For the past few months, #Bolivia economy has been under heavy observation, bond prices shooting up, the currency peg in the country under threat and both Fitch and Moody's have downgraded the country into deeper junk status.
Below some ideas on why. 1/n The country has traditionally been a raw materials exporter, and thus its fortunes are heavily correlated with commodity indexes. Given the current context one would expect the country to enjoy a bonanza given the increase in prices and higher demand for energy. HOWEVER.... (2/n)

The Fed has taken an extraordinary amount of actions in response to the #COVID19 shock. Their response has been far superior to the #GFC. Since March 9, the Fed has expanded its balance sheet in a staggering 70%. 1/ A big chunk of the #COVID19 intervention came in form of purchases of Treasury securities and MBS. These would be undertaken at the unprecedented rate of up to $125 bn/day during the week of March 23. Since the start of this QE the Fed has acquired around $1.6 tn of treasuries 2/

El shock desatado por el #COVID19 amenza el crecimiento de muchos paises exportadores de materias primas. Paises en #Latinoamerica son los ejemplos mas llamativos Las proyecciones para #Bolivia indican una contraccion de la economia de alrededor de 3.1% anual para 2020 A diferencia de 08, #COVID19 esta afectando profundamente al lado real de la economia. La demanda global agregada por commodities ha disminuido considerablemente. Esto sumado a la rediccion significativa en el precio del petroleo significa un shock doble para #Bolivia

Where is the money going? The ongoing #COVID19 outflow episode of non-resident portfolio flows is unprecedented. YTD EMs have suffered an outflow of around $80bn. These flows have been reassigned to other asset classes and geographies, but where? 1/n ETF high freq data and ESG data show some correlation with the recent outflow, another good reference point is the non-resident flow accounting for DM. Weekly data from Japan shows inflows ytd
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A couple of important notes to understand in what ways the recent #COVID19 outflows episode is different from the #GFC one 1)EMs suffered important outflows during the GFC, but these were "distributed" in a long and stretched way, very painful yet more predictive 1/n However, this time around the #COVID19 outflow episode was very sudden, "fast" and deep. A literal "sudden stop" The last four weeks represent the largest weekly outflows on record

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