Tragedy in Brazil: Presidential candidate Campos killed in plane crash

Eduardo_Campos_Bloomberg

Brazilian presidential candidate Eduardo Campos (PSB) was tragically killed in a plane crash yesterday, throwing Brazil’s October presidential election into disarray and causing big swings in local financial markets. Campos’s running mate, Marina Silva, was not onboard the plane, according to party officials.

Campos was in third place in recent polls with the support of about 10 percent of voters. While he was not expected to win the October 5 vote, he was perceived as a market-friendly alternative to President Dilma Rousseff, and his death will set off an intense scramble for his supporters in an increasingly-contested election. While it is too soon to draw a definitive conclusion about the impact of this event on the shape of the presidential race, FSG believes that Campos’s demise is likely to improve Rousseff’s chances of re-election in the first round. This is because:

1. Rousseff was already hovering around 50% of total valid votes in the latest pollsRousseff only needs to receive just over 50% of the valid vote to win in the first round, and according to IBOPE’s election poll from August 7, Rousseff would get 50% of valid vote despite obtaining only 38% of total vote. This is because blank and null votes do not count toward the total vote.

IBOPE Voting Intention Poll – August 7 2014

IBOPE Voting Intention Poll

2. A portion of Eduardo Campos’s votes will go to Rousseff in the first round: Regardless of who becomes the new candidate for the PSB, it is expected that at least some of Campos’s supporters will shift their support to Rousseff, which would provide her with the extra votes she needs to be the first-past-the-post in the first round. The fact that Campos served as a minister under PT president Lula, and that his political party (PSB) was part of Rousseff’s governing coalition until 2013, puts him in the orbit of the PT in the eyes of many voters. Some Lula supporters had shifted their support away from Rousseff to Campos only because they were disappointed with Rousseff’s execution of PT’s policies, but now that Campos is no longer in the race, they might shift their support back to Rousseff.

3. The proportion of null and blank votes could increase: By the same token, Campos had also gathered the support of disaffected voters from other political parties other than the PT, namely the PSDB. In the absence of another solid candidate that represents “the option for change,” the percentage of voters that vote in blank or null could increase. Additionally, a significant chunk of former PT voters supporting Campos might not be willing to shift their support back to Rousseff, or any other candidate. This would automatically increase the percentage of valid votes obtained by any candidate in the first round, including Rousseff, facilitating her re-election as president of Brazil without the need of a second round.

One factor that could disrupt this outlook would be the selection of Marina Silva to replace Campos as the PSB candidate, and her subsequent rise in the polls. Given Silva’s strong national brand, and the potential for a robust sympathy vote, there is a good chance that she could syphon votes away from both Rousseff and Neves to force a second-round vote. If this were to happen, the potential for Silva to endorse either Rousseff or Neves in a runoff election could prove to be a significant wildcard.

Given this potential runoff scenario, FSG will be monitoring the following factors in the weeks ahead:

  • Nomination for Campos’s replacement: The PSB has 10 days to nominate a new presidential candidate, and initial reactions within the PSB suggest that Campos’s running mate Marina Silva will become PSB’s new candidate.
  • Potential for Silva to issue an endorsement: Assuming Silva is the candidate chosen to replace Campos, there is a lot of uncertainty as to who she might support in a second round. In fact, during the 2010 presidential elections, when she was the third-place finisher in the first round with her own political party (Green Party), she decided not to endorse neither Rousseff nor José Serra (PSDB).
  • Where Silva’s supporters might go in a runoff: Assuming again that Silva is PSB’s presidential candidate the precedent we have from 2010 is that 50% of her votes went to Rousseff and 50% to Serra. What her voters would do this time around is hence very unclear.

In summary, although Rousseff’s re-election in the first round on October 5 seems be the most likely scenario, we still need to wait for new polling data and for the definition of the PSB’s internal political transition to have a clearer sense of the impact of Campos’s death on the presidential elections.


FSG clients can access all research on Brazil through the client portal. Not a client? Contact us for more information.

Brazil’s Second M&A Wave: Best Practices for Approaching Acquisitions in Brazil

Multinationals’ interest in mergers and acquisitions (M&A) in Brazil is increasing as valuations fall and the real depreciates. Additionally, the divestment of non-core assets by other companies and the need for growth capital in the SME space is generating new strategic acquisition targets for multinationals in Brazil.

