EMIA Week in Review: Saudi Arabia’s New Economy, Temer Admits Pension Reform Delays & More

October 30, 2017


YPF Unveils Ambitious US$ 30bn Five-Year Investment Plan


  • Argentina's state-controlled energy company YPF has unveiled a US$ 30bn five-year investment plan to boost oil production and sharpen its focus on electric power generation.

  • Some US$21.5bn will come from YPF's own coffers, with the remainder to be sourced from its project partners, the company said in a statement on Wednesday.

  • Argentina's state-controlled energy company YPF plans to invest US$21.5 billion in the country from 2018 to 2022 and increase oil production by 26%, the company said in a statement on Wednesday.

  • Investment in the country's energy sector by companies in partnership with YPF is projected at US$8.5 billion during the period, bringing total expected investment to US$30 billion through 2022, the statement said without giving further details.


Zambia Signed as New Africa Finance Corporation Member

BizNis Africa

  • Zambia, becomes the first Southern African member country of Africa Finance Corporation (AFC), a development finance institution for infrastructure in Africa.

  • The accession of Zambia to AFC membership marks a significant milestone in the Corporation’s mission to address Africa’s infrastructure needs and build the foundation for robust economic development across the continent.

  • To date the Corporation has invested $4.5 billion in projects across 28 African countries and in a wide range of sectors including power, telecommunications, transport and logistics, natural resources, and heavy industries.

  • Zambia’s membership accession supports AFC’s membership expansion strategy and the continued alignment of its country membership with its operational footprint.


Saudi Arabia Announces Plan to Build US$ 500bn New City and a Bridge Connecting with Egypt


  • Saudi Crown Prince Mohammad Bin Salman announced plans to build a new city on the Red Sea coast, promising a lifestyle not available in today’s Saudi Arabia as he seeks to remake the kingdom in a time of dwindling resources.

  • The prince said the city project, to be called “NEOM,” will operate independently from the “existing governmental framework” with investors and businesses consulted at every step during development.

  • The project will be backed by more than US$500 billion from the Saudi government, the country’s sovereign wealth fund and local and international investors, according to a statement released on Tuesday at an international business conference in Riyadh.

  • The ambitious plan includes a bridge spanning the Red Sea, connecting the proposed city to Egypt and the rest of Africa.


ELN Accused of Violating Ceasefire in Colombia


  • On 25 October indigenous groups in Colombia’s north-western Chocó department accused the Ejército de Liberación Nacional (ELN) guerrilla group of murdering local indigenous leader Aulio Isarama Forastero.

  • The ELN is meant to be observing a 100-day bilateral ceasefire it agreed with the Colombian government as part of the ongoing formal peace negotiations that the two parties are holding in Quito, Ecuador.

  • If the accusations made by the Chocó indigenous groups are confirmed this would represent the first violation of the ceasefire by the ELN and represent a significant setback for the peace negotiations, the fourth round of which are currently taking place.

  • The ELN leadership itself has said that it is trying to determine if any of its units were involved in Isarama’s murder but that it does not believe that this was the case.


World Wine Production at its Lowest in 50 years; Europe Hit Hard, Argentina Will See 25% Increase


  • Europe is making wine at significantly lower levels than usual – and that's because of “extreme weather events” such as frost and drought that have damaged vineyards, according to the International Organization of Vine and Wine, (OIV).

  • The intergovernmental wine organization says this year's output is projected to be the lowest in more than 50 years.

  • It is projecting that 246.7 million hectoliters will be produced this year globally, a drop of 8.2% compared to last year.

  • The situation is bleakest in the three countries that produce the most wine – Italy (down by 23%), France (down by 19%) and Spain (down by 15%).


Xi Reaffirms his Grip on China


  • Chinese President Xi Jinping on Wednesday unveiled the new lineup of the ruling Communist Party highest body, whose members will rule alongside him as he embarks on a second five-year term as party leader with an agenda to spread prosperity and expand the global influence of the world's second largest economy.

  • As expected, Xi was given a renewed mandate following the first meeting Wednesday of the new Central Committee that was elected at the party's twice-a-decade national congress.

