EMIA Week in Review: EAEU-Singapore FTA by Year-End, Brazil’s Central Bank Slashes Rate & More

September 18, 2017

EMIA

Venezuela plans to abandon the dollar; greenback currently sells for 22.400 Bolivar

MercoPress

  • Venezuela temporarily suspended the sale of U.S. dollars through its Dicom auction system, following an announcement last week that it was moving away from the greenback in response to U.S. sanctions.

  • The United States in August prohibited dealings in new debt from Venezuela and state oil company PDVSA in response to the creation of a new legislative super-body that critics call the consolidation of a dictatorship

  • President Nicolas Maduro last week said the crisis-stricken OPEC country would create a basket of currencies to “free” Venezuela from the dollar, using the Dicom auction system.

  • Upcoming auctions are deferred until “the necessary adjustments are made to our system to incorporate other currencies” and to resolve problems associated with its correspondent bank, Dicom said via its Twitter account.

 

Kenya and Ethiopia target major investment opportunities

BizNis Africa

  • Rising security risks and political instability in Egypt, economic downturn and militancy in Nigeria and escalating political risks in South Africa led to doubts whether the balance between risks and opportunities in these markets is still favourable for businesses.

  • Despite recent recovery in Nigeria and South Africa, Kenya and Ethiopia might soon outshine these heavy-hitters in the competition for investment, according to the newly released Africa Risk-Reward Index developed by Control Risks and Oxford Economics.

  • “Experienced investors – not only in Africa, but around the world – know that risk and reward are close companions. While no serious investor should overlook the economic giants of the continent, real competitive edge can only be achieved when investors manage to stay ahead of the pack in knowing what’s next.”

  • “The Africa Risk-Reward Index helps investors to identify some of the more hidden investment opportunities in times where the heavy-hitters are struggling,” comments Paul Gabriel, Control Risks Senior Analyst for Africa and lead-author of the report.

 

Brazil’s Temer charged with obstruction of justice and racketeering

MercoPress

  • Brazilian President Michel Temer was charged with obstruction of justice and racketeering on Thursday, according to a statement posted on the prosecutor general's office website, threatening to delay the government's economic reform agenda in Congress.

  • It is the second set of criminal charges filed against the president based on the plea-bargain testimony of the owners of the world's largest meatpacker, JBS SA.

  • They accused Temer of taking bribes in return for political favours and of conspiring to buy the silence of a witness who could implicate the leader.

  • In a statement on Thursday, Temer strongly rejected all allegations of wrongdoing.

 

China Market Watch: Alibaba Begins New Retail Era with Hangzhou Mall & More

China Briefing

  • Alibaba is reportedly building a five-story shopping complex in Hangzhou. The development marks the fruition of “New Retail“, a term coined by Alibaba founder Jack Ma to describe “the integration of online, offline, logistics, and data across a single value chain.”

  • According to media reports, the five-story shopping complex will host several Alibaba brands, such as the Taobao retail brand and the Hema grocery brand, with innovative features, such as unmanned stores and virtual fitting rooms.

  • Farmers in Heilongjiang and Yunnan provinces have turned their regions into major centers for cannabis cultivation, according to a recent article in the South China Morning Post.

  • Government plans to ban plastic waste imports could have a major impact on the recycling and polyethylene industries. China is the largest waste importer in the world, accounting for over half of the world’s plastics waste.

 

Colombia: Peace with the ELN?

Hydrocarbons Colombia

  • The oil industry has suffered enough because of the constant attacks by one of the oldest guerrillas in the country; the National Liberation Army (ELN).

  • A cease-fire is great news for this sector, as it would mean a great relief for oil firms, at least while it lasts.

  • The oil sector welcomed the announcement by the government and the ELN to agree on a bilateral ceasefire.

  • The armed group promised to stop the kidnappings and attacks on oil pipelines from October 1st to January 12 of next year.

 

Kaladan woes reflect frustrated Indian vision for Myanmar and Southeast Asia

Global Risk Insights

  • India’s ambitions to establish a foothold in Myanmar and strengthen ties with Southeast Asia risk being jeopardised by the ongoing Kaladan project.

  • This ambitious venture exposes India’s overseas infrastructure failings, and thus its inability to push rival China aside.

  • Long deterred by Myanmar’s status as a military dictatorship, India has only relatively recently built substantial strategic and economic ties with neighbour Myanmar. With China becoming increasingly assertive in that region, Myanmar now forms an important part of India’s ‘master plan’ for ASEAN connectivity.

