Powell brushes off rate-cut bets as fed moves carefully. Federal Reserve Chair Jerome Powell pushed back against Wall Street’s growing expectations of interest-rate cuts in the first half of 2024, saying the committee will move cautiously with borrowing costs at a 22-year high but retain the option to hike further. (Bloomberg) 

Boom and bust times for shipping lines. After a pandemic-induced profit surge, the global container shipping industry, which is responsible for transporting 80% of the world’s merchandise, faces a stark reversal of fortunes. (Global Trade Newsletter) 

US sanctions Dubai traders for selling Iranian oil to Europe, Asia.The US government has accused a network of commodity traders in Dubai, Hong Kong and Singapore of circumventing sanctions on Iran, facilitating shipments worth billions of dollars to Asia and Europe. The companies were involved in an oil export scheme orchestrated by Tehran-based Sepehr Energy, which is headed by an Iranian oil ministry official and has ties to the country’s military, according to the US Office of Foreign Assets Control (OFAC). (Global Trade Review)

Inflation’s cooldown gives the Fed leeway. Fed’s preferred measure of inflation is still higher than the central bank would like, but it has been coming down more quickly than it thought (WSJ)

Fed Chair Powell: Too early to say when to expect rate cuts. Investors have mostly concluded that the Federal Reserve is done hiking interest rates, and are already looking toward rate cuts next year, possibly as early as in the first half of 2024. Fed Chair Jerome Powell says: Not so fast. (CNN) 

Lula faces numerous challenges as Brazil assumes G20 presidency. As Brazil takes over the G20 presidency on December 1 from India, Luiz Inácio Lula da Silva will be challenged to fulfil his promise of holding up the interests of the global south amid two ongoing wars and a slowing global economy. (Al Jazeera)

Somalia has joined the EAC regional bloc. What happens next? After more than a decade of intense lobbying, Somalia has been admitted into the East African Community (EAC). After ratification by the Somali Federal Parliament, the membership will become official. (Al Jazeera)

ECB’s inflation success undermines tough talk on rate policy. European Central Bank officials keep insisting that interest rates need to stay high, but another stark slowdown in inflation suggests the economic picture is changing faster than they expected. (Bloomberg) 

Banks may struggle to fund longer tenors under OECD Arrangement, experts say. Revised repayment terms under the OECD framework on export credits could be challenging for banks, prompting increased demand for alternative means of funding, according to industry experts. (Global Trade Review)

Falling prices may sound good, but deflation can be dangerous. Here’s why. After encountering rapid price increases for more than two years, discounts at some stores would certainly feel like a much-needed respite. But business leaders, economists and investment moguls aren’t so gung-ho about it. (CNN)

FedEx, UPS snag Black Friday volume share from regional carriers: Shipium. National carriers grappled with capacity constraints during the COVID-19 pandemic’s volume surge, leading many shippers to use smaller providers’ services. But delivery demand has cooled off this year, and FedEx and UPS are offering up rate discounts to draw more volume into their networks. (Supply Chain Dive)

Asian factories still under pressure on mixed demand rebound. Key gauges of activity at Asia’s factories failed to turn around the bearish sentiment in November, as global demand for goods remained soft and China’s faltering economic recovery tempered any optimism. (Bloomberg)

Consumers pulled back on spending, inflation eased in October. Americans slowed their spending in October and inflation continued cooling as the economy downshifted into fall after a fast-paced summer. Weakening price pressures likely end Fed rate hikes. (WSJ)

National Bank of Canada's fourth-quarter profit jumps on capital markets strength. National Bank of Canada (NA.TO) reported a rise in fourth-quarter profit on Friday, as a strong performance at its capital markets unit helped offset the hit from bigger provisions. An uncertain economic outlook has prompted lenders to build rainy-day funds to brace for potential loan defaults. (Reuters).

Argentina Potentially Headed into ‘Stagflation’ Amidst Economic Crisis

Kendall Payton, editorial associate

Argentina’s President-elect Javier Milei has appointed Luis Caputo, a former finance minister and central bank chief, as his economy minister with his mission being to “pull Argentina from its deep economic crisis,” he said during a recent radio interview.

While Argentina’s economy expanded by 5% in 2022, deteriorated economic conditions caused a 2.5% contraction this year and annual inflation has reached 143%, according to statistics from The World Bank. However, the economy is expected to grow 2.7% in 2024.

“The choice of Caputo is a wise choice in order to bring some kind of favorable expectations for markets regarding what economic policy is going to look like, at least in the short run,” said Nicolás Saldías, a senior analyst at the Economist Intelligence Unit for Latin America and the Caribbean. “He’ll be very orthodox, and he understands the financial markets quite well.”

Seen as a more market-friendly pick, Caputo’s dollarization plan seeks to eradicate fiscal deficits and close the central bank. He is expected to seek a “non-disruptive roadmap” for the short-term in order to win over the markets, according to the Buenos Aires Times.

The economic plan will focus on cutting spending and resolving up to 23.8tn pesos of peso dominant liabilities held by creditors. Milei said stagflation is likely to be caused by carrying out fiscal restructuring, ultimately leading to a negative impact on the economy. “What we are doing is creating all the mechanisms to stop the money supply and put an end to inflation within a span of 18 to 24 months,” he said in the radio interview.

Milei previously promised getting rid of the central bank in order to cut inflation and eventually lead to dollarization of the economy, replacing the peso with the U.S. dollar. However, the plan is no longer a priority, but will come back into focus once Argentina’s economy improves. “It’s not clear if Caputo is inherently against dollarization,” said Saldías, “but at least for the short run, the fears of a dollarization under Milei seem to be overblown.”

Customers in Argentina have averaged 78 days beyond terms, with 56% of credit professionals saying payment delays have increased with up to 90-day payment terms, per the FCIB Credit and Collections Survey. The most common causes for payment delays are government approval, regulatory issues and central bank issues (all 56%).

What FCIB Credit and Collections Survey respondents are saying:  

• Our customers are constantly battling against the central bank's hard currency restrictions and the ongoing plague of hyperinflation. Win-win solutions are difficult to come by under those circumstances. Start early building a relationship with your customer and include your salesperson.
• Ensure stringent contracts are in place and don't expect to be paid to terms. Secured terms are advised.
• With continued global inflation, war in Ukraine and high interest, you need to know your true legal customer to prevent fraud and keep your A/R secured.
• Do due diligence for all prospect customers, especially to those small-medium privately held companies with no financials or credit reports. Check the profile and validate business addresses, the company domain e-mail address, etc. and start with small, reasonable credit line and reasonable payment terms. 

The FCIB Credit and Collections Survey is now open. It covers Canada, Israel, Saudi Arabia and the UAE. You will earn ICEU/Participation credit for your input. Be sure to share the link with your credit and collections network.  

 

Week in Review Editorial Team:

Annacaroline Caruso, editor in chief

Jamilex Gotay, editorial associate

Kendall Payton, editorial associate