Please see below selected pre-2016 intelligence about the Americas. This is a synthesis of major recent developments at corporates, business schools, thinktanks, media, commentators, and other key influencers.
- Brazil’s annual rate of inflation rose to 10.5% in November, the highest it has been in 12 years. In a further blow to the embattled government Moody’s downgraded all its ratings for Petrobras, the country’s state-owned oil company, which is at the centre of a corruption scandal, and warned Brazil’s sovereign rating was at risk because of the country’s “worsening governability”.
PwC Canada acquired Cinovate, a leading Canadian Salesforce.com consultancy. PwC says the deal enhances its ability to deliver a suite of cross-industry, cloud-based Salesforce solutions to the marketplace for implementation by the firm’s more than 420 Salesforce-Certified technology consultants. Cinovate was founded in 2009 by Ron Caruso and Matthew Fidler, the firm’s Managing Partners. Cinovate’s operations will be integrated within PwC’s Salesforce Consulting operation, led by PwC’s Justin Wortley.
- Puerto Rico managed to avoid a default by paying all the principal and interest due on $354m of a category of bonds that carry government guarantees. The American territory made the payment by using money that had been set aside to pay a lower class of bonds next month. The island is struggling to cope with $72 billion in debt. Alejandro García Padilla, the governor, went to Congress this week to ask it to pass a plan that would allow Puerto Rico to seek a type of bankruptcy protection; he warned that “we have no resources left”.
- The Federal Reserve raised rates for the first time in 9 years. The FOMC announced rate lift-off by raising the target range on the fed funds rate by 25 basis points to 0.25% - 0.5%. Moreover, in line with expectations, the FOMC and Chair Yellen delivered dovish forward guidance regarding the future path of rate hikes. Past episodes of first rate increases in a U.S. monetary policy tightening cycle were often accompanied by a flattening U.S. yield curve, and currency depreciations and/ or monetary policy rate increases in emerging markets. The close correlation with emerging market borrowing costs suggests that lift-off in 2015 may increase global financing costs, especially for vulnerable countries.
- PwC Canada bolstered its presence in British Columbia by combining practices with RHB Schmitz de Grace, a local chartered accounting firm based in Prince George, B.C. RHB is a full service tax and assurance firm with a team of 21 people who have been working in Prince George since 1976. The firm is led be Allison Beswick and Norm Hildebrandt, who have become partners at PwC. RHB specialises in helping private companies with financing, risk mitigation, accounting, audit and tax compliance, business evaluation, wealth management and succession planning. The firm also provide assistance with bookkeeping, personal tax and retirement planning, and financial management.
- The US economic growth rate was revised upwards to 2.1% in the third quarter at an annual rate, from 1.5% in an earlier estimate. The revision was mostly because businesses held higher levels of inventories than had been thought. The growth in consumer spending was revised down a bit but was still robust at 3%. Third-quarter U.S. GDP was revised upwards to 2.1% from a previously reported 1.5% gain. The revision was driven mostly by a boost to inventory levels. Consumer spending was revised slightly lower. Corporate profits were off 1.1% in the quarter. The US meanwhile generated 271,000 new jobs in October, pushing the unemployment rate down to a seven-year low of 5%. Many market watchers speculate that this unexpectedly high number means the Federal Reserve is likely to raise interest rates in December.
- According to Eurasia Group, in Brazil, improvements to energy and infrastructure concessions will be delayed until 2015, and fiscal adjustment will be significantly hindered by a political crisis that could unseat President Dilma Rousseff (a 40% chance). Legislation to strengthen local authorities in Mexico will not help to improve security, particularly as the drug cartels diversify into other forms of criminal activity such as gasoline theft, extortion, and human trafficking.
- Growth in the US economy slowed sharply in the third quarter, but American consumers continued to spend at a robust pace, suggesting the expansion remains on track. Real gross domestic product rose at a 1.5 per cent annual pace in the July-to-September period, well below the 3.9 per cent rate recorded for the second quarter but roughly in line with Wall Street estimates.
- The US trade deficit rose sharply as exports, hampered by a strong dollar, fell to their lowest level since mid- 2012.
- PwC US analysis found that the September employment report showed slower job gains for Q3 and adds to uncertainty at the Fed. Despite the weaker-than-expected report, PwC believes the economy is still on solid footing and that the Fed will raise rates in December.
- Source's Brazil consulting market 2015 provided detailed insight into Brazilian consulting market in 2014 and 2015. Meanwhile, Tte EIU's "Growth in an uncertain global environment", provides a snapshot of market outlooks for some of Latin America's largest economies.
- Standard & Poor’s cut Brazil’s prized investment grade credit rating to junk and warned that it could lower it again in the coming months, in a major blow to President Dilma Rousseff’s government. S&P attributed the move, which surprised analysts who had not expected such a downgrade until at least next year, to government backpedalling on its budget deficit targets as well as what it described as divisions in Ms Rousseff’s cabinet over fiscal policy.
- Puerto Rico presented a five-year plan to restructure its $72 billion of debt. As well as proposing cuts to public spending under the auspices of an independent board, the plan asks creditors to accept a “consensual compromise” that will force them to take a haircut on the bonds they hold, including on general-obligation bonds that hitherto were considered safer bets.
- New figures showed that joblessness in the U.S. is now roughly at the Fed’s estimate of its “natural rate”, which stands at 5-5.2%. If unemployment falls much further, the Fed’s models predict that wage growth and inflation will accelerate.
- US GDP figures showed a first estimate for the June quarter of 2.3% growth (annualised), while a restatement of the March quarter figures showed growth of 0.6% (annual), instead of the fall of 0.2%. Consumption growth accounted for nearly all the increase in real GDP while business investment disappointed.
- The US economy added 215,000 jobs in July. The unemployment rate held at a seven-year low of 5.3%. Wages edged up month to month and are up 2.1% year over year. Hours worked also increased in the month. Analysts said the figures meant a US interest rate rise in September remained a possibility.
- The IMF’s annual review of the American economy urged the Federal Reserve to delay an increase in interest rates until the first half of 2016 because of lingering uncertainties about the strength of the recovery. It also warned of the “potential for a rise in global imbalances” if the dollar, which has risen by 20% against most big currencies over the past year, were to appreciate more. The Fed is also worried, according to the minutes from its latest meeting, making the timing of a rate rise all the more uncertain.
- The US Federal Reserve lowered expectations for GDP growth in 2015 after the weak start to the year. It was the second time since December that the central bank has downgraded its GDP forecast for this year. Fed members now see GDP expanding by 1.8% to 2.0% this year down from the prior estimate of 2.3% to 2.7%. But 15 of 17 Fed members still indicated the first rate hike should take place this year, no change from their March predictions