  • The party had already elevated Xi's status on Tuesday at its closing session by inserting his name and dogma into the party's constitution alongside past leaders Mao Zedong and Deng Xiaoping, cementing his status as the most powerful man to head the country in decades.

  • Xi said his return as general secretary constituted “not just approval of my work but also encouragement that will spur me on.”


Mexican Government Struck by Odebrecht’s Bribe Money


  • Mexican President Enrique Peña Nieto faces a tough choice on whether to pursue a graft probe involving a prominent ally and Brazilian construction firm Odebrecht.

  • Mexico's top prosecutor, acting Attorney General Alberto Elias Beltran, fired the federal attorney general responsible for electoral crimes, adding fuel to a case that may complicate the president's efforts to shake off allegations of corruption in the run-up to the July 2018 presidential vote.

  • The dismissal of top electoral prosecutor, Santiago Nieto, came two days after he accused Emilio Lozoya, the former boss of state oil firm Pemex, in a newspaper interview of writing to him to ask to be declared innocent of funneling Odebrecht cash to political campaigns.

  • In Brazil, Odebrecht has admitted to paying bribes in several countries in Latin America, including Mexico.


Saudi Arabia’s New Economy: Too Much, Too Fast?

Global Risk Insights

  • The Kingdom of Saudi Arabia is well into its generational transformation of the economy and society.

  • Vision 2030, an ambitious reform plan aiming to diversify the country away from oil dependency, was launched by the young Crown Prince Mohammed bin Salman in 2016 and has been executed by a framework and targets set out in the enabling National Transformation Plan.

  • Since then, social and economic reforms have been announced and carried out at break-neck speed, almost too rapidly for the economy and society to absorb.

  • Fiscal reform has been implemented quite rapidly, perhaps to the detriment of the economy, with the likes of the International Monetary Fund (IMF) even advising the Kingdom to slow down as economic growth halts to about 0% in 2017.


Macri Anticipates Sweeping Tax, Education and Labor Reforms


  • President Mauricio Macri said on Monday he will seek more sweeping reforms for Argentina after his governing coalition scored a resounding victory in congressional elections.

  • Macri's center-right coalition remains a minority in both houses of Congress. But the “Let's Change” coalition won in 13 out 23 provinces as well as the Argentine capital in Sunday's voting and will have the biggest bloc in Congress.

  • Macri told reporters Argentines should expect reforms in tax, education and labor, without providing details. The conservative leader has been pushing a free-market reform agenda to overhaul Argentina's struggling economy.

  • But his ordering of layoffs of state workers, the elimination of tariffs aimed at protecting local industry, and hikes in utility rates has fueled labor unrest.


China Bans Imports of Foreign Waste to Combat Pollution

China Briefing

  • China will ban the import of 24 types of waste by the end of the year as part of a campaign against “foreign garbage”.

  • The ban was announced by five government agencies in July and will go into effect on December 31, 2017. It affects several classes of waste including waste plastic, glass, slag, waste wool, ash, cotton, yarn, and unsorted paper.

  • The ban has already affected both overseas exporters of waste and China-based purchasers of waste, as well as companies who purchase raw materials made from reprocessed waste.

  • Many developed countries depend on Chinese demand to handle their excess waste, which Chinese recyclers purchase, sort, process, and subsequently re-sell. As a result of the ban, prices of materials like paper and plastic have skyrocketed, driving up costs for businesses reliant on cheap recycled goods.


Venezuela Delaying Debt Payments: Foreign Reserves Down to US$ 9.9 Billion


  • One week before Venezuela faces a critical debt payment, the distressed country is already late on a series of smaller bills.

  • The nation's state-owned oil giant, Petroleos de Venezuela, SA, has two major bond payments totaling about US$2 billion coming due in the next two weeks.

  • While the market expects the company, PDVSA, to avoid default, the missed payments have rattled investors and raised fresh questions about how long embattled President Nicolas Maduro's regime might last.

