EMIA Week in Review: Argentine Peso Rises Against USD, Hammond in Latin America on Trade Mission

August 7, 2017

EMIA

Qatar files a complaint to WTO on the trade embargo imposed by Gulf neighbors

MercoPress

  • Qatar has filed a complaint with the World Trade Organization over a trade embargo imposed by its Gulf neighbors.

  • The complaint accuses Saudi Arabia, Bahrain and the United Arab Emirates of violating the trade group's “core laws and conventions on trade of goods and services, and trade-related aspects of intellectual property,” according to a statement from Qatar's ministry of economy and commerce.

  • The three Gulf States cut diplomatic ties and transport links with Qatar on June 5, accusing it of funding terrorism. Qatar has denied the accusations.

  • Egypt, which is also participating in the embargo, was not named in the WTO complaint.

 

Russia & EAEU Launch Common Regulated Pharma Market

Russia Briefing

  • The Eurasian Economic Union has ratified a regulatory framework for medicines circulation in the EAEU.

  • According to Member of the Board – Minister of the Eurasian Economic Commission (EEC), Valery Koreshkov, “National medicines markets of the five Member States of the Eurasian Economic Union (EAEU) [will] unify and start operating in the format of a single space”.

  • “Manufacturers of the Union countries will be able to apply for registration of medicines and their release under common procedures and reduce administrative costs.”

  • An average consumer will notice changes in the pharmaceutical market over time – it currently takes seven to ten months from the moment of filing a drug application for approval to releasing the drug into circulation and its sale.

 

International interest for Mexico’s reserves

Hydrocarbons Mexico

  • Mexico will carry out a new oil Round next year.

  • This will be the eighth auction since 2014, when Energy Reform was enacted.

  • The government has just added a new, high potential offshore block.

  • A technical review revealed the possible existence of large oil reserves in the Yucatan Platform, which motivated the government to add block 30 of this area to Round 2.4.

 

Latam and Caribbean forecasted to expand 1.1%, but South America, 0.6%

MercoPress

  • Latin America and Caribbean countries will grow 1.1% on average in 2017 after two consecutive years of contraction.

  • Growth comes thanks to an international context that shows improved growth expectations despite geopolitical risks, and better prices for the commodities that the region exports, according to a new annual report that ECLAC presented on Thursday in Santiago, Chile.

  • The regional United Nations organization released its Economic Survey of Latin America and the Caribbean 2017, in which it underscores the importance of macroeconomic policies to invigorate long-term growth and move toward the necessary structural change in the region’s economies.

  • The Economic Survey of Latin America and the Caribbean 2017 also includes, exclusively on ECLAC’s website (www.cepal.org), notes about the economic performance of each of the region’s countries in 2016 and in the first half of 2017, as well as the respective statistical annexes.

 

China’s AI Industry: Identifying Opportunities for Foreign Investment

China Briefing

  • On July 20, 2017, China’s State Council released a development plan for the country’s artificial intelligence (AI) industry.

  • The plan aims for the total market size of AI related industries in China to exceed RMB 1 trillion (around US$150 billion) by 2020.

  • By 2030, the plan aspires to reach 10 times this figure.

  • Claims that China has the rest of the world beat in AI are hyperbolic. Although the country ranks first globally for widely cited AI related papers, 70 percent of these are self-citations, and China is still behind the US and UK in terms of publication influence.

 

Venezuela diverting oil to Russia’s Rosneft, ignoring contracts in the US

MercoPress

  • Venezuela's state-run PDVSA has reduced crude sales to its U.S. refining unit Citgo Petroleum while increasing supply to Russia's Rosneft.

  • The new comes following a plan signed in May to catch up on overdue deliveries, according to PDVSA documents, sources from the company and its joint ventures.

  • Venezuela's oil output has declined since 2012 with the fall accelerating this year amid a lack of investment and payment delays to suppliers.

  • Almost all of Petroleos de Venezuela's customers are receiving reduced volumes. That includes the United States, which has received less Venezuelan crude oil this year.

 

China Makes Digital Inroads into Smart Europe: Traditional Europe Watch Out and Learn

China Briefing

  • China has been making further inroads into the EU’s digitally advanced economies, giving strong hints in the process as to where Beijing and Chinese businesses see both value and growth being added.

