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Central Americans edge north as pandemic spurs economic collapse By Reuters

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© Reuters. FILE PHOTO: A man checks the temperature of a migrant from Honduras who was trying to reach the U.S., at the Corinto border between Guatemala and Honduras, in Puerto Barrios

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By Laura Gottesdiener, Lizbeth Diaz and Sarah Kinosian

MONTERREY, Mexico (Reuters) – After losing her job in Honduras, Gabriela Alvarado has spent the last six weeks crisscrossing towards the U.S. border, part of a small but growing movement of Central Americans heading north after the coronavirus ravaged the already poor region.

Alvarado and her husband, Jose, decided their only option was to leave their two children with relatives and try to reach the United States, after a fruitless hunt for work at home.

“I went searching but there’s nothing, everything is shut down,” the 24-year-old former factory worker said on Tuesday from the northern Mexican border state of Sonora. “There’s no employment.”

Earlier this year, U.S.-bound migration plummeted as Central American and Caribbean countries imposed strict restrictions on movement in response to the growing coronavirus pandemic, and the United States implemented a new program of rapidly expelling people caught crossing the border without authorization.

The historic lockdowns threw the region’s well-trodden migration routes into such chaos that some ‘coyotes’ – human smugglers – reversed course and began trafficking stranded Central Americans south to their home countries.

Now, only weeks before the U.S. presidential election, the region’s complex migration machinery is reactivating, smugglers, experts and migrants say, as the collapse of Central America’s economies pushes families deeper into poverty, creating what could become a lightning rod political issue for the next U.S. administration.

U.S. Border Patrol conducted nearly 55,000 expulsions or apprehensions of migrants at the southwest border in September, according to new data from U.S. Customs and Border Protection (CBP), a 238% increase from April.

Around two thirds were Mexican nationals, a DHS spokesman told Reuters, while Honduras, Guatemala, and El Salvador were the next three largest countries of origin.

Early data for October shows the upward trend continuing, one U.S. source with knowledge of the numbers said.

The data points to a rebound in traffic, although the U.S. Customs and Border Protection (CBP) said more than a third of the people expelled under the new U.S. program had been caught more than once.

CBP acting Commissioner Mark Morgan on Wednesday said worsening economic conditions in the Western Hemisphere due to COVID-19 was expected to keep pushing migration higher.

‘OPENING BACK UP’

Back in February, a human trafficker known as Chicote, who oversees a network of coyotes, took his last trip to the U.S. border, nervously eyeing migrants who coughed or sneezed while packed into the crowded safe houses the network uses to move people while evading authorities.

By March, as the coronavirus swept across the region, members of the Gulf Cartel in northeastern Mexico told him to suspend operations. Chicote said he works with the drug traffickers to help migrants cross the Mexican border state of Tamaulipas into Texas.

Then, in July, a Gulf Cartel operative looking for ways to boost the gang’s income asked Chicote to restart.

At first, still concerned about the pandemic, Chicote declined. But now, after a seven-month hiatus, he says he’s back in business, with a twist. He now insists both smugglers and migrants use masks and plenty of anti-bacterial gel.

“Everything is opening back up,” he said.

“People don’t have money and they have debt – and the easiest way for them to make money is to get to the United States,” Chicote said, explaining that his clients’ family members in the United States foot the trip’s $12,000-a-head price tag.

Chicote asked not to be identified by his real name for fear of retribution.

‘THE SITUATION GROWS WORSE’

In Honduras, the central bank expects the economy to contract between 7% and 8% this year due to pandemic-related restrictions, marking the worst financial collapse in the country’s history.

“People migrate because of extreme poverty and violence,” said Ismael Zepeda, a researcher at the Tegucigalpa-based think tank Foro Social de la Deuda Externa de Honduras (FOSDEH).

“With the economic contraction, poverty is becoming more profound.”

The controls on movement across the region, shrinking resources available to many potential migrants, and lingering fears of the pandemic still raging in Mexico and the United States have so far kept a lid on migration.

But in a sign that pressure is building, thousands of adults, children, and elderly people joined a hastily organized and largely unsuccessful caravan that departed from Honduras two weeks ago, many grabbing their bags and leaving just days after learning on social media of the caravan’s planned departure.

“Every day the situation grows worse here,” said 21-year-old Enoc de Jesus Ramirez, who said he joined the caravan after he lost his job at a gas station and his girlfriend was laid off from the factory where she worked.