  • Last week, Venezuela missed five coupon payments totaling nearly US$350 million tied to the debt of PDVSA, the government and the utility Electricidad de Caracas. That stoked a minor sell-off in a number of outstanding bonds.


Brazil’s Temer Admits Pensions Reform could be Delayed Until Next Year


  • Brazil's President Michel Temer admits for the first time that the crucial pension reform legislation could not be passed by Congress this year.

  • In an interview with Poder360 news website, Temer said the government had to again consult lawmakers in the government coalition, many of whom have already said they are doubtful the legislation will pass this year.

  • The pension reform is crucial to Temer’s attempts to plug Brazil’s budget deficit and reduce the bloated pension system. But its provisions to increase the retirement age have made it unpopular with Brazilians.

  • Temer put the delay down to charges in a corruption case that put his legislative agenda on hold for six months.


Massive Data Breaches and Cyber Threats in India

India Briefing

  • India’s digital infrastructure, user base, and accessibility are rapidly improving. However, proper cyber security measures have yet to keep up with India’s digital push – leaving many companies vulnerable to cyber-attacks.

  • According to the Ministry of Electronics and Information Technology, India witnessed over 27,000 cyber security threats in the first half of 2017.

  • These threats include ransomware attacks, website intrusions or defacement, phishing attacks, and data breaches.

  • Foreign businesses entering the Indian market should be aware of the increasingly commonplace nature of cyber-attacks in the country, and craft proactive measures to anticipate and respond to these threats.


OECD calls for Mexican Energy Regulatory Integration

Hydrocarbons Mexico

  • The Organization for Economic Cooperation and Development (OECD) recommended the creation of a group to exchange information and facilitate procedures within the Mexican energy sector.

  • The recommendation was made to the National Hydrocarbons Commission (CNH), the Energy Regulatory Commission (CRE) and the Agency for Safety, Energy and the Environment (ASEA).

  • “Those are institutions whose independence has to be strengthened, and they have to keep their course regardless of political cycles,” said OECD Cabinet Director, Gabriela Ramos.

  • She added that the implementation of this mechanism has been well received by other energy regulators in the world, and stressed that the importance of these initiatives is to encourage confidence and investments in the market.


Saudi Arabia’s New Economy: Insider’s View

Global Risk Insights

  • An economy that relied on its vast oil reserves and high oil prices to drive state spending was for decades able to function sustainably, with more than 60% of the labor force employed by the public sector and 80% of government revenues derived from oil proceeds.

  • Yet, the halving of oil prices from their above $100-dollar barrel days in 2014 to the mid $50s seen today has given the Kingdom impetus to chart a new course, spearheaded by the ambitious, young, reform minded Crown Prince.

  • Austerity measures have been enacted and government spending reined in, in an effort to reduce the budget deficit that shot up to 17.2% of GDP in 2016 to an anticipated 9.3% of GDP in 2017 and 1% by 2022.

  • This fiscal adjustment required cuts to utilities subsidies, slashing of public sector wages, and a reduction in capital spending that included the postponement of major public infrastructure projects.


The Role of the Oil and Gas Industry in the Colombian Post Conflict Process

Hydrocarbons Colombia

  • The Colombian Association of Petroleum Engineers (Acipet) hosted its 17th Oil and Gas Congress, where topics like the role of the industry in the post-conflict process were debated.

  • Peace Commissioner Rodrigo Rivera said the government has "removed the factor of disturbance, insecurity and violence from areas where the oil sector operates,” and added that the government’s negotiating team is working to achieve peace with the ELN, which will be a key element to guarantee security for companies in producing regions.

  • Former Vice President of Colombia, Francisco Santos, spoke about another important issue when it comes to discussing the situation of the industry in the country.

  • He said that "investors will go to other places if there are no (legal) conditions. Mexico opened its doors but here we have unstable rules and legal uncertainties that show a deterioration of industry conditions."

Tags: brazil, china, colombia, cyber security, eln, emerging markets, emia, frontier markets, headline news, hydrocarbons, india, mexico, pension reforms, saudi arabia, temer, waste industry, weekly roundup, xi jingping
Posted in Global, Macro Economics, Macro Economics