However, M&A is a very time-consuming and resource-intensive activity, and many acquisitions fail to deliver expected returns to shareholders (see chart). In Brazil, M&A failure can stem from a multitude of factors, including not having a structured process for mapping and screening potential targets; failure to assess tax, labor and environmental contingencies correctly; not including price adjustment mechanisms; failure to retain key employees; and conducting a poorly-structured post-acquisition integration process.

Chart: Brazil M&AFSG recently published a report specifically addressing ways to overcome common pitfalls in the execution of an M&A deal in Brazil. In our research we focused on best practices in the following areas:

1. How to determine whether an acquisition is the right strategy for growth in Brazil

Not all companies are suited for a strategic acquisition in Brazil, and even if they feel they are, it might not be the right moment to embark on such a time- and resource-consuming endeavor. Before you decide on an acquisition in Brazil ask yourself whether growing inorganically fits your company’s culture and strategy, and whether your company is ready for an acquisition in Brazil.

Finally, even if the answers to the questions above in “Yes”, there is a final question you should be asking yourself, which is whether an acquisition is a better alternative than growing organically. The decision between organic and inorganic growth will depend on the capabilities you need to grow in Brazil, on whether or not you will be able to find an appropriate target that has those capabilities, and ultimately on the time and cost of building up those capabilities organically versus the time and cost of acquiring them through an acquisition.

2. Tactics for tackling key challenges that arise during the execution of a strategic acquisition in Brazil: 

Conducting a strategic acquisition in Brazil can prove a long and challenging road. From the first phase of an acquisition – mapping and screening potential targets, to the final step – post-acquisition integration, multinationals should be equipped with the tools and best practices to successfully navigate the acquisition process.Just to give an example, since observing tax, labor and environmental laws is so challenging for most SMEs in Brazil, many of them choose not to be fully compliant with those laws in order to gain cost advantages and stay profitable. As such, most companies in Brazil have learned to coexist with pending litigations, however a multinational is likely to attract more attention from regulators and tax authorities, which could result in significant contingencies were the multinational to acquire a non-compliant SME. Therefore, when conducting due diligence, multinationals should be very diligent in finding all the “skeletons in the closet”, which also implies getting external help from local lawyers and tax advisors.

3. Assessing the pros and cons of partnering with a private equity fund as an overarching risk mitigation strategy: 

The rise of private equity in Brazil and entry of foreign funds present interesting alternatives to standard acquisitions. Acquiring a company from a private equity fund is the most effective way to find a target that is already compliant with multinational corporate standards in areas such as governance, accounting or systems, as well as with local tax, labor and environmental standards.

Some private equity funds have specialized in investment opportunities that they can later exit selling to multinationals via strategic acquisitions. However, buying from a private equity fund comes at a price. Therefore, multinationals will need to assess whether they can generate enough additional value from the PE fund’s asset to still achieve the desired return on investment on that acquisition. This is especially crucial in Brazil, where payback periods tend to be longer than in other emerging markets as a consequence of “custo Brasil”, or the high cost of doing business in the country.

For more on best practices when approaching mergers and acquisitions in Brazil, FSG clients can access reports on the client portal.

Emerging Market View: What Our Analysts Are Reading

Emerging Market View What our analysts are reading

Much like the US soccer team advancing in the World Cup despite a loss to Germany in yesterday’s game, Brazil’s economic outlook (regardless of the economic angst in recent years) seems to be catching a break as well – and it’s about time.

“Brazil still offers a significant amount of untapped opportunities in most sectors, especially in relatively faster-growing regions in the North and Northeast. Successful multinationals stress the need to focus on the long-term,” according to Pablo Gonzalez, Senior Analyst for Brazil after reading an article published by the FT.

FSG’s clients are encouraged to read further on how to make the case for Brazil, our latest report which identifies the opportunities and long-term factors that continue to make Brazil a good bet for multinationals. Also in the news lately is the rising cost of energy, a topic of recent concern given the unrest in the Middle East.  The Wall Street Journal reports that higher oil prices are casting a shadow over emerging markets.

“Higher energy prices disproportionately affect emerging market consumers and economies. The increase in oil prices as a result of the rising political risk premium from the conflict in Iraq could spell trouble for emerging markets that are large importers of oil or already experiencing decelerating growth,” says Sam Osborn, Associate Practice Leader for FSG’s global analytics.

An example of impact follows Turkey’s recent decision to cut interest rates again.

“The interest rate cut will be helpful to local businesses but will fuel inflation. Rising energy prices because of the situation in Iraq are already affecting transportation costs, and the central bank will struggle to contain them with lower interest rates. As a result, MNCs can expect consumers to be squeezed for at least several more months,” says Martina Bozadzhieva, Head of EMEA Research at FSG.

