The Dominoes Keep Falling: Leftward Lurches And Emerging Market Defaults

• The Dominoes Keep Falling: Leftward Lurches And Emerging Market Defaults
  by John Rubino, http://dollarcollapse.com/  
  Sometimes one big event dominates the landscape, like last week when the Fed raised interest rates. Other times a bunch of less-universally-significant-things add up to a meaningful story. And the story that follows here is, of course (given the venue), ominous.
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  First up is the much-discussed US$9 trillion that developing countries borrowed back when the dollar was weak and their currencies were relatively strong. Pundits have been warning that with the dollar soaring this debt was largely underwater and therefore a threat. But as far as anyone could tell it wasn’t blowing anything up.
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  Then on Friday a big Mexican construction company defaulted:
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  ICA Skips Debt Payment as $1.35 Billion Bond Default Looms
  (Bloomberg) – Empresas ICA SAB will skip a debt payment due by the end of the month as Mexico’s biggest construction company heads for the nation’s biggest default in at least two decades. Stocks and bonds declined.
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  The builder won’t pay $31 million in interest on its $700 million in bonds maturing in 2024, the company said Friday in a statement. ICA was using a 30-day grace period that ends Dec. 29. The company will be forced to halt payments on all of its $1.35 billion in overseas notes, eclipsing glassmaker Vitro SAB as the biggest corporate bond defaulter in Mexico since Moody’s Investors Service began tracking the data in 1995, according to the rating company.
  ….
  Now multiply the above by, oh, a thousand, and you get a sense of what could happen in 2016 if the dollar stays strong, commodity prices stay low, and the other big dollar borrowers start toppling.
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  Next, we got to see how a formerly-well-run country responds to a financial crisis brought about by overspending and rampant corruption: It replaces its rock-solid, fiscally responsible finance minister with a political operative more open to spending whatever it takes to keep the incumbents in power.
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  Brazil’s New Finance Minister Faces a Big Test After Friday’s Rout
  (Bloomberg) – Nelson Barbosa could, of course, turn out to be the man who fixes Brazil’s finances, tames soaring inflation and revives the sinking economy, but investors sure aren’t betting on it.
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  As word spread across Sao Paulo trading floors Friday that Barbosa would be the country’s next finance minister, replacing the beleaguered Joaquim Levy, markets plunged. By day’s end, the currency was down 2.6 percent, stocks 3 percent.
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  That harsh reception is the exact opposite of the broad rally that greeted Levy when he took the post a year earlier. Levy, though, was the market’s golden boy, with his University of Chicago-training, asset-manager experience and reputation as a fierce budget cutter. Barbosa, while generally respected by analysts for his technocratic skills, isn’t seen as being quite as tight-fisted on spending, a perception he only reinforced when suggesting Friday that he was amenable to granting subsidies to some industries.
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