  • Chinese ride sharing company Didi Chuxing is investing in a smaller European Uber rival, Taxify, which dominates the Baltics.

  • Didi has a strong presence in China, headquartered in Beijing, and providing rides for 400 million users across 400 cities in the country.

  • It provides services such as taxi hailing, private car hailing, Hitch (social ride-sharing), Didi Chauffeur, Didi Bus, Didi Test Drive, Didi Car Rental, Didi Enterprise Solutions, Didi Minibus, Didi Luxe, and bike-sharing to users in China via a smartphone application.

 

Brazilian economy struggling to climb out of deep recession

MercoPress

  • Brazil revealed mixed economic reports: record trade surplus, slight drop in unemployment and a stable industrial output.

  • The July trade surplus was US$6.298, according to government data. Exports totaled US$18.769 billion and imports US$12.471 billion.

  • This follows a surplus of US$7.195 billion in June.

  • At the same time unemployment rate fell to 13% in the second quarter of 2017, reaching the lowest level of the year. The jobless rate was below the reading of the immediately previous quarter (13.3% between March and May).

 

Hammond in Brazil announced the doubling of support for bilateral trade

MercoPress

  • The Chancellor, Philip Hammond, has unveiled a series of new commercial agreements with Brazil on Monday, on day one of his visit to showcase British business and deepen trade and economic ties with South America’s biggest economies.

  • Among the measures has been doubling support to £3 billion, to promote bilateral trade.

  • Leading a business delegation including the London Stock Exchange, the Green Investment Bank and Crossrail International, the Chancellor was in Brasilia for the second UK-Brazil Economic and Financial Dialogue (EFD).

  • He is accompanied by City Minister, Stephen Barclay MP, and Trade Minister, Mark Garnier MP.

 

Colombian gas hopes are out at sea

Hydrocarbons Colombia

  • The offshore potential in the Caribbean Sea is raising expectations on the Colombian coast. Municipalities and departments are working to attract companies to their territories.

  • According to industry experts, offshore industry development will be key to the economic growth of the region and will allow the consolidation of different companies’ logistics centers.

  • Recent discoveries in the Purple Angel, Gorgon 1 and Kronos wells have proven the potential of this industry, especially in the gas sector.

  • Upcoming projects represent investments of approximately US$1.4B and Repsol (MSE:REP), Ecopetrol (NYSE: EC) and Anadarko (NYSE: APC); three of the five companies with offshore projects in Colombia, will work in the free zone of Palermo (Barranquilla) along with Halliburton.

 

African real estate creates new ways to attract business capital

BizNis Africa

  • The Africa Property Investment (API) Summit and Expo, to be held at the Sandton Convention Centre from 24 to 25 August 2017, will unpack and examine the latest in developments and potential opportunities for the African real estate sector.

  • Among the topics and trends that will come under the microscope at this event will be the African real estate market markets’ ability to attract capital from different investor types.

  • “This is largely linked to the improvement in the macroeconomic environment within a number of African countries, many of which are still largely commodities dependent,” says Klaus-Dieter Kaempfer, Absa Head of Commercial Property Finance for Africa.

  • “One important development within African real estate markets over the past decade has been the adoption, in some markets, of Real Estate Investment Trust (REIT) structures as vehicles to enable the participation of diverse investor types,” notes Kaempfer.

 

Corruption allegations take center stage in Malaysian general election campaign

Global Risk Insights

  • Political parties are mobilizing in preparation for general elections which must be held by August 2018.

  • The main coalitions are Barisan Nasional, which has won every election since it was founded in 1973, and Pakatan Haraban, which has been steadily gaining vote share over the past decade.

  • The election is significant because of two factors: the return of Mahathir Mohamad, a former prime minister who has joined the opposition coalition, and the 1MDB scandal which continues to dog the current prime minister Najib Razak.

  • Together these two factors may be able to lead the opposition to an unprecedented victory.

 

Incentives in Shenzhen for Attracting Foreign Talent

China Briefing

  • Shenzhen has been implementing a variety of preferential policies and subsidies to attract high-level foreign talent to the city in the last few years.

  • This year, regulations have been amended and policies have been promulgated to incentivize living and working in the vibrant city.