However, Iraq is not the only concern:

 FSG clients should review more analyses of rising energy prices here.​

Brazilians on the Edge of Their Seats during the World Cup? You Bet – but not for the Reason you Might Think.

During my most recent trip to Brazil, a week before the start of the World Cup, I was eager to understand the mood of the country, and to see whether Brazil, infamous for miraculously pulling things together at the last minute, would live up to that reputation.

My initial impressions were positive. Upon landing in São Paulo, I was pleasantly surprised when our plane taxied right past Guarulhos’ notoriously decrepit facilities to a gleaming new terminal. Riding on the Marginal Pinheiros into the city, I saw crews busily laying fresh sod along the highway, picking up litter, and painting lanes on the road.

However, the more time I spent in São Paulo, speaking to people from taxi drivers to multinational executives, the more it became clear that enthusiasm for the Cup is as shallow as the roots of the freshly laid sod I’d seen along the highway. Of all the executives I spoke with over the week, only one individual was planning on attending a World Cup match.

This may seem odd in a country where football is akin to religion, but I think it reflects the overwhelming sense of anxiety surrounding the impending spectacle. Brazil’s economy has slowed dramatically in recent years, and only 34% of Brazilians believe that the World Cup will boost economic growth. Meanwhile, the slowdown, which is unlikely to reverse course without major economic reforms, has been long and deep enough to affect Brazil’s notoriously Pollyannaish consumers, whose confidence fell in May to the lowest level since 2009.

Despite the country’s economic malaise, FSG clients have generally been more concerned about hitting profitability targets in Brazil than maintaining their top-line growth rates. However, this perspective has recently begun to shift as companies realize that the World Cup is likely to lead to lower sales and falling productivity as consumers stay home and infrastructure is overwhelmed. Indeed, among the executives that I surveyed during our São Paulo Supper Club, 40% stated that they had low confidence that they would hit their 2014 top-line targets in Brazil, the highest level of pessimism we have ever seen among our clients in Brazil.

In addition to the country’s economic malaise, a lot of the anxiety also seems rooted in uncertainty over whether the event will bring escalating protests and violence, and how Brazil is likely to be portrayed in the global press. Brazilians are right to be anxious, given that the atmosphere is ripe for increased protests, with 72% of Brazilians reporting dissatisfaction with how things are going in their county, and roughly six-in-ten thinking that hosting the Cup is bad for Brazil.

However, a poor showing in the World Cup may be precisely what the doctor ordered for the Brazilian economy. Anything but resounding success could very well prove to be disastrous for the incumbent, Dilma Rousseff, in October’s presidential elections. This is crucial because political change in October is a prerequisite for Brazil to implement meaningful economic reforms. Indeed, a recent survey of investors shows that much more than the World Cup itself is at stake during the 32-day-long football tournament, with those polled forecasting that the BRL is likely to slide to 2.5 BRL/USD if Dilma is reelected.

Given what’s at stake for the future of Brazil during the World Cup, I suspect that many Brazilians will be sitting on the edge of their seats over the next few weeks; however, their attention is quite likely to be more focused on what’s happening off the field than on the field.

2014 will be a pivotal year for Brazil

Multinationals are struggling to assess whether and when Brazil will return to high-growth after three years of disappointing economic performance, and more specifically, they want to understand how 2014 – a pivotal year with the World Cup and the October presidential elections – will affect their businesses in the near future.

FSG recently published a report specifically addressing most of these questions. The report is intended to equip senior executives with the knowledge to:

  • Understand Brazil’s new economic reality: Over the last decade, Brazil’s ability to grow beyond 2–3% was driven by internal and external growth accelerators, which began to subside in 2011. These accelerators were: workforce growth; a massive credit expansion; a commodity super cycle driven by China’s demand for commodities; and high levels of capital flows into the country. A return to higher growth will depend on the government’s ability to pass key structural reforms, and implement effective policies that lift gross fixed investment and productivity levels in the economy. Unfortunately, 2014’s calendar will not be conducive to any major reforms or investments, and the likelihood of significant reforms emerging over the medium term will depend heavily on which candidate wins the elections in October.