  • India’s government is ready to exploit the opportunities afforded by Myanmar’s more democratic, liberal regime. Nevertheless, the long-mooted Kaladan Multimodal Transit Transport Project, intended to integrate India’s traditionally underdeveloped northeast with Myanmar’s southwest, is yet to materialise.

 

Mexican Energy Reform: deals and opportunities

Hydrocarbons Mexico

  • Important companies showed their interest to compete for Mexico’s Oil Round 3, as well as to enter the newly liberalized fuel and gas markets.

  • The National Hydrocarbons Commission (CNH) published the list of companies registered for the prequalification process to bid on the next three farm-outs announced by Pemex for Round 3.

  • According to the entity, at least 15 international companies want to collaborate with the NOC (National Oil Company).

  • Among the companies that asked to participate in the tender that will take place on October 4th are: California Resources Corporation, Cheiron Holdings, China Offshore Oil Corporation (SHA: 600583), DEA Deutsche Erdoel, Ecopetrol (NYSE: EC), Geopark (NYSE:GPRK), Gran Tierra Energy(NYSE: GTE) and Sierra Oil & Gas.

 

Korean Investment in Vietnam

Vietnam Briefing

  • The year 2017 marks 25 years of Vietnam and South Korea’s diplomatic relations.

  • During this period, the focus of trade and investments has shifted from labour intensive sectors such as garments and textiles, to capital intensive sectors such as electronic goods, and finally at present to consumer goods and services.

  • Bilateral trade jumped from US$0.5 billion in 1992 to US$45 billion in 2016, while in terms of investments, South Korea has emerged as the largest foreign investor in Vietnam.

  • Bilateral trade will continue to grow further in the next few years. Total trade is expected to reach US$70 billion by 2020.

 

Russian E-Commerce Up 22 Percent to Expected US$20 Billion in 2017

Russia Briefing

  • Russia’s e-commerce market is growing at a rapid pace, and is indicative of a major shift in how Russians are purchasing products.

  • “Domestic e-commerce expenditure hit 498 billion rubles (US$8.6 billion) in the first half of this year, a 22 percent increase year-on-year”, Russian Post and the Association of Internet Trade Companies  (AITC) said in a joint statement on Tuesday.

  • AITC expects the market to exceed 1.1 trillion rubles (US$19.1 billion) by the end of 2017.

  • Meanwhile, cross-border e-commerce trade increased 34 percent in the first half of 2017 year-on-year to 178 billion rubles (US$3 billion), meaning the share of cross-border tax free trade grew 35.7 percent in the first half of the year

 

Africa Renewable Energy Forum to be held in Morocco

BizNis Africa

  • The Africa Renewable Energy Forum (ARF) and the preceding Gas Options: North & West Africa meeting will take place from 29 November to 1 December 2017 at the Hyatt Regency Hotel, Casablanca, Morocco.

  • As the officially labeled side-event of COP22, the Africa Renewable Energy Forum was first held in Marrakesh from 2-4 November 2016 under the aegis of the Ministry of Energy of Morocco and endorsed by ONEE.

  • The second Forum returns to Morocco this year to build its foundation as the pan-African meeting for stakeholders driving forward renewable energy projects in Africa.

  • ARF will bring together government ministers, heads of African utilities and some of the biggest global investors in renewable energy to discuss solutions to move forward renewable energy projects.

 

BP and Bridas Corporation form Argentina’s Largest Private Integrated Energy Company

MercoPress

  • British Petroleum has agreed with Argentina's Bridas Corporation to form a new integrated energy company by combining their interests in the oil and gas producer Pan American Energy and the refiner and marketer Axion Energy in a cash-free transaction.

  • The new company, Pan American Energy Group, will be the largest privately-owned integrated energy company operating in Argentina.

  • PAEG will be owned equally by BP and Bridas Corporation, itself a 50:50 joint venture of Bridas Energy Holdings of Argentina and CNOOC Limited of China.

  • PAE is currently owned 60% by BP and 40% by Bridas, while Axion is wholly-owned by Bridas. There will be no payments for the equity exchange.

 

China – India Business Relations Robust Despite Border Hype

China Briefing

  • Less than three months after a border standoff began at Doklam, China and India agreed to de-escalate the situation in favor of talks and military disengagement.

  • The standoff caused some strain in bilateral trade and business relations.

  • Yet, eventually, economic and commercial interests trumped geopolitical concerns, leading to the relatively swift resolution of border tensions.

