central bank. Further, the SFC reiterated that digital currencies can be used for illicit means, including money laundering and terrorist financing." Continue reading →

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Argentina inches toward economic crisis, again

"Inflation is accelerating and projected to hit 40% in 2014, according to Sergio Berensztein, director of Poliarquía Consultores. Unofficial estimates put the inflation rate at above 25% in 2013, much higher than the official government rate of 10.9% — a figure few believe, Berensztein says. A study from consultancy Estudio Bein estimates inflation has eroded wages nearly 10% over the past four months. The Argentine peso was devalued nearly 20% in January, further diminishing purchasing power and making imported items more expensive. Moody's downgraded Argentina's sovereign rating March 17 to Caa1, seven levels below investment grade status, Bloomberg reported." Continue reading →

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Who Needs Bitcoin? Venezuela Has Its ‘Sucre’

"The late Venezuelan president created the sucre, a virtual currency designed to dethrone the dollar as the main trading currency used with his country's regional trading partners: Ecuador, Cuba, Bolivia and Nicaragua. The sucre is managed by a board of central-bank representatives, which has helped bolster its use. Ecuadorean companies exported $737 million worth of goods to Venezuela using the sucre system in the first nine months of 2013, an 80% increase from the same period in 2012, according to Ecuador's central bank. That growth has drawn attention from the country's regulators, which are cracking down as fraud involving the virtual currency rises." Continue reading →

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Bill Bonner: Is This the World’s Cheapest Commodity Play?

"Brazil has made its share of bad decisions… and suffered its share of bad policies. Generals, dictators, repression, depression and hyperinflation – Brazil has seen it all. In the 1980s, Brazil’s consumer price increases went wild. In constant currency, a taxi ride that might have cost 4 cruzeiros in 1980 would have cost 5 trillion cruzeiros in 1994. The government tried to head off inflation by introducing a new currency, the cruzado. Then came the new cruzado. Then came the cruzeiro back. And finally, the government introduced the real. With prices rising so rapidly, it was impossible for investors and business people to make reasonable projections." Continue reading →

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Argentina Raises Tax on Foreign Credit Card Purchases to 35%

"President Cristina Fernandez de Kirchner’s government is raising taxes on credit card purchases abroad in a bid to stem the drop in Argentina’s international reserves to their lowest levels since December 2006. The government raised the the tax charged on credit card purchases in foreign currency to 35 percent from 20 percent, according to the Official Gazette. Argentina’s dollar reserves have plunged 29 percent this year to $30.9 billion as the government uses the funds to pay international debt and import energy, while Argentines take advantage of a strong official rate for the peso to spend abroad. The official rate is 6.2 pesos, while the black market rate is 9.2." Continue reading →

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