Brazil Outlook and long range scenarios

  • Set expectations for 2014’s economic performance: Brazil is set to muddle through 2014 with the help of government spending and decent private consumption. However, investment will remain muted due to higher uncertainty about where the economy is headed. While FSG believes that Brazil is likely to grow around 2% in 2014, there are two major downside risks to our forecast: 1) persistent high inflation that forces the central bank to continue raising interest rates and limit credit growth; and 2) a rapid deterioration of fiscal accounts that prompts the government to reduce spending, raise taxes, and delay infrastructure investments, in order to avoid a sovereign risk downgrade by credit agencies.
  • Monitor signposts for the October presidential elections: Although FSG believes Rousseff remains the favorite to win in October’s elections, economic turmoil and social unrest during the World Cup could rapidly erode her popularity down to July 2013 levels, when Brazilians took the streets to protest against widespread corruption and the poor quality of public services. If momentum for change were to build, we could see Rousseff as more vulnerable to the Eduardo Campos-Marina Silva alliance (PSB-Rede) than to Aecio Neves (PSDB), despite Neves’s current strength in the polls.
  • Assess economic growth prospects for 2015 and beyond: Regardless of who wins the elections, 2015 will be a tough year of adjustment, as Brazil tries to regain credibility in its macroeconomic framework by restoring its fiscal balance and reducing transfers from the treasury to public banks. Over the long term, a return to high growth is less likely with Rousseff than with Campos, as we see Rousseff’s PT as less prone to undertake the reforms and policies that the country needs to unlock investment growth and produce productivity gains.

In the report we provide a detailed analysis of the key signposts to monitor ahead of the October presidential elections, as well as a comparison of the policy agendas of Rouseff and Campos, and their likely impact to multinationals in different sectors. FSG clients can access the full report here.

Download the podcast

Memo to EMEA and LATAM regional heads: time to pick up the phone and chat

Struggling to Combat Slowing Growth and Rising Costs in Key BRICS Markets?

A conversation with your regional counterpart in EMEA, LATAM, or APAC can help you understand the common structural factors driving lackluster growth and help you re-set corporate expectations for growth in 2014

BRIC deceleration

2013 has been a difficult year for the BRICs—economic growth has decelerated across the board due to the confluence of external headwinds and domestic inefficiencies, while the political will to push for necessary structural reforms has proven elusive.

For emerging markets executives seeking to respond to slowing growth in key BRICS markets, cross-regional conversations can be valuable for issue diagnosis and strategy development. The premise of the argument here is a simple one: common problems can and ought to be identified, so that viable strategies for driving profitable growth given less favorable medium-term prospects for the BRICs can be replicated and applied across regions.

I’ve been ruminating about Brazil’s slowdown and potential for recuperation in 2014 for several quarters now, while my EMEA colleague, Martina Bozadzhieva, has been doing the same with respect to Russia.  However,  it wasn’t until we had an opportunity to sit down together and discuss the dynamics driving Brazil and Russia that we learned how much these two seemingly disparate markets have in common.

Listen to our podcast below for a quick recap of the structural factors driving lackluster growth in Brazil and Russia, and get a cross-regional perspective on strategies for managing corporate expectations and improving bottom-line performance across the BRICS.

Download the podcast or access the entire FSG iTunes library here

Sluggish Growth in Brazil is Driving MNCs to Invest in Efficiency-Enhancing Measures

Brazil Economy

The case for Brazil is getting harder to make

While the Brazilian economy grew faster than expected during the second quarter, full-fledged recovery remains elusive and several rounds of interest rate hikes have yet to rein in stubbornly high inflation. FSG is expecting relatively weak GDP growth of 2-2.2% YOY in 2013, with potential for electorally-motivated fiscal stimulus to drive growth of around 2.7% YOY in 2014. These numbers are disappointing, and underscore the extent to which Brazil’s long-term potential remains constrained by structural bottlenecks and protectionist policies.

Most multinationals are in Brazil for the long haul, but many plan to limit investment

Here at FSG, we have been carefully tracking multinational sentiment with respect to Brazil, and on a recent trip to Miami, I had the opportunity to sit down with many of the LATAM executives we work with to discuss how the role of Brazil within their regional portfolios has changed as economic growth has slowed.

Suffice it to say that while weak prospects have put a damper on sentiment, few executives are contemplating pulling out of the market. However, many executives I have spoken with in recent weeks anticipate holding investment flat over the near- to medium-term, with the potential for scaling back presence if the situation does not improve over the course of 2014-2015.

Interestingly, this sort of pessimism is gaining ground in spite of high top-line growth. Most executives we work with don’t anticipate that Brazil’s slowdown will have a significant impact on their ability to reach ambitious revenue-growth targets, largely because in a market the size of Brazil, there is still white space to be found. Rather, they are concerned about hitting bottom-line targets, and with good reason: Brazil’s high-cost, protectionist operating environment poses a significant drag on margins for foreign multinationals.

