jueves, 31 de julio de 2014

Why has the cost of a dollar jumped?

The answer may well have to do with the hefty US$4.8 billion loss Portugal's largest bank (in terms of assets), Banco de Espirito Santo, reported on July 30. Losses could be even higher, up to US$5.7 billion. The US$4.8 billion loss was 72% higher than had been expected earlier in the month when Portugal's central bank -- based on information provided by KPMG, the Espirito Santos's group's auditors -- stated on July 11 that Banco de Espirito Santo had enough capital to weather possible losses.

The central bank not only ordered the bank to raise more capital, it also forced the suspension of voting rights of three Board members of the Espirito Santo family and ordered the  bank's auditors replaced. Last week, the family patriarch, Ricardo Espirito Santo, was arrested in connection with an investigation of money laundering and tax evasion. An outsider replaced him as head of the bank.

The damage had already been done, though. Extensive lending to prop up weak companies in the family empire took its toll when those family companies failed anyway. Three family holding companies have filed for bankruptcy protection this month.

What does this have to do with Mexico? Portfolio flows... If the effective failure of Portugal's largest bank were to cause investors to become more concerned about risk, they will pull back from investments in emerging markets. Economex does not think it's a coincidence that the fix rate peso jumped from $13.06 on July 29 to $13.23 on the 31st.

And then, of course, Argentina's default doesn't help.

No hay comentarios:

Publicar un comentario