  • Alberto Vettoretti, Managing Partner of Dezan Shira & Associates says: “The Shenzhen municipal government has been very active in formulating incentives to attract foreign and local talents to the city, which has recently become one of the most expensive in the Mainland in terms of real estate.”

  • In this article, we detail three recent government initiatives that provide opportunities for foreign talent.

 

Will the South China Sea dispute mark the downfall of ASEAN?

Global Risk Insights

  • The claimants involved in the dispute believe that the ocean area in which the islands are located is rich in oil and gas deposits, and control over the region has been sought for quite some decades.

  • The clash of interests involves a number of states: China, Taiwan, and four ASEAN members including Vietnam, Brunei, the Philippines and Malaysia.  

  • Recent standoffs – particularly between China and the Philippines – have resulted in increased militarization in the area, a more assertive, belligerent China unwilling to recognize international law, and a call for resolution.

  • Naturally, ASEAN and its recognized role in promoting peace and stability in the region has come under scrutiny during the dispute, and the organisation’s failure to provide successful mediation on the issue has raised concerns as to its ability to guard the interests of Southeast Asian nations.

 

Argentine Peso rises against the US dollar as Central Bank shows its muscle

MercoPress

  • Argentina's Peso rose against the dollar on Monday for the first time in two weeks, after the central bank intervened in the foreign exchange markets on Friday to halt the currency's rapid decline to historic lows, when it reached 18 Pesos.

  • The peso rose 0.86% on Monday to 17.65 per dollar, its sharpest single-day gain since April, after touching a record low of 17.80 per dollar on Friday.

  • The rebound came after the central bank sold US$305 million in reserves on Friday, its first sale in foreign exchange markets since June 2016.

  • The currency closed July down 5.8%. While government officials and the central bank have played down the risks of currency declines against the dollar, the recent drop's speed was out of line with fundamentals and could increase already high inflation, economists said.

 

Kayin state struggles expose Myanmar’s energy dilemma

Global Risk Insights

  • ocal and national opposition to a proposed coal plant in Kayin state, eastern Myanmar, has exposed Myanmar’s energy security dilemma.

  • Activists argue the project will have a range of negative impacts, encouraging land grabbing; polluting air and water supplies; ruining local livelihoods; and exacerbating already poor public health across the region.

  • Approximately one-third of Myanmar’s citizens have electricity access – among the lowest rates in Asia.

  • Low energy security has particularly hampered economic growth and the livelihoods of citizens in rural areas, where electricity is most scarce. Nevertheless, focusing on coal power creates unnecessary risks and ignores viable renewable alternatives for rural communities.

 

Hammond arrives in Argentina on trade mission; scheduled to meet Macri

MercoPress

  • Chancellor of the Exchequer Philip Hammond is scheduled to arrive in Buenos Aires Tuesday evening following a two day business promotion visit to Brazil.

  • It will be the first time a leading UK cabinet minister sets foot in Argentina in sixteen years; the last was when ex Prime Minister Tony Blair met ex president Fernando De la Rua in the Iguazu falls in 2001.

  • Hammond, who is taking advantage of the August parliament recess, is scheduled to meet president Mauricio Macri, Economy minister Nicolas Dujovne, (whom he met at the recent G20 summit in Hamburg), Finance minister Luis Caputo and foreign minister Jorge Faurie.

  • The Chancellor is leading a business delegation including the London Stock Exchange, the Green Investment Bank and Crossrail International and is accompanied by City Minister, Stephen Barclay MP, and Trade Minister, Mark Garnier MP.

 

Winners & Losers in the EU’s Digital Connectivity with China & the OBORSphere

Silk Road Briefing

  • The digital economy, also known as the internet economy, is based on digital computing technologies, comprising new business models such as e-commerce, cloud computing, and payment services.

  • With China possessing one billion consumers able to access the digital economy, and the State Government putting into plans to deliver to 95 percent of China within 24 hours by 2020, the opportunities for getting produce both into and out of China and the OBOR region as a whole are immense.

  • The digital revolution is impacting on the essential deliverables of the OBOR routes – getting product delivered, on time, safely, and securely.