Recent exchange rate volatility is making an already-difficult situation worse 

FSG Client Poll

The Brazilian real has been remarkably volatile over the course of Q3-early Q4, depreciating to a low of 2.45 BRL/USD in late August as investors were originally anticipating that the United States would begin to taper bond purchases in September. A majority of companies we work with report that they have built their budgets for 2013 around an anticipated exchange rate of exchange rate of 2.1–2.2 BRL/USD. As such, recent volatility has exacerbated their exposure to FX-related losses and made deal making a herculean endeavor.   

Companies able to take the long view are targeting their investments to improve efficiency

Top investment priority in Brazil

When all is said and done, there is little reason to believe that the protectionist bias of Brazilian labor, tax, and investment policies will change over the medium term. President Rousseff is likely to be re-elected, and domestic politics preclude any marked departure from the ad hoc interventionism that has defined her first term thus far. Executives that are able to plan for the long-term are increasingly coming to terms with this reality and targeting their investments accordingly in an effort to boost profitability. In the B2B space, many companies we work with view investing in local manufacturing as the best way to bring down costs over the medium to long run, while B2C companies are investing in their supply chains. 

Emerging Markets Opportunity Not Over

Currency-Volatility-Global-Performance-DriversRecent reversals in capital flows caused large and sudden currency devaluations, faster than many emerging markets expected or could manage. As a result, many market commentators have called this end of the emerging markets opportunity. That statement couldn’t be further from the truth. While companies should always expect challenges in emerging markets, the changing environment will also create a new set of opportunities.

FSG identified four ways companies can capture growth in this shifting environment:

  1. Leverage home-currency strength to win share back from emerging markets–based competition
  2. Double down on local production to reduce production costs
  3. Use balance sheet strength to earn financing margins
  4. Reassess customer segmentation to identify local customer “winners”

FSG looks at these strategies and the drivers of the changing global environment in our 2014 Global Performance Drivers report, now available for FSG clients.

What happened?

Capital flows reversed because of push and pull factors.  As the US economy continues to improve, the Federal Reserve is expected to reduce bond purchases, changing the risk-return payoff for portfolio investors, “pulling” capital out of emerging markets.  We also see slowing growth in emerging markets “pushing” capital to developed markets.  The outflow of capital is more concerning for countries like Turkey, Poland, and Ukraine, which have high levels of short-term external debt. Countries fitting this profile may run into short-term funding challenges that could drive up local interest rates, or in the worst case cause temporary liquidity problems. Other countries like India and Indonesia may now struggle with inflation as currencies decrease faster than is manageable, driving up costs for consumers.

Latin America’s Moment: Making the Case and Capturing Opportunity

Making the Case for Latin America Has Historically Revolved around the Region’s Untapped Growth Potential

Making the case for resources has long been a challenge for emerging markets executives—while emerging markets represent tremendous growth opportunities, they have historically been viewed as risky, volatile, and fragmented, undermining corporate willingness to commit large amounts of resources. On a regional level, many of the Latin America executives we work with have expressed frustration at having to defend the region’s potential when top-line growth has been higher elsewhere in the world, particularly in Asia.

At Frontier Strategy Group, we have long strived to help our clients overcome such skepticism and communicate upwards effectively by emphasizing the region’s hard-won macroeconomic stability, relatively under-penetrated markets, and growing middle class. While these drivers remain in place and multinationals’ growth targets for Latin America are now on par with those seen in Asia, sluggish global growth has raised the stakes, and emerging markets are increasingly expected to deliver both top- and bottom-line growth.

However, Sluggish Global Growth & Underperformance in 2012 Have Undermined Confidence in Latin America

In the wake of Venezuela’s recent devaluation and the death of President Hugo Chávez, as Argentina continues to impose heterodox capital and import controls and Brazil edges towards stagflation, it is easy to understand why multinational executives face growing skepticism from risk-averse corporate centers as they strive to make the case for resources in Latin America.

Fortunately, Executives Compelled to Reassess the Region’s Potential Can Walk Away Reassured

While we certainly acknowledge the endogenous and exogenous factors undermining Latin America’s near-term outlook, we remain bullish about the region’s potential over the medium-to-long term, and our optimism is grounded in a demonstrable belief that the region’s core advantages have in fact remained intact, and will be reinforced by positive secular trends.

