Week in Review

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What We're Reading:

What We're Reading:

A rising demand for coal amidst war in Ukraine. Demand for coal in Europe is rising as Russia's invasion of Ukraine threatens the country's vast natural resource and fossil fuel reserves—and subsequently, the world's energy supply. (NPR)

Ukraine nuclear plant: How risky is standoff over Zaporizhzhia? The rhetoric surrounding Europe's biggest nuclear power plant close to the front line in Ukraine is becoming increasingly alarming, with international figures warning of the risk of a major accident. (BBC)

India raises wheat output estimate but local prices surge. India raised its wheat production estimate on Wednesday even as other forecasters and traders were scaling down output numbers because of a heatwave. (HSN)

Japan’s trade deficit widens in July as commodity imports bite. Is the energy crisis the final nail in Germany’s export-dependent economic model? The danger of reading too much into snapshot pieces of economic data is illustrated by Germany’s latest export figures. (HSN)

How Russia is dodging Western sanctions with gray-market imports. A deeper dive into the gray market has meant that Russians continue to have access to such goods as iPhones and Zara dresses even months after their Western makers left Russia. But are these parallel imports even legal? (DW)

Germany's Rhine is at one of its lowest levels. That's trouble for the top EU economy. As ship captain Stefan Merkelbach navigates his tour boat down the Rhine River through the town of Koblenz, passengers take pictures of medieval castles and fortresses along the banks. Merkelbach's got his eye, though, on the ship's depth gauge, which hovers at around 5 feet deep. In a normal year, this stretch of the river is between 10 and 20 feet deep. (NPR)

Panama Canal grapples with climate change threat. Global warming and changing weather patterns are affecting the water supply for one of the world's most important waterways, the Panama Canal, as well as access to drinking water for millions of Panamanians, reports journalist Grace Livingstone from Panama City. (BBC)

China’s response to Pelosi visit a sign of future intentions. China’s response to U.S. House Speaker Nancy Pelosi’s visit to Taiwan was anything but subtle—dispatching warships and military aircraft to all sides of the self-governing island democracy, and firing ballistic missiles into the waters nearby. (AP)

China’s heatwave could have a knock-on effect on its economy, says economist. China is currently caught in the grip of a devastating heatwave that could have a serious impact on its economy, according to the chief economist of Hang Seng Bank China. (CNBC)

High winds drive major wildfire in Spain; 35 aircraft sent. A wildfire burning out of control in Spain’s eastern province of Valencia has become one of the country’s biggest this year, and 35 aircraft have been deployed as the blaze entered its fifth day, authorities said Friday. (AP)

US, Taiwan to launch formal trade talks in Autumn. The United States and Taiwan announced on Wednesday objectives for trade negotiations set for the early autumn in another step to boost ties even as tensions soar with China over the self-ruled island. (IndustryWeek)

Kashmir: India triggers outrage by expanding voting rights. Kashmiri political parties are concerned that the inclusion of 2.5 million new voters in the Muslim-majority region will permanently disenfranchise Kashmiris. (DW)


FCIB Roundtables Boost Credit Intel

Annacaroline Caruso, editorial associate

Fall marks the return of FCIB’s International Credit Risk roundtables. The first one since 2014 takes place Oct. 5 in New York. FCIB roundtables provide an opportunity for open discussions on international trade topics, said Tim Bastian, ICCE, CICP, senior director of risk at Western Oilfields Supply Company (Bakersfield, CA).

As a past attendant, Bastian points out that the participation between speakers and guests helps break down what is happening in today’s economic environment and its effect on credit risk. “My job is to look out for what is coming next, and that it what you learn during these roundtable conferences,” Bastian added.

Experts will present a global economic overview and touch on a variety of topics such as supply chains, bankruptcy red flags and best practices for international business transactions. This information is critical for credit risk managers during these volatile times, Bastian said. “For example, interest rates are rising because of inflation, and it is costing companies more to get funding. Supply chain issues and currency trends are also complex. I am often watching two or more markets and challenges, which can sometimes be overwhelming.”

Click the following link to learn more about FCIB’s Oct. 5 International Credit Risk Roundtable, or you can register here.


Wells Fargo Identifies About a Handful of Countries Ripe for Default

Diana Mota, editor in chief

Several months ago, Sri Lanka had the distinction of being the first sovereign to default on its obligations this year. “However, over the past few months, Russia and Belarus have been declared in default, while other governments have inched closer to missing payments,” according to Wells Fargo.

Wells Fargo economists “believe conditions are ripe for a wave of sovereign defaults across the emerging markets” due to a “worldwide synchronized economic slowdown” expected by the end of this year into 2023. Inflationary pressures and central bank tightening “have tightened financing conditions for many emerging market sovereign borrowers,” they said.

In a recent report, Wells Fargo Economics identified several sovereigns it believes “are either on the brink of default or trending in a direction consistent with a rising risk of default.” Ukraine tops the list as the next candidate. Other countries at risk include Ghana, Egypt, Costa Rica, Argentina and El Salvador.

“In some cases, global developments have exacerbated local economic imbalances, resulting in weaker underlying fundamentals, and a raising the likelihood of sovereign default,” Wells Fargo finds.

Analysts pegged the following countries as having little risk of default: China, Israel, Saudi Arabia, South Korea and Qatar United Arab Emirates.

Analysts noted they built their framework around four indicators they believe capture repayment capacity:

  • Gross Government Debt (% of GDP)
  • Interest Expense (% of government revenue)
  • FX Denominated Debt (% of total outstanding sovereign debt)
  • Foreign Exchange Reserve Adequacy

Global Trade Is Adapting to New Realities

Brink News

Trade disputes, economic uncertainty and a growing income gap have stoked a global protectionist fire. Nationalist parties across the world have flourished on the coattails of a trade-unfriendly agenda, while the Trump administration’s anti-trade agenda has proven difficult to reverse. In the last few years, the U.S. has left the Trans-Pacific Partnership and seen an average 25% tariff imposed on goods produced in China. 

This month, Altamar’s team of Muni Jensen and Peter Schechter spoke to Chad Bown, senior fellow at the Peterson Institute for International Economics, to examine the changing state of global trade.

Reprinted with permission from Brink News.


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Week in Review Editorial Team:

Diana Mota, Editor in Chief

Annacaroline Caruso, Editorial Associate