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Latin America is at the centre of the coronavirus pandemic, suffering some of the worst infection rates and highest death tolls in the world. Now economists warn that the region faces more bad news: its sickly economies risk falling into a new debt crisis even worse than the last big bust of the 1980s

The continent was struggling with multiple “pre-existing conditions” before the virus took hold… Now some of the longest lockdowns in the world, together with the accompanying costly rescue programmes, have wreaked havoc on public finances.

Government borrowing in the region is spiralling, alarming investors…

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Eric Parrado, chief economist at the Inter-American Development Bank… said the rapidity of the debt build-up was particularly worrying.

““It’s not so much the absolute level of indebtedness which matters, as the speed at which it rises,” he said. “It’s rather like a bullet: if you throw it, it has no impact, but from a gun it’s the speed that kills you.””

https://www.ft.com/content/a86e0382-8f63-4f4f-839c-51c5a9ccc9e5


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“…in a true testament of just how brutal the oil price crash has been, Pemex has finally bowed to the pressure and joined its Latin American peers Brazil’s Petróleo Brasileiro SA (Petrobras) and Colombia’s state firm Ecopetrol SA to trim their 2020 capex by 30%, according to a new Moody’s report via Natural Gas Intelligence.”

https://oilprice.com/Energy/Crude-Oil/Mexicos-Pemex-Scrambles-To-Save-Itself-From-Oil-Price-Crash.html


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Dubai-based commodity trading firm GP Global has been forced into a financial restructuring after a failure to win backing from some of its lenders left it short of cash.

“The company, one of the biggest marine fuel suppliers in the Middle East bunkering hub of Fujairah, said it has undertaken the restructuring exercise because of challenges from the global economic meltdown…”

https://www.argusmedia.com/en/news/2124539-banks-cut-lending-to-dubais-gp-global-update


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S&P Global Ratings said on Monday it expected Gulf countries’ government debt to increase by a record high of about $100bn this year, as funding needs spike due to the coronavirus crisis and low oil prices…

“Saudi Arabia, Qatar, Bahrain and the emirates of Abu Dhabi and Sharjah have already borrowed tens of billions of dollars this year to bolster state coffers.”

https://www.aljazeera.com/ajimpact/sp-ratings-sees-gcc-debt-rising-record-100bn-year-200720151610212.html


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The decision by Oil Search to write off more than 1 billion Kina in Papua New Guinea exploration assets is another nail in the coffin for our economy under the current government…

“…the Oil Search announcement is yet another step backwards for jobs and livelihoods.”

https://news.pngfacts.com/2020/07/state-of-png-economic-paralysis-as-more.html


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Australia will spend A$16.8 billion (9.31 billion pounds) to extend its wage subsidies for businesses hit by the coronavirus pandemic, as a surge in new infections in the country’s southeast threatens to keep the economy in recession

“However, subsidies will be reduced under the new programme, which runs through to March 28, 2021.”

https://uk.reuters.com/article/uk-health-coronavirus-australia/australia-extends-jobs-support-as-new-covid-19-outbreaks-threaten-economy-idUKKCN24M0DO


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The Trump administration is holding firm in opposition to the renewal of enhanced unemployment benefits in the next fiscal stimulus bill

“Speaking in the Oval Office, Mr Mnuchin said the White House… did not want to see enhanced unemployment benefits continue at their current level of $600 a week…”

https://www.ft.com/content/b5e35edf-a3ed-4b83-9a05-612d8e8cf8a8


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America’s corporate chiefs are steeling themselves for prolonged economic disruption and the prospect of a slow, halting recovery, The Times’s David Gelles writes.

“Several C.E.O.s he spoke with were in a gloomy mood about the road ahead.”

https://www.nytimes.com/2020/07/20/business/dealbook/coronavirus-economy-recovery-companies.html


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The picture’s getting bleaker for some key Manhattan shopping districts.

“Lower Fifth Avenue, running from 42nd to 49th streets, had the biggest drop in retail asking rents in the second quarter, sliding 30 percent from a year earlier, according to a report by brokerage Cushman & Wakefield.”

https://www.businessoffashion.com/articles/news-analysis/manhattans-retail-pain-worsens-with-fifth-avenue-rent-slide


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British households have suffered the biggest hit to their finances since the oil crisis of the mid-1970s as the coronavirus pandemic threatens to inflict severe financial hardship across the country…

“…income levels for the typical family… crashed back down to 2006-07 levels in a matter of months.”

https://www.theguardian.com/world/2020/jul/21/uk-households-suffer-biggest-financial-hit-since-1970s-due-to-coronavirus


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More than half of UK manufacturers expect to make job cuts over the next six months as large employers across automotive, aerospace and other core industries brace themselves for a sustained downturn in demand during the pandemic.

“The UK will lose high value skills in what is being called a “jobs bloodbath”…”

https://www.ft.com/content/afa20d03-480a-4e56-a23e-4c522d96089c


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Colour me surprised:

EU leaders have struck a deal… The recovery fund centres on a €390bn programme of grants to economically weakened member states — a significantly smaller sum than the €500bn package originally proposed by Berlin and Paris in May.”

https://www.ft.com/content/713be467-ed19-4663-95ff-66f775af55cc


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European banks are facing as much as €800bn in loan losses and a €30bn hit to their revenue over the next three years as a result of the coronavirus crisis…

“Business lines such as payments, trade finance and credit cards are already showing evidence of being on a downward trend as activity stalls.

