Brazil: If You Like Russia, You’re Gonna Love…
BY WALTER T. MOLANO
Russian bonds did very well last year. Sovereign bond prices rose, despite the decline in oil prices. Most investors pointed to the country’s strong leadership, and Putin’s commitment to rein in the fiscal deficit. Last month’s decision to cut government expenditures by 10 percent was well received. It is true that Russia should be given high marks for implementing an orthodox response to its terms of trade shock. Moscow has allowed the exchange rate to devalue more than 60 percent. The monetary authorities hiked interest rates aggressively to stabilize the currency, without burning through its international reserves. On the contrary, the central bank husbanded its reserves to help corporates meet external obligations. Russia was cut off from the international capital markets in 2014, following its invasion of Eastern Ukraine. But instead of forcing its corporates to default, the government provided them with the hard currency resources to meet their external obligations. Thus, it’s little wonder why investors reacted so favorably.

Read the full article on Latin Vex.