  • This includes not just e-commerce, but also e-customs and e-government. Supporting services will all be managed by e-platforms

 

Decisive vote in Brazilian lower house for president Temer’s future in office

MercoPress

  • The Brazilian Congress will return from recess this week and could bring back political uncertainty fears to local markets, as lawmakers are set to decide on Wednesday if the Supreme Court should trial President Michel Temer for corruption.

  • Temer was formally charged with passive corruption by the prosecutor-general Rodrigo Janot at the end of last month.

  • However, the House of Representatives and the Supreme Court must accept the charges against the president before any trial can begin.

  • Earlier in July, a report from Sergio Zveiter, the congressman in charge of guiding the House of Representatives vote on Temer's corruption charge, said that lawmakers should allow Temer to be accused and trialed.

 

China Market Watch: Telecom Roaming Charges to be Cancelled, Starbucks Buys out JV Partner

China Briefing

  • China’s three major telecom service providers, China Telecom, China Unicom, and China Mobile, will cancel roaming fees for mobile phone services in September, a month ahead of the preliminary deadline.

  • Seattle-based coffeehouse chain Starbucks has announced that it will buy out the 50 percent stake in remaining stores it does not wholly own in Shanghai and the surrounding Jiangsu and Zhejiang provinces.

  • Its largest ever acquisition, costing US$1.3 billion, will claim Starbucks’ ownership of 1,300 stores in the region, bringing its total amount of stores in China to around 2,800.

  • Chinese search engine Baidu has reported its first profits in three quarters since an advertising scandal last year, in which a student died after taking therapy advertised on the platform.

 

Brazilian budget remains at record breaking deficit

MercoPress

  • Brazil posted another large budget deficit in June, the biggest on record for the month, highlighting the government's uphill battle to meet its budget target amid a slow economic recovery.

  • The monthly primary deficit, before interest rate payments, narrowed in June to 19.552 billion reais (US$6.21 billion) from 30.7 billion in May.

  • The deficit in the 12 months through June reached 167.2 billion reais, equivalent to 2.62% of gross domestic product and well above the official target for a deficit of 143.1 billion reais for this year.

  • Policymakers have frozen about 45 billion reais in federal spending and raised taxes on fuel as they scramble to meet the budget target.

 

Energy Reform’s environmental, political and social challenges

Hydrocarbons Mexico

  • The government, Pemex and Mexico in general have their hopes up for Energy Reform.

  • Even though last Rounds exceeded authorities’ expectations, this does not exempt the Reform from having environmental, political and social challenges that must be resolved soon.

  • The National Hydrocarbons Commission (CNH) received and approved a force majeure request for the Ponton area, where Renaissance Oil Corp. is working.

  • Renaissance claimed environmental damage has impeded its development plans in the area. The firm argued that the damage took place before winning the block last year. Pemex was the operator of the area before Energy Reform.

 

Investing in Inland China: Assessing Chongqing’s Industrial Zones

China Briefing

  • Rising minimum wages have led commentators to declare the end of affordable Chinese labor.

  • However, these assertions ignore the vast expanse of the Chinese mainland, and the varying economies that exist within it.

  • The sprawling city of Chongqing especially stands out as a major emerging manufacturing destination for foreign investors.

  • Over the past years, manufacturing in China has steadily crept inland as companies seek not only to lower their costs, but also to take advantage of government incentive programs aimed at developing western provinces.

 

Exxon puts Guyana on the world oil map with another major discovery

MercoPress

  • Exxon Mobil said that it has discovered additional oil in the Payara reservoir offshore Guyana, increasing the total discovery to approximately 500 million barrels oil equivalent.

  • The result increases the estimated recoverable resources in Guyana’s Stabroek Block formation to about 2.25 to 2.75 billion barrels.

  • By way of comparison, the much-heralded Thunder Horse find in the Gulf of Mexico has reserves of about one billion barrels.

  • Esso Exploration and Production Guyana, an Exxon subsidiary, is operator and holds 45% interest in the Stabroek Block. Hess Guyana Exploration has another 30% interest, and CNOOC holds the remaining 25%.

Tags: argentina, argentina peso, brazil, china, eaeu, emerging markets, frontier markets, hammond, latam, malaysia, russia, trade mission, uk, weekly roundup
Posted in Global, Macro Economics, Macro Economics