  • Indeed, a week after the disengagement, India’s Prime Minister Narendra Modi attended the ninth BRICS Summit in Xiamen, and met separately with Chinese President Xi Jinping for bilateral talks.

 

Mujica’s wife Lucia Topolansky becomes Uruguay’s vice-president

MercoPress

  • Uruguay has a new vice-president following the resignation of the questioned and discredited Raul Sendic.

  • On Wednesday mid-morning, Lucia Topolansky, wife of ex president Jose Mujica received unanimous support from the General Assembly (123/123).

  • Under the Uruguayan constitution the head of the most voted Senate group of the winning party in the last election, in this case the MPP (Popular Participation Movement), leads in the presidential succession line.

  • She is the first woman to occupy such a post.

 

Joint Ventures in India: Learning from McDonald’s Experience

India Briefing

  • A troubled relationship between McDonald’s and one of their Indian partners is spoiling the American corporation’s once impressive position in India’s food and beverage industry.

  • McDonald’s is set to close nearly 170 outlets in northern and eastern India; 43 outlets have already shut down in Delhi.

  • Since September 2013, McDonald’s has engaged in drawn out legal battles with their partner for north and east India: Connaught Plaza Restaurants (CPRL). Infighting between the American corporation and CPRL has tarnished McDonald’s brand reputation in the subcontinent, and sabotaged business development and expansion.

  • Foreign businesses and investors should read McDonald’s ordeal as a precautionary account on the risks of joint ventures (JV) in India, and the importance of patient and diligent vetting and planning.

 

Chennai To Vladivostok As India-Russia Maritime & Overland Routes Develop

Silk Road Briefing

  • The investment relationship between India and Russia is developing with two Indian Ports eying trade opportunities either end of Russia.

  • Both Delhi and Moscow are looking at creating a key maritime route connecting India with Northeast Asia and the Western Pacific region via a direct shipping link between Chennai and Vladivostok.

  • Another planned, mainly overland route extends from shipping originating in Mumbai through to the Iran’s Chabahar Port, and overland to European Russia.

  • The shipping route concept came following Indian Foreign Minister Sushma Swaraj’s visit to Vladivostok last week to attend the Eastern Economic Forum. India, like China, is looking to expand its presence in Russia’s Far East to harness natural resources there, among them oil and gas supplies as well as diamonds.

 

Twelve-month Consumer prices in Argentina reach 22% in August

MercoPress

  • Consumer prices rose 1.4% in Argentina in August, government statistics agency Indec announced, bringing eight-month inflation to 15.4%.

  • The central bank is targeting national inflation between 12 and 17% for 2017, well below economists' expectations of 22%.

  • In greater Buenos Aires, used as a proxy before the national index was launched in July, prices rose 1.5% in August and 23.1% in the 12 months through August.

  • The annual inflation reading combine data from the new Argentine inflation index, which has national coverage, and the previous benchmark index, which monitored prices only in Buenos Aires metropolitan area.

 

Nigerian real estate sector grows as nation rises from recession

BizNis Africa

  • The Nigerian real estate sector is turning the corner as the country’s economy appears to be emerging from recession.

  • The easing of inflationary pressure, improved investment inflows, increased oil production and an improvement of foreign exchange liquidity, have all contributed to a positive growth outlook for the country.

  • Nigeria has faced strong headwinds in the past two years however, the currency uncertainty and falling oil price and production that have weighed heavily on consumer confidence are giving way.

  • The World Bank predicted an exit from recession this year and economic growth of 1%, which was later reviewed to 1.2% by mid-year.

 

Uruguay’s Sendic makes way for first female vice-president

LatinNews

  • on 11 September, Uruguay’s Vice-president Raúl Sendic formally tendered his resignation in a letter to party coordinators in the national senate.

  • President Tabaré Vázquez, flanked by all of his cabinet ministers, sought to downplay the significance of Sendic’s departure in a press conference.

  • Vázquez praised the strength of Uruguay’s democratic institutions, allowing the government to proceed “as normal” after Sendic’s resignation, the first ever vice-president in Uruguay’s history to resign.

  • Vázquez pointedly praised the “courage and commitment” shown by Sendic and was careful to emphasise that he was not pushed but had rather taken the decision himself to step down.

 

Singapore Set to Sign Free Trade Agreement with the Eurasian Economic Union by Year-End

ASEAN Briefing

  • Singapore is set to sign a Free Trade Agreement (FTA) with the Eurasian Economic Union (EAEU), a free trade bloc that includes Armenia, Belarus, Kazakhstan, Krygyzstan, and Russia.