Not Only Do Latin America’s Core Advantages Remain Intact…

Latin America’s core advantages can be divided into four buckets, including profitability, relative growth, stability, and concentrated financial resources. Of these four advantages, profitability stands out as the most salient given the pivot to profitability that emerging markets executives are experiencing. As growth remains stalled in developed economies and corporate places increasing pressure on emerging markets, 73% of FSG clients in Latin America have experienced or expect to experience a shift in corporate emphasis towards bottom-line growth over the near-term. With this in mind, it is certainly reassuring to consider that available data on publicly traded companies indicate that average operating margins in Latin America are 55% higher than in the BRICs excluding Brazil.

At present, Latin America derives its profitability advantage vis-à-vis other emerging market regions primarily from a host of demand-side factors which allow multinationals to sell at higher margins and maximize the gains associated with realizing economies of scale. However, these advantages have the potential to diminish over time as competition within the region increases, meaning the time to build market share and brand loyalty is now.

When it comes to GDP growth, while the pace of growth in other emerging markets is expected to decelerate in comparison with pre-crisis rates, LATAM has remained relatively resilient and will accelerate in the coming years.

If you’re tempted to dismiss growth and profitability out of fear of resurgent instability, think again. More conservative corporate centers have historically associated Latin America with hyperinflation, uneven growth, and overexposure to commodity boom-and-bust cycles. Part of the story we’re striving to help our clients communicate is that while these sorts of risks persist in specific markets, the region as a whole has progressed tremendously thanks to orthodox macroeconomic reforms.

Inflation targeting regimes, reduced deficit spending, and the liberalization of trade and capital flows have brought down inflation, empowered consumers and provided the stability necessary for sustained growth. Latin America also remains well-positioned to ride out any future global downturn, as its economy is less dependent on trade than APAC, and less integrated into the global financial system, reducing the risk of Eurozone contagion. Concentrated financial resources also bode well for B2C and B2B multinationals—per capita private consumption spending and government expenditure in LATAM outpace other EM markets including India and EMEA, and are on par with China.

But investment and reform are positioning the region to build on these strengths moving forwards, unlocking new opportunities for multinationals:

Most importantly, Latin America is well-positioned to build on these core advantages, and secular trends are already yielding proof points. Trends we’re tracking range from Peña Nieto’s ambitious reform agenda and the resurgence of manufacturing in Mexico to Colombia’s peace dividend and Peru’s rapid rise. On a pan-regional level, energy resources will bolster government coffers and empower investment in infrastructure and human capital, while the rise of the Pacific Alliance will provide a decidedly pro-business counterweight to the increasingly anachronistic Mercosur. The region is on the rise, and there has never been a better moment to make—and win—the case.

Emerging Market View: What Our Analysts Are Reading – 3/1/2013

Many of this week’s US headlines primarily focused on the the imminent United States government sequestration.  In addition to following those developments, our research talent kept an eye on headlines pertaining to emerging markets, too.  Below are some headlines with FSG research analyst commentary:

Bloomberg News reported that Emerging Stocks Erase Weekly Gain on China, Commodities:

“Today’s headlines highlight the US budget sequester’s ripple effect on emerging-market growth. That could incrementally diminish the opportunities for MNCs in some EMs, but it doesn’t change the fundamentals. We are more concerned that US-based MNCs will react to economic mismanagement at home by remaining overly risk-averse abroad, allowing local competitors to capture yet more market share.”
- Joel Whitaker, Senior Vice President and Head of Global Research

The Wall Street Journal’s Deal Journal blog posted Doubts Over Returns Hit Fundraising in China:

“Look beyond headline GDP to gauge China’s economic performance. Look at corporate profits in China and return of PE investment is a good indicator.”
- Shijie Chen, Research Practice Leader for Asia Pacific

From Reuters - Brazil may use imports to curb inflation:

“Offhand comments by Brazil’s finance minister raise the possibility that the country could drop import tariffs in sectors and on goods where local producers have been raising prices aggressively. This would be a 180 turn from years past, when Brazil raised tariffs on imported goods in industries impacted by cheaper imports due to a strong currency.”
- Clinton Carter, Director of Research for Latin America

And lastly, another article from Reuters - Russia says central bank independence not at risk:

As CEE governments struggle to boost growth without increasing fiscal deficits, they are increasingly pushing regional central banks to cut interest rates, even at the expense of undermining the banks’ independence. This is a trend to watch in 2013, especially in Russia where reduced central bank autonomy could significantly undermine investor confidence.”
- Martina Bozadzhieva, Senior Analyst for Central and Eastern Europe