EMIA Week in Review: Petrobras Corruption Probe Nearing an End, Cryptocurrency in India & More

October 9, 2017

EMIA

Brazil’ Finance Minister Eyeing to Run for President in 2018

MercoPress

  • Brazil’s Finance Minister Henrique Meirelles has hired social media experts to boost his image ahead of the 2018 election, the Sao Paulo, Brasilia and Rio do Janeiro media have anticipated.

  • Meirelles hired analysts linked to the Getúlio Vargas Foundation (FGV) think tank to study his social media presence on a daily basis and build a communication plan.

  • They have reportedly been working for Meirelles for more than three months.

  • The finance minister’s potential candidacy adds to political uncertainty ahead of a presidential election marked by a strong anti-establishment climate and a lack of clear favorites.

 

ELN Shows No Will to Negotiate

Hydrocarbons Colombia

  • Just a few days before the beginning of the bilateral ceasefire between the Government and the National Liberation Army (ELN), the Coveñas /Caño Limón (CCL) pipeline suffered three attacks in two days, causing serious environmental damage.

  • The attacks to CCL, one of Ecopetrol’s (NYSE:EC) most important assets, took place in the municipalities of Teorama (Norte de Santander) and Arauquita (Arauca), and then in Norte de Santander in the border with Venezuela.

  • They mark the 50th time that this pipeline has been attacked this year.

  • Ecopetrol activated its contingency plan to address the emergency and recommended locals to abstain from approaching the resulting spill.

 

Cryptocurrency in India: Usage and Regulation

India Briefing

  • Bitcoin trading in India peaked to over US$3.5 million this September, following a steady rise in domestic usage.

  • While a monthly trading volume of US$3.5 million may seem insignificant in juxtaposition to global trends – the U.S. bitcoin trading volume for the same month exceeded US$36 million – the figure demonstrates India’s growing interest in cryptocurrency.

  • India’s financial institutions are digitizing at a time when nearly 40 percent of the country’s 1.3 billion population own smartphones.

  • Indians, furthermore, are becoming skeptical of keeping the entirety of their savings in banks – a sentiment exacerbated by the recent demonetization of 86 percent of the country’s paper currency.

 

African National Oil Companies Need to be Disruptive

BizNis Africa

  • National Oil Companies (NOCs) across Africa have an enormous opportunity to secure a more sustainable future by transforming into national energy companies (NECs), escaping the economic trap of a lower oil price and embracing the disruptive forces unleashed by climate change and a low-carbon world.

  • A new era of lower oil prices is challenging business models that have long relied largely on exploration and production of hydrocarbons, particularly ‘black gold’ oil.

  • This is likely to prompt African countries that have for decades depended on their NOC as a key source of revenue to rethink the “nation-building” role that their NOCs have played.

  • In turn, the sustainability of NOCs will depend on their ability to transform into NECs, responding to the demands placed on them by consumers, governments and non-governmental organizations (NGOs) to respond to climate change and a new energy future.

 

The Next Big Offshore Boom is About to Happen…in Brazil

MercoPress

  • The latest demonstration of the viability of deepwater projects, even in the post-2014 oil industry era, comes from none other than Brazil.

  • On Wednesday, the country's National Petroleum Agency put 287 oil and gas blocks up for auction, and only 37 found buyers.

  • Too few, it might seem at first. But the proceeds came in at more than US$1.2bn, a hefty share of this pledged by heavyweight Exxon. The NPA's expectations for the proceeds were much more modest, at US$157 million.

  • The 287 blocks auctioned are just the first portion of a number of deposits that hold an estimated 10 million barrels of crude in proven reserves.

 

All Set for Mexico’s Round 2.1

Hydrocarbons Mexico

  • The National Hydrocarbons Commission (CNH) signed new exploration and production contracts with the winning companies of Round 2.1.

  • The entity signed 10 E&P contracts, which represent investments of US$8.2B and have a duration of 30 years, with two possible extensions of five years.