  • Commenting on the incoming trade deal, which is expected to be signed by the end of this year, Singapore’s deputy prime minister, Tharman Shanmugaratnam reiterated his country’s interest in economic and trade cooperation with Russia, noting that the two states have not been using the existing potential in full.

  • Led by Russia, the EAEU essentially extends from the borders of China to the borders of the European Union.

  • For his part, Russian First Deputy Prime Minister Igor Shuvalov said that while the timescale was tough, the Eurasian Economic Union and Singapore may sign a free trade agreement by the end of 2017, and ratify it in the first half of 2018.

 

Brazilian tycoon who implicated President Temer arrested for withholding information

MercoPress

  • The former chairman of the world’s largest meatpacker, whose testimony implicated Brazil’s president in corruption, turned himself in to police Sunday after the country’s Supreme Court ordered his arrest.

  • Joesley Batista has avoided prosecution under a plea bargain deal in which he described how meatpacking giant JBS had bribed dozens of politicians, including President Michel Temer.

  • Earlier this year, Temer was charged with corruption for allegedly orchestrating a scheme in which he would get payouts totaling millions of dollars for helping JBS resolve a business issue.

  • Temer denies wrongdoing, and Congress voted in August that he would not stand trial on the charge while in office.

 

South Africa: Rise of renewable energy is disruptive for power sector

BizNis Africa

  • While renewable energy independent power producers (IPPs) take stock following the news that Eskom will be required to conclude another round of IPP power purchase agreements by the end of October 2017, question marks remain over what the future holds for SA’s power utility.

  • Following months of uncertainty over SA’s Renewable Energy Independent Power Producer Procurement Programme, Energy Minister Mmamoloko Kubayi announced in September that Eskom would sign the agreements by the end of the following month.

  • To the chagrin of the IPPs, Kubayi also announced that Eskom would be allowed to re-negotiate the tariffs to not more than 77c per kilowatt hour (KWh).

  • The Minister said the current prices were unaffordable for Eskom, even though solar and wind energy are now cheaper than Eskom’s average cost of supply.

 

Back Cryptocurrencies With Natural Resources – Russia

Russia Briefing

  • Cryptocurrencies backed by natural resources would be more trusted than ones backed by banks, Alexander Borodich, the founder of the Universa block-platform and a venture investor has suggested at the Third Eastern Economic Forum (EEF) in Vladivostok.

  • Borodich said that, as a country rich in natural resources, Russia is able to convert electricity to cryptocurrencies through mining, thus generating as much cryptocurrencies as possible to trade with on the market.

  • “With the status of cryptocurrencies in Russia not yet clear even to the government, there are certainly some projects that are more or less related to cryptocurrency. Several mining companies have presented their solutions on mining cryptocurrencies. Actually, they are more about mining than cryptocurrencies,” he noted.

  • He added that the BRICS countries and the Russian Far East were now discussing the creation of a joint virtual currency for the entire bloc.

 

Brazil’s central bank slashes rate one full percentage point to 8.25%

MercoPress

  • Brazil's central bank slashed its key interest rate this week by a full percentage point to 8.25%, the eighth consecutive cut as the country slowly exits a painful recession.

  • The one percentage point fall in the base Selic rate had been predicted by markets and matched a previous cut in July.

  • The decision was announced hours after the government stats agency IBGE reported that inflation notched up only slightly in August, leaving the year-to-date inflation rate of 2.46% the lowest in almost two decades.

  • Markets expect 3.38% price increases for this year, meaning the government will easily beat its target of 4.5% inflation. That's light years from the 10.67% inflation in 2015 and 6.2% at the end of 2016.

 

Iran-Russia Rail Corridor Direct to Europe

Silk Road Briefing

  • The Russian and Iranian joint railway projects benefit virtually all of Europe and Asia, according to Abbas Nazari, head of the Islamic Republic of Iran Railways’ foreign affairs department.

  • Nazari has stated that the railway project, part of the International North-South Transport Corridor is: “Profitable not just for both countries, but also for Asian and European states. Russia is a prominent railway power; it has an extensive network of railways, which accounts for 85 percent of all freight transported by the country.”

  • “An important element of our cooperation is the North-South transport corridor which, as you know, begins in Europe and runs to India via Russia, Azerbaijan, and Iran.”

  • “We seek to ensure that Iranian railways become the primary transit element of the North-South Transport Corridor”. He added further that the length of the Iranian segment of the corridor is about 2,000 kilometers”.

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Posted in Global, Macro Economics, Macro Economics