A Bit More Detail

As Argentina starts to mend fences with the international financial markets, the emerging powers that make up the BRICS bloc invited it to their next summit. This could be a step towards this country’s reinsertion in the global map, after its ostracism from the credit markets since the late 2001 debt default.

For now, there is no letter “A” in the BRICS acronym, which stands for Brazil, Russia, India, China and South Africa. But in Buenos Aires speculation is rife about whether it should be called BRICSA, ABRICS or BRICAS, if Argentina is admitted.

The invitation for President Cristina Fernández to participate in the group’s sixth summit, scheduled for Jul. 15 in the northeast Brazilian city of Fortaleza, is seen as another sign that Latin America’s third-largest economy may be incorporated, after India, Brazil and South Africa indicated their interest.

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The formal invitation to Fernández was issued by Russia, which also thus confirmed its support.

“I think this shows that Argentina is fully inserted in international relations, not ‘isolated from the world’,” Nicolás Tereschuk, a political scientist at UBA, told IPS. “It simply doesn’t toe the line with the policies of the central countries at just any cost or in any circumstances, as it used to do at other times in its history.”

Argentina’s invitation from BRICS came almost simultaneously with the May 28 announcement of an agreement reached by the Fernández administration and the Paris Club, which this country owed 9.7 billion dollars since the default 13 years ago.

Indonesia, Asia’s second-best performing stock market last year, may be ready to join the so- called BRIC group of major emerging nations, according to Templeton Asset Management Ltd.

“Indonesia’s political and economic outlook has improved tremendously in recent years,” Templeton portfolio manager Dennis Lim wrote in a note yesterday on Chairman Mark Mobius’s blog. “So clearly, it would not look out of place beside the BRIC countries.”

Inclusion in the category -- Brazil, Russia, India and China -- coined in 2001 by Goldman Sachs Group Inc. Chief Economist Jim O’Neill may increase demand for Indonesian stocks. Investors should “stick with the BRICs,” a group that “tends to outperform in non-recession years,” Morgan Stanley strategists led by Jonathan Garner said last week.

The Jakarta Composite index jumped 87 percent last year as Indonesia skirted the global recession after nine interest rate cuts by the central bank. President Susilo Bambang Yudhoyono’s re-election in July boosted confidence he will maintain policies that helped Southeast Asia’s biggest economy expand more than 6 percent annually in the two years until 2008.

Economic growth may average 6.6 percent over the next five years as poverty and unemployment decline, Yudhoyono said on Jan. 4. Fitch Ratings on Jan. 25 raised Indonesia’s credit ratings to one level below investment grade.

Global stock markets, commodities and emerging market currencies retreated sharply Thursday after state-owned investment conglomerate Dubai World asked for a six-month reprieve on its massive loan repayments.

The company is burdened with $59-billion (U.S.) in debt.

The debt standstill marks the end of Dubai's credit-fuelled real estate explosion, which spurred construction of scores of ostentatious infrastructure projects, including the world's tallest building and sprawling palm-shaped tourist resorts built on sand foundations.

It also raised the spectre of the largest sovereign default in nearly a decade and prompted fears of financial woes spreading to other economies just as the global recovery strives to take root.

The Dubai crisis could hit emerging-market sentiment and investor tolerance for risk, which have both helped drive the global economic recovery this year, Scotia Capital currency strategist Sacha Tihanyi warned.

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“The thing that would make anyone nervous is the fact that this is a financial-sector shock. It was financial-sector shocks that played such an intensive role in the recession and financial crisis,” Mr. Tihanyi said in an interview.

Indeed, shares of banks with exposure to Dubai World debt or holdings in the United Arab Emirates, including HSBC, Barclays and Royal Bank of Scotland, fell sharply on the news. European markets suffered their largest one-day decline in seven months, dropping more than 3 per cent. Emerging-market currencies and equity markets sank. Brazilian shares dropped more than 2 per cent and Mexican stocks lost about 3 per cent. Commodities, including oil and base metals also lost ground. Even gold, which has surged to record levels in recent weeks, sold off as investors reined in their risk exposure.

At this point, I am of course simply trying to get an overview like the rest of you and not least deciding whether it will have any far reaching repercussions beyond today's theatricals. However, in case you did not turn on your Blackberry today, they story is that the Dubai government has requested investors in the debt of the investment company Dubai world whether they wouldn't be so nice as to accept a wee postponement of the payment of their debt. Especially, a payment due already the 14th of December in the form of $3.52 billion of bonds from property unit Nakheel PJSC looks as if it is near dead in the water.

The price of Nakheel’s bonds fell to 70.5 cents on the dollar from 84 yesterday and 110.5 a week ago, according to Citigroup Inc. prices on Bloomberg.“Nakheel is now standing on the brink of failure given the astonishing amount of cash Dubai would have to inject on it in order to see the enterprise survive,” said Luis Costa, emerging-market debt strategist at Commerzbank AG in London.

Obviously, announcements of delay of debt payments smells an awful lot like default and with $59 billion worth of liabilities at Dubai World many a financial institution and investor are exposed here. Naturally, and apart from the internal mess this is likely to cause in the Middle Eastern region, I am looking closely at the notion of European banks being sucked in here too.

in George Bush's words 'this suckers going down'. well it may be.....this is a potential mutiple default scenario. The 'implied support' by the emirates for the companies they own when no guarantees are in place has been the basis for credit ratings across the region. That is, that the sovereign would not default. That the federal government has allowed this to come into question demonstrates a very real hazard for investors, It is something it would avoid at all costs. Its about cash. There just isnt enough of it