EMIA Week in Review: Venezuelan Default Round the Corner? Vietnam’s Growth Accelerates in Q3 & More

November 6, 2017


EU Support: Argentina Sells 30-Year Euro Bond, First Time in History


  • Argentina finalized its foreign bond sale plan for 2017 on Thursday, selling 2.75 billion Euros in three bonds in an offering that was more than four times oversubscribed, the Finance Ministry said in a statement.

  • Argentina sold 1 billion Euros in 5-year bonds at a 3.375% interest rate, 1 billion Euros in 10-year bonds at 5.25%, and 750 million Euros in 30-year bonds at a 6.25%.

  • That marked the first 30-year euro bond sale in Argentina's history, the ministry said, and is a clear support from European investors.

  • Thursday's issue brought the total amount of bonds Argentina has sold on international markets in 2017 to around US$ 13.4bn, higher than the US$ 12.75bn in issuance Finance Minister Luis Caputo said in June that the country was targeting for the year.


Vietnam’s Growth Accelerates to 7.46% in Q3 2017

Vietnam Briefing

  • Vietnam grew by 7.46 percent in Q3/2017, the highest in the last seven years.

  • From January to September, the country grew by 6.41 percent, the strongest since 2015.

  • This growth surge was largely driven by the industry, construction, and service sectors.

  • According to the Vietnam Institute for Economic and Policy Research, Vietnam will continue to grow at 7.12 percent in this quarter, bringing the annual growth rate to 6.64 percent


Maduro Announces “restructuring of all future debt payments”; Default Round the Corner?


  • Venezuela on Thursday announced plans to restructure its burgeoning foreign debt, a move that may lead to a default by the cash-strapped OPEC nation whose collapsing socialist economy has left its population struggling to find food and medicine.

  • President Nicolas Maduro vowed to make a US$1.1 billion payment on a bond maturing on Thursday, but also created a commission to study “restructuring of all future payments” in order to meet the needs of citizens.

  • Venezuela has few avenues to do that though because of sanctions by the United States that bar American banks from participating in or even negotiating such deals.

  • Thus, Maduro's most readily available recourse to ease payments is unilaterally halting them.


Colombian Government Talks Oil Production

Hydrocarbons Colombia

  • Ministry of Mines and Energy (MinMinas), German Arce, participated in the ‘Leadership and Energy Markets in Latin America’ forum, where he spoke about oil production and his perspectives on the issue.

  • Arce said oil production could stabilize at 850mbd (850,000 barrels a day) or an even slightly higher figure this year, since he believes that there are the right conditions to achieve this number and meet this year’s extraction target.

  • "I think we have reached a point of stabilization. This year's production target, which is around 850mbd, we are meeting it. We could be a little higher than that, with stable levels of oil prices," he said. However, this figure is lower compared to 2016’s value, when the sector produced 885mbd on average.

  • The government had pledged to help boost exploration and investments to increase oil and gas reserves this year and oil production has continued to fall in the country, as it stood at 858mbd on average in August.


Macri’s Ambitious Infrastructure Investment Plan Begins with 7,700km of Roads


  • Argentina hopes to attract US$26.5 billion in infrastructure investments through 2022 in the form of public-public private partnerships (PPPs), government officials told a gathering of construction and finance executives this week.

  • The plan, enabled by a law passed last year that lowered barriers to foreign investment in public works, will include US$ 5.2 billion in projects that will open to competitive bids in 2018, mostly in the transportation, communications and technology sectors.

  • Since taking office in December 2015, business-friendly President Mauricio Macri has ramped up investment in Argentina's roads, railways and sewage systems after more than a decade of underinvestment during populist administrations.

  • Argentina's treasury will invest 1.9% of GDP in infrastructure in 2018, in line with 2017 levels, according to the government's budget. Caputo said the PPPs would allow total infrastructure investment to rise about 60% year-over-year, reaching around 3.5% of GDP.


Investing in Cambodia’s Phnom Penh

ASEAN Briefing

  • Phnom Penh, once known as the ‘Pearl