  • Companies will work under the mode of shared production.

  • The Commission pointed out that the assigned areas sum to 5,872km² in total, and blocks could have resources of up to 2.4Bbl.

 

Shutting Down India’s Shell Companies – Government Continues Anti-Corruption Drive

India Briefing

  • Over the past two years, Prime Minister Modi’s government has introduced a slew of measures to prevent money laundering, counterfeiting, hoarding, and tax evasion – all popular modes of operating in the black economy.

  • Ending these practices was, at least partly, responsible for two of the government’s flagship initiatives – GST and demonetization.

  • Relatedly, making the Aadhaar biometric identification number mandatory for banking transactions and filing returns, also aims to bring transparency in the Indian economy.

  • As part of this crusade, the government is now actively targeting shell companies.

 

Petrobras Controversy: Brazil Denies Any Current Plans to Privatize the Company

MercoPress

  • A senior official in Brazil said there are no current plans to privatize the national oil company to deal with its massive debt, according to a new report by Reuters.

  • Fernando Coelho Filho, the minister of mines and energy, had suggested that Petrobras could face such a sale in the future, but did not provide a concrete timeline.

  • “We are not dealing with that at this time. We are currently focused on (the sale of) Electrobras,” the minister told reporters regarding the national utilities company.

  • Brazilian President Michel Temer has insisted that the national oil and gas company would not be privatized, despite efforts by other parts of the Brazilian government to do that exact thing. At a Reuters sponsored event last month, Temer vowed that Petrobras would remain under the control of the central government.

 

Judge Moro Says Petrobras Corruption Probe is Nearing an End

MercoPress

  • The judge overseeing a sprawling corruption probe into billions of dollars in kickbacks to Brazilian politicians and officials said Monday that the investigation is nearing an end.

  • Judge Sergio Moro didn't set a timeline for when the “Car Wash” probe might wrap up.

  • However, he said he is personally “a bit tired” of the work and believes it is in its final phases.

  • The “Car Wash” investigation began in March 2014 in the southeastern state of Parana, where Moro works. It has ensnared many of Brazil's elite and spawned related probes that have expanded nationwide and to several other Latin American nations.

 

The Impact of Chinese Investments in Malaysia

Global Risk Insights

  • There has been a recent surge of Chinese investment in Southeast Asia associated with the Belt and Road Initiative (BRI), including the recent East Coast Rail Link (ECRL) connecting Malaysia’s east and west coasts.

  • For countries like Malaysia, these investments in infrastructure offer clear benefits but also come with costs, both economic and strategic.

  • After a trip to China in November 2016, Malaysian Prime Minister Najib Razak returned with over $34 billion in deals largely oriented around infrastructure development. Najib’s return was met with both optimism and concern.

  • The optimism stemmed from the potential benefits that such infrastructure developments will bring. The concern stemmed from the growing Chinese influence in Malaysia.

 

Ecuador’s Vice-President Put Under Pre-Trial Detention

Latin News

  • On 2 October, Ecuador’s supreme court (CNJ) ordered Vice-President Jorge Glas to be held in detention while investigations into his role in the Odebrecht corruption scandal continue.

  • Glas is accused of receiving some of the US$33m in bribes that Brazilian engineering firm Odebrecht has admitted paying to Ecuadorean government officials in exchange for state contracts.

  • Glas has been under investigation since August, when his powers as vice-president were removed by President Lenín Moreno.

  • Glas maintains his innocence and says that he will clear his name in the courts, and he has even encouraged members of the ruling Alianza País (AP) party to support the continuing of the criminal investigation into the activities of Odebrecht in Ecuador

 

E-commerce Wins Big in Festive Shopping Season, Gujarat Hub for E-Vehicles – India Market Watch

India Briefing

  • This festive season was the biggest shopping event for India’s online retailers in terms of units sold, profits generated, market share, and number of customers who shopped online.

