Credit Management July and August 2020

Handy Andes are not to be sniffed at
ACCORDING to a report in MoneyWeek, the
region colloquially known as the Andean
Three – Chile, Peru and Colombia – should
not suffer too greatly from the coronavirus
pandemic.
The report notes that ‘emerging
markets have been flattened by investors’
stampede for the exit. The Institute of
International Finance estimates that
overseas investors pulled $95bn from
emerging markets in the first quarter
of 2020 – a record quarterly outflow.
Investors are right to be worried.’ It also
notes that emerging markets tend to
have poor health systems (an export
opportunity, despite cash-strapped
governments?), which won’t help the
fight against the pandemic. Indeed, the
International Monetary Fund (IMF) thinks
Latin America’s economies will contract
by 5.2 percent this year.
However, MoneyWeek reckons that the
Switzerland takes centre stage
in a post-Brexit world
SWITZERLAND is invariably associated
with cheese, mountains and watchmaking.
However, it also has a strong financial
centre and in a post-Brexit world, UK
finance-related services should consider a
tie up with the Swiss.
Yes, it’s true that Switzerland is not
the world’s largest country in terms of
geography or population (just 8.5 million
people) but it’s incredibly wealthy (20th by
GDP). Importantly, it has a strong banking
and money management sector. A recent
report from TheCityUK highlighted that
the UK and Switzerland dominate global
Brazil may drive you nuts
BE careful in Brazil – a point I’ve noted
before – as it appears that there’s some
serious political infighting going on
which is more than likely going to
damage the economy further. As the
Economist has detailed, Latin America’s
biggest economy is contending with both
the pandemic and an economic crisis
and now the justice minister Sérgio Moro
has resigned, ‘openly accusing president
Jair Bolsonaro of obstructing justice.
That has dealt a serious blow to the
president and sparked destabilising talk
of impeachment.’
Andean Three won’t see the pandemic
altering their medium-term growth
prospects too much. Why? It appears
that unlike some of their neighbours,
Chile, Peru and Colombia are wellmanaged,
open economies, with positive
demographics and great growth potential
as ‘all three are commodity powerhouses.’
Colombia has iron ore and oil; Peru the
world’s greatest deposits of silver, the
third-most copper and fifth-most gold;
and Chile has the world’s largest reserves
of copper and lithium. They’ve also
diversified into other areas such as nontraditional
agricultural exports such as
blueberries, avocados and grapes.
Quite simply, coronavirus is taking the
world by storm, but ultimately, we will all
still want the energy, food and minerals
that the three countries possess. Make a
beeline for the area and hold your nerve as
it should pay off in the long run.
exports of financial services – the UK’s
financial exports are $82bn while that of
the Swiss is $23bn. Singly or combined,
they put the US ($68bn), Germany ($16bn)
and France ($1.5bn) to shame.
With both (now) outside the EU and
(will be) excluded from its single market in
financial services, there’s a real potential
for a profitable tie up – especially as both
have strong regulatory systems backed by
the rule of law.
Now is the time to look to the future
and plan for some financial coalescence if
you’re in fintech.
The problem for exporters is that Brazil
was badly wounded by the last recession
where its GDP fell by more than seven
percent; the recession ended in 2017.
Bolsonaro was seen as a knight in
shining armour who would bring about
economic liberalisation and deal with
corruption. But in falling out with major
political allies he has not been very
effective; the country, an exporter of
soy, oil and metals, is very exposed to
commodity prices that have slumped
recently as the pandemic has destroyed
demand.
Make friends in Vietnam...
CORONAVIRUS has left no one untouched.
But that said, it appears that Vietnam could
do very nicely in the end and benefit from
a post virus revival. Why? While many
conglomerates moved their manufacturing
to China as it was a low-cost destination, a
number are now moving out as costs there
have risen. On top of that, the Chinese
shutdown showed to many the wisdom
of diversifying their supply chains. With
Vietnam having a young population which
is accordingly less affected by the virus
than Western countries, and having a lowcost
base, it’s a ready market for anyone
exporting to both its manufacturing sector
and a population that is seeing rising wealth.
…but watch out in Egypt
THE International Monetary Fund (IMF)
has approved a $2.77bn loan to Egypt in an
attempt to prevent economic collapse amid
the pandemic. Egypt, which last received
a loan from the IMF in 2016 is in trouble.
Tourism, which accounted for five percent
of the country’s GDP, has had sectoral
difficulties for years in light of terrorism,
but now it has completely vanished.
Compounding problems is slowing
international trade that has reduced
revenue from the Suez Canal. And it’s not
helping that plunging global energy prices
have hurt the country’s oil and gas sector.
To illustrate the state of the Egyptian
economy, IHS Markit’s Purchasing
Managers Index for the Egypt fell to a
historic low of 29.7 in April from 44.2 in
March, indicating that the private sector
is suffering as a result of social-distancing
measures that have seen mosques,
churches, gyms and nightclubs close.
Never say never, but while there is still
business to be done in Egypt, there are real
issues to plan out for.
CURRENCY UK
EXCHANGE RATES VISIT CURRENCYUK.CO.UK
OR CALL 020 7738 0777
Currency UK is authorised and regulated
by the Financial Conduct Authority (FCA).
HIGH LOW TREND
GBP/EUR 1.12748 1.10466 Flat
GBP/USD 1.28036 1.20784 Up
GBP/CHF 1.22482 1.17374 Up
GBP/AUD 1.88844 1.80656 Down
GBP/CAD 1.71744 1.68581 Flat
GBP/JPY
139.70041 129.33969 Up
This data was taken on 17 June and refers to the month
previous to/leading up to 16 June 2020.
Advancing the credit profession / www.cicm.com / July & August 2020 / PAGE 31