EMIA Week In Review: Libyan Oil, Instability In Zambia, Update On Brazil & More

July 25, 2016

EMIA

Libyan oil revival: Slim prospects?

Global Risk Insights

  • There was an announcement to unify Libya’s contending National Oil Corporations (NOCs) on 2nd July.

  • This could greenlight a turn towards the restoration of the oil sector.

  • The goal is to return to pre-revolution 1.6 million barrels per day (bpd) production levels.

  • The NOC’s merger with an energy company founded by the rival eastern government motions a reform of the industry at least on legal and commercial grounds.

 

Laos’ new PM pushes for regional integration

Global Risk Insights

  • Laos chairs ASEAN for 2016.

  • The country’s new Prime Minister, Thangloun Sisoulith, has indicated his willingness to refresh relations with Laos’ neighbours.

  • His predecessor, Thongsing Thammavong’s rule was marked by corruption, human rights abuses, and ill-advised efforts to borrow billions for massive infrastructure projects.

  • Such projects often conflicted with the interests of fellow ASEAN members, notably Cambodia, with icy relations ensuing due to disputes.

 

Instability in Zambia increases as election looms

Global Risk Insights

  • Last week, the government arrested the editors of Zambia’s leading newspaper, The Post, after shutting down the paper in a move that many deemed politically motivated.

  • The Post had been critical of both Lungu and his ruling Patriotic Front party, and was shuttered on allegations of unpaid taxes.

  • The paper’s staff received a stay from the revenue appeals tribunal, and re-entered the Post’s offices, when they were arrested for trespassing and beaten by police.

  • Aside from the implications for freedom of the press and civil society, the ploy against the Post is a worrisome indicator for investors.

 

Tanzania’s helium find risks greater instability over land

Global Risk Insights

  • The discovery of a massive helium deposit in Tanzania this week has excited both scientists and mining experts, yet for all its potential this new cache holds risks for Dodoma.

  • Specifically, this new deposit threatens to only further increase tensions between indigenous groups and the government; as development projects continue to infringe on ancestral lands.

  • Tanzania’s extractive, agribusiness, and tourism sectors all face increased uncertainty going forward.

  • This latest find, estimated at 54 billion cubic feet of helium, is a major shot in the arm to global helium reserves which have been running dangerously low, with prices rising by 500% in the last 15 years.

 

A political risk revolution: Social & regime risk

Global Risk Insights

  • Today’s dynamic social environments render traditional political analysis ineffective and require new strategies to measure risk.

  • Traditional analysis has historically failed to accurately forecast political risk because it is not repeatable across diverse geopolitical conditions and it overlooks industry-specific data.

  • Two more reasons are that it requires local knowledge of individual leaders’ personalities and behaviors, and it remains incompatible with typical investment time horizons.

  • Moreover, yielding a positive return on investment from political risk analysis becomes nearly impossible when social risk variables that impact national policies are factored into this complex equation.

 

Unsuccessful coup threatens Turkey’s economy

Global Risk Insights

  • The thwarted coup left approximately 300 dead and highlighted severe tensions within the Turkish Armed Forces (TSK) and between security officials and the Justice and Development Party (AKP)-led civilian powers.

  • Initial analyses have been focusing on the potential impact of the current post-coup crackdown on Turkey-EU, Turkey-US and Turkey-NATO relations.

  • However, the failed rebellion is likely to lead to long-term negative effects on the country’s economic and financial sectors.  

  • Concerns about post-coup insecurity are likely to exacerbate already existing trends and weaken the Turkey’s economic forecast.

 

Tanzania’s 2016-2017 budget: The Magufuli legacy?

Global Risk Insights

  • Whenever a developing country sees a huge proposed budget increase – 31% in the case of Tanzania – the question becomes: where is the money coming from?

  • In this case, the money seems to be coming from a vast increase in public sector borrowing from local financial institutions, as well as a boost in revenue collection.

  • Dar es Salaam is still waiting for its maiden dollar-denominated sovereign bond issuance to take place, and the cost of eurobond borrowing for emerging markets like Tanzania having risen significantly in recent months.

  • However, it is unclear how much “crowding out” – reductions in credit to small businesses and other local borrowers – will take place as a result, and more importantly, how sustainable the subsequent debt payments will be in the long-run.

 

New push for competition policy in Latin America

Global Risk Insights

  • Competition policy is arguably the best complement to trade policy for inclusive, sustainable development.

  • It is only within large, competitive markets – that promote efficiency, innovation and diversity – that consumers can maximise their welfare.

  • For Latin America this is particularly important given the renewed pro-market attitude and the subsequent push for further regional integration; not to mention the multiple regional and inter-regional trade agreements currently under negotiation.

  • Furthermore, competition policy (CP) can be an ideal tool to bolster economic growth and poverty alleviation.

 

Opportunities in India’s Emerging Fintech Sector

India Briefing

  • India’s financial technology (fintech) sector may be young but is growing rapidly, fueled by a large market base, an innovation-driven startup landscape, and friendly government policies and regulations.

  • Several startups populate this emerging and dynamic sector, while both traditional banking institutions and non-banking financial companies (NBFCs) are playing catch up.