  • India’s online marketplace generated approximately US$1.5 billion in the five-day festive sales, starting from September 19 – offering heavy discounts and promotional offers. This will continue till Diwali, end of October.

  • The World Economic Forum (WEF) has ranked India 40 out of 137 countries in its global competitiveness ranking report for 2017. Albeit one rank lower than last year’s, industry experts say that India continues to show signs of economic progress.

  • India is pushing for clean energy and technologies across its economy, including in the automobile industry. This comes after a recent announcement by China’s Vice-Minister for Industry, Xin Guobin, who spoke of a tentative national plan to phase out fossil fuel vehicles.

 

Ceasefire Between Colombian Government and ELN Begins

LatinNews

  • On 1 October, the bilateral ceasefire agreed between the Colombian government and the Ejército de Liberación Nacional (ELN) insurgent guerrilla group formally came into force.

  • This is the first time the ELN has agreed to a bilateral ceasefire since its formation in 1964, and it is hoped that the initiative will help to expedite the official peace negotiations between it and the government led by President Juan Manuel Santos.

  • The text of the agreement, signed by the head of the government’s negotiating team in Quito, Juan Camilo Restrepo, and his ELN counterpart, ‘Pablo Beltrán’, states that its primary objective is to improve the humanitarian situation for the Colombian population.

  • President Santos has stated that he hopes that the ceasefire – currently scheduled to last until 9 January 2018 – will be extended, and could ultimately serve as the first step towards a lasting peace agreement with the 2,000-strong guerrilla group.

 

Saudi Arabia’s Escalating Foreign Policy: the Qatar Crisis is just the Beginning

Global Risk Insights

  • Since the oil price fell in 2014, Saudi Arabia has been grappling with systematic political and economic problems whilst a competition with Iran for regional hegemony has escalated.  

  • Domestic problems and a coming succession to the kingdom’s throne put an added onus on foreign policy success, yet Saudi’s foreign policy is floundering.

  • The Qatar diplomatic crisis is a bold move that indicates Saudi’s failures are driving a stronger, riskier foreign policy.

  • The almost certain failure of the diplomatic blockade is likely to drive Saudi to greater extremes, with a corresponding destabilising effect in the Middle East.

 

Pension Funds – Should They be Financing Infrastructure in Africa?

BizNis Africa

  • Infrastructure as an asset class can provide a distinct addition to African pension and investment portfolios and is increasingly being considered.

  • In principle, the asset class presents a compelling natural “fit” to the longer-term liability profile of most pension funds given the investment horizon of most infrastructure investments, with the primary appeal of this asset class being the potential to deliver a predictable cash flow stream over time.

  • The World Bank places an approximate US$93 billion a year into infrastructure on the continent, a third of which is for maintenance of existing infrastructure.

  • Its Infrastructure Action Plan FY 2012-2015 proffers important guidance as to what African institutional investors can factor into their considerations in terms of defining infrastructure and in-turn, identifying strategic benefits in allocating to this asset class.

 

Brazil’s Attorney General Questions Temer Over Ports Decree

LatinNews

  • On 2 October, Brazil’s new attorney general, Raquel Dodge, asked the supreme court (STF) for permission to question President Michel Temer over allegations that he received bribes to publish a ports decree, benefitting local company Rodrimar.

  • Dodge inherits the case from her predecessor, Rodrigo Janot (2013-2017), who stepped down on 17 September.

  • This shows her early commitment to furthering the progress of anti-corruption operations amid media speculation that she might treat Temer more leniently than Janot.

  • Dodge has announced that the investigation into the ports decree will be concluded within 60 days. If she finds evidence against Temer, she will send the case back to Brazil’s STF, which will decide whether to forward it to the chamber of deputies who will vote on whether to send him to trial.

Tags: africa, brazil, cryptocurrency, e-commerce, emerging markets, emia, frontier markets, gst, india, infrastructure, meirelles, offshore, pensions, petrobras, temer, weekly roundup
Posted in Global, Macro Economics, Macro Economics