After the group initially overwhelmed Guatemalan border security, the Guatemalan government gave special powers to the army to round up and deport more than 3,000 of the migrants back to Honduras, including Ramirez.

While such large groups garner attention in Washington, the majority of Central Americans who migrate without authorization do so either alone or through smuggling networks, largely out of sight.

In Guatemala, a low-level smuggler named Pablo, who asked not to use his full name, told Reuters that when trafficking ground to a halt in the spring he rode out his unemployment at a barber shop, charging $1.30 per cut.

But in recent weeks he has resumed transporting people across the border into Mexico, he said. From there, other members of the smuggling network will help migrants continue their journey northwest, often working with the Sinaloa Cartel to cross the Sonoran desert.

“We use scouts who search out Border Patrol,” he explained. “For every 10 people, usually six get through (the border).”

Others, like Alvarado and her husband, make the dangerous trek up through Sonora alone, without the expensive services of smugglers. Some will then contract a trafficker to help them with the tricky final leg of the journey.

Victor Clark, director of the Binational Center for Human Rights in Tijuana and an expert in migration, said the pandemic has forced some smugglers to drop the price of crossing the desert into the United States to as low as $5,000, from $8,000.

“Central Americans are worn out (economically), and their families in the United States are also absorbing the costs of the pandemic,” he said.

Meanwhile, in the southeastern Mexican state of Veracruz, a few dozen members of the caravan who were able to evade the Guatemalan soldiers and Mexican border officials waited on Tuesday afternoon by the train tracks, aiming to catch a ride further into Mexico.

“The people are going hungry in Honduras,” said Marcos, who didn’t give his last name. “So I left to see if I can survive in another country.”





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central bank governor By Reuters

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© Reuters.

BEIJING (Reuters) – China will strike a balance between stabilising economic growth and preventing risks, even as debt was allowed to temporarily rise this year to support the coronavirus-hit economy, central bank governor Yi Gang said on Wednesday.

Yi told a financial forum in Beijing that he expected China’s macro leverage ratio to stabilise next year as the economy expands, after the debt gauge rose in 2020.

Bank lending in the first nine months totalled 16.26 trillion yuan ($2.44 trillion) as policymakers looked to reboot economic activity, beating a previous peak of 13.63 trillion yuan in the same period last year.

“Monetary policy needs to guard the ‘gates’ of money supply, and properly smooth out fluctuations in the macro leverage ratio, and keep it on a reasonable track in the long run,” Yi said.

Ruan Jianhong, head of the statistics department at the People’s Bank of China (PBOC), said in July that the country’s macro leverage ratio jumped 14.5 percentage points in the first quarter and climbed further in the second quarter.

The central bank has not given further details.

The Institute for International Finance (IIF) said in July that China’s debt-to-GDP ratio was on track to hit 335%, from nearly 318% in the first quarter.

At the same forum, Vice Premier Liu He earlier said the economy will very likely grow this year, adding that prudent monetary policy should be kept appropriate and flexible, and liquidity reasonably ample.

On Monday, China reported gross domestic product grew 0.7% in January to September from a year earlier, versus a contraction of 1.6% in the first half following the outbreak of the novel coronavirus.

On Sunday, Yi said full-year GDP will likely grow by about 2%.

That would make China the only major economy expected to report growth in 2020, though it would be the country’s weakest annual expansion since 1976.

 

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Column: Savings stash squares brutal second-wave rescue costs

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© Reuters. FILE PHOTO: The Federal Reserve in Washington

By Mike Dolan

LONDON (Reuters) – The public’s financial caution around lockdowns continues to give governments and central banks both the reason and room for open-ended support of their economies through another looming wave of this year’s devastating pandemic.

With a second surge of the COVID-19 virus in full swing in Europe at least and no effective vaccine on the table yet, questions about how governments can afford the blinding costs of economic support through the Northern winter are resurfacing.

The unprecedented numbers being clocked up worldwide are daunting. Estimating a global tally for this year’s fiscal rescues so far, the International Monetary Fund last week pinned it at $11.7 trillion, or almost 12% of world output.

And that was before the latest resurgence of the virus and renewed clampdowns on mass gatherings, socialising and travel.