  • Earlier this year, the National Association of Software and Services Companies (NASSCOM) reported that around 400 fintech firms operated in India, boosted in large part by foreign investments in fintech-focused startup accelerators and incubators.

  • NASSCOM predicts that India’s fintech software market alone could touch US$ 2.4 billion by 2020, doubling on the current rate of growth.

 

India’s New National Education Policy Offers New Opportunities for Foreign Educational Institutions

India Briefing

  • In recognition of the fact that many of India’s best students go to foreign universities, a report recommends that India encourage high quality foreign universities and educational institutions to collaborate with Indian partners and establish an Indian presence.

  • The Indian government has long resisted allowing foreign universities to offer degrees to Indian students in India.

  • India’s educational system currently lacks the robust institutions at national, state, and district levels that are necessary to provide and manage quality colleges.

  • While the NEP is yet to get adopted, MHRD’s recommendations are significant for foreign educational institutions interested in investing in the Indian educational market.

 

Rousseff’s great mistake was to allow Venezuela into Mercosur, says Brazilian minister

MercoPress

  • The minister who is an influential member of interim president Michel Temer cabinet and is a potential presidential candidate for 2018, has in these two months strongly steered Brazil's foreign policy away from regional alliances and left leaning governments.

  • Serra described the policies of Lula and suspended Rousseff as populist, away from the real interests of Brazil.

  • Rousseff has been suspended from office since last May and replaced by interim president Temer until the Senate takes a final vote on her impeachment process for alleged cosmetic accountancy of government accounts.

  • Brazil with the support from Paraguay have asked to postpone handing the Mercosur chair to Venezuela until it complies with full member responsibilities and commitment promises, despite the fact the rotation should take place this month.

 

Half of Brazilians prefer Temer to remain as president until the 2018 election

MercoPress

  • The poll, conducted on July 14 and 15, showed just 3% of people are in favor of holding early elections.

  • Despite half of Brazilians wanting Temer to continue in the country's top job instead of having Rousseff return, the interim president's approval rating is only 31%.

  • The wide-ranging poll also showed rising confidence in the economy.

  • The Datafolha Index of Confidence registered 98 points, the highest since the end of 2014 and 11 points higher than the last poll in February.

 

Oil company pledges US$ 1.4bn in investments in Argentine Patagonia

MercoPress

  • PAE said that US$ 900 million are to be invested in the San Jorge Gulf area, mainly Chubut US$ 300 million in Neuquen and US$ 70 million in Tierra del Fuego, while US$ 130 million in capital equipment.

  • “This is a great challenge for Argentines to see if we are capable of producing oil despite the drastic fall in international prices, half of what it was only some months ago”, said president Macri.

  • PAE, which is also the main private producer of hydrocarbons in Argentina has become the main investor in the energy private sector, totaling US$ 13 billion between 2001 and 2015.

  • In that period (2001/2015) PAE gas production increased 67% and oil, 34%, and is also the Argentine hydrocarbons company with the largest replenishment reserves in that period, 150%.

 

CEO denies plan to privatize Petrobras: ‘Brazilian society not mature enough to discuss the issue’

MercoPress

  • Parente, who took over the leadership of the debt-laden company in May, told Folha de S.Paulo that management continues to study the best option to sell part of its fuel distribution unit BR Distribuidora SA.

  • When asked if the company could be privatized, Parente said: “In no way. I want to leave my opinion very clear, I don't believe Brazilian society is mature enough to even discuss privatization.”

  • Parente acknowledged that Petrobras still has US$14 billion in assets to sell this year after delays in its divestment program, but he said management will stick to that sale target for the year.

  • He said the company is analyzing partnerships in several of its businesses, including units planned for divestment, to reduce risks and the need for capital injection.

 

Petrobras tenth FPSO vessel in the pre-salt Santos Basin begins production

MercoPress

  • On Jul 11, the first production well 8-LL-81D-RJS produced at a steady rate of 30,000 barrels per day.

  • The FPSO unit that is being used for the Lula project has the capacity to process 150,000 barrels of oil every day.

  • The vessel is also capable of storing 1.6 million barrels of oil and compressing 6 million m³ of gas each day.

  • Currently, six FPSO units are working in the Lula field.

 

G20 trade ministers Shanghai meeting question China’s industries overcapacity

MercoPress

  • The specter of protectionism has loomed large over global trade amid sluggish economic growth and is a pressing concern for China.

  • The country’s huge but struggling steel sector has relied on exports to offset the impact of slowing domestic demand, but it has been accused of using unfair pricing to push foreign competitors out of business.

  • The ministers discussed the need to address overcapacity, particularly in the steel sector, but some disagreed about the need for specific new commitments to resolve the problem.

  • Chinese trade officials have repeatedly stressed that the country has been the victim of overzealous anti-dumping actions by foreign countries, which fail to take into account Chinese efficiency or its low labor and production costs.

Tags: brazil, china, economic, helium, libya, mercosur, oil & gas, petrobras, political, protectionism, risk, rousseff, tanzania, zambia
Posted in LatAm, Macro Economics, Macro Economics