“A spike is also looming in small-business defaults after government support schemes end this autumn…”

https://www.ft.com/content/1c4faf6c-975c-4566-8e0e-c9cbd613db42


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Italy is emerging from its COVID-19 nightmare into what is usually its busiest season for tourism. The industry normally brings in 13 percent of the country’s $2 trillion GDP.

“But there is no normal this year, and most tourists are not coming — sparking fears that the pandemic will cause lasting economic damage.”

https://www.pbs.org/newshour/show/can-italian-tourism-industry-survive-the-pandemic


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Fresh figures released by a Cypriot government official on Monday put a damper on hopes that the country’s tourism industry would swiftly recover from the coronavirus pandemic

“…only 34,000 tourists arrived in Cyprus in June and July, while the respective figure in the same two months of 2019 exceeded one million.”

http://www.xinhuanet.com/english/2020-07/21/c_139227297.htm


Another cruise line is about to hit the dust as Cruise & Maritime Voyages (CMV) goes into administration which is very close to bankruptcy. The largest independent UK cruise line has suffered hugely by the suspension of operations and the impact on the industry. With no way of sailing, CMV is not able to continue…”

https://www.cruisehive.com/largest-cruise-line-so-far-closes-down-due-to-the-suspension-of-operations/40818


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With tourists gone, Bali workers return to farm and fishing:

“Ni Nyoman Ayu Sutaryani, a mother of three, made a steady living for two decades working as a masseuse and yoga instructor at Bali’s luxury hotels and spas. Now at 37 she finds herself back on the farm of her childhood village here, standing precariously at the top of a tall bamboo ladder, picking cloves.”

https://www.nytimes.com/2020/07/20/world/asia/bali-tourism-coronavirus.html


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Quarantines in Hawaii and other U.S. destinations have been blamed for the collapse of tourism, which in Hawaii fell to 564 visitors on Saturday.

“Normally in July, the state receives about 35,000 daily passengers, most of them tourists.”

https://www.staradvertiser.com/2020/07/20/hawaii-news/hawaii-like-other-destinations-struggling-to-reopen-tourism/


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“On Tuesday, July 21, 2020, at 10:00 am, the parliament of Saint Lucia will convene.

“There is the distinct accuracy that more of the same is on the order paper – extensive borrowing and St Lucia on the verge of economic collapse.”

https://menafn.com/1100515721/St-Lucia-faces-economic-collapse-amid-extensive-borrowing


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Cuba said this week it will allow some stores to sell food, personal hygiene and other consumer goods in U.S. dollars and will eliminate a 10% tax on the greenback, an effort to rake in more hard currency to purchase goods abroad…

“Pandemic fallout has worsened shortages of food, medicine and other goods and long lines at retail outlets.”

https://en.mercopress.com/2020/07/18/cuba-devalues-its-currency-and-makes-the-us-dollar-legal-tender-for-shopping


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The final blow to any lingering hopes of a swift tourism recovery was dealt yesterday evening when the prime minister announced the suspension of all commercial flights and passenger vessels between The Bahamas and US, with effect from Wednesday, July 22, in a bid to contain the renewed COVID-19 outbreak on New Providence and Grand Bahama.”

http://www.tribune242.com/news/2020/jul/20/body-blow-for-tourism-restart/


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“Beijing has made martyrs of its banks and insurers, asking them to lend to the needy, forgo profits and support the animal spirits of its trillion-dollar capital markets. But, along with brokers, they’re still a troubled bunch… China’s Lehman moment, when isolated events cross the line into systemic effects, is just lurking around the corner.

“Last Friday, regulators took control of nine troubled firms…”

https://economictimes.indiatimes.com/news/international/world-news/saddled-with-risky-financial-assets-china-is-getting-closer-to-its-lehman-moment/articleshow/77077339.cms


“…there is a massive housing bubble developing in China, the size of which dwarfs the levels of our housing market before the financial crisis.”

https://seekingalpha.com/article/4359452-china-potential-bubble-of-all-bubbles-should-be-on-your-radar


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The Covid-19 crisis, exacerbated by the consequences of having hyper-accommodative monetary policy for too long, has led to entire economies becoming over-indebted.

“Everyone knows how excessive debt can lead to crisis. We have paid the price of this causality for decades. And yet negative interest rates open the credit floodgates to both governments and the private sector. They are a source of financial instability and help to create asset bubbles.”

https://www.ft.com/content/6e979e1d-d367-44f3-8fce-f0b3652e8629


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Sovereigns no longer borrow money with the intention to repay the full amount. They simply assume that the debt will be rolled over by borrowing from others to repay balances that are due. But will the current environment with economic and commodity price shocks caused by COVID-19 challenge this operating model? Will it become more difficult for some countries to refinance their debt?.

“…The reality is that countries are struggling to balance their books.”

https://www.spglobal.com/marketintelligence/en/news-insights/blog/when-sovereigns-default-bondholders-beware


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