The IMF reckons developed economy governments are likely to have exploded annual budget gaps by about 11% of gross domestic product (GDP) by the end of the year, lifting debt-to-GDP ratios by almost a fifth to 125%.

This year’s deficit in the United States is set to jump more than 12 percentage points to almost 19% and the euro zone budget shortfall is due to balloon 9 points to more than 10% – or almost a trillion euros ($1.2 trillion).

The commensurate surge in central bank bond buying is clearly the main reason financial markets haven’t run scared and benchmark 10-year borrowing rates remain near record lows of less than 1% stateside and below zero in much of the euro zone.

And on that, the IMF estimates the European Central Bank (ECB) has bought as much as 71% of all euro government debt sold since February while the U.S. Federal Reserve has snapped up 57% of all Treasury debt issued since then.

The question for the public at large, however, is how long can governments keep this up and what’s the payback?

Part of the answer lies in a circular flow involving the mass build-up of precautionary household savings during pandemic lockdowns and beyond, and whether, or how quickly, they get run down and spent.

Unlike the money supply implosion that accompanied the banking crash and credit crunch 12 years ago, the opposite happened this year as governments pre-empted their own shutdowns with a flood of income support, lending and credit guarantees while firms rushed to borrow and build cash buffers.

Yet without households running down those savings fully, its unlikely the money supply surge from government and central bank largesse will spur any significant inflation – in itself the only significant reason central banks would rethink underwriting the government bond boom and keeping debt costs affordable.

“If more fiscal stimulus is needed, the ECB will buy it,” said UniCredit chief economist Erik Nielsen. “So long as this debt is parked on the central bank’s balance sheet, it’ll be de facto cost-free for governments and taxpayers.”

Money printing is only inflationary if people and companies spend it, Nielsen wrote, and there’s really no realistic prospect of the private savings glut becoming inflationary even if spent in a very short period.

“It’s an output gap story. The huge expansion in private savings in recent months illustrates this, so the fiscal expansion is basically no more than an exercise in propping up demand as the private sector retrenches.”

SAVING THE WORLD

U.S. household savings quintupled from January to more than $6.3 trillion in April, with the savings rate as a share of income quadrupling to a record of more than 33% as most people continued getting paid, or received additional benefits, but had little to spend it on during lockdowns.

The savings rate has more than halved since to 14% – or $2.4 trillion – in August. But it remains more than twice as high as in January.

While Europe only publishes savings data on a quarterly basis, it paints a similar picture. Eurostat shows the euro zone savings rate more than doubled to a record of almost 25% by the middle of the year.

That’s why TS Lombard economist Shweta Singh describes the money growth surge back to World War Two peaks in the United States as a “false positive” and no precursor to inflation.

What’s more, if the virus dissipates, consumer spending re-emerges and those precautionary savings are run down quickly, it will most likely be an environment where deficits and debt sales shrink too and central bank balance sheets flatten out.

Myriad questions and longer-term conundrums persist.

Can debts rise endlessly if inflation never emerges? What happens to sovereign credit ratings in that scenario? What happens if, or when, inflation does re-emerge?

Investors at Columbia Threadneedle, for example, think caution is still warranted over the “political will” in the euro zone to manage the rising debt stock of countries such as Italy and Spain which have debt-to-GDP ratios above 100% but no domestic central bank.

Pan-European borrowing helps, they say, but it may have political limits too.

Yet on the issue of “exit policies” and inflation in a recovery, UniCredit’s Nielsen is adamant: “If I were a central banker, I would be much happier navigating those future challenges than those that they have been facing these past few years.”

(The author is editor-at-large for finance and markets at Reuters News. Any views expressed here are his own)

(by Mike Dolan, Twitter: @reutersMikeD; Editing by David Clarke)





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things could have been far worse By Reuters

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© Reuters. Britain’s Chancellor of the Exchequer Rishi Sunak leaves Downing Street, in London

LONDON (Reuters) – After statistics showed state borrowing had soared while tax receipts had fallen, British finance minister Rishi Sunak said on Wednesday that things could have been far worse had the government not acted to protect livelihoods.

“Whilst it’s clear that the coronavirus pandemic has had a significant impact on our public finances, things would have been far worse had we not acted in the way we did to protect millions of livelihoods,” Sunak said.

“Over time and as the economy recovers, the government will take the necessary steps to ensure the long-term health of the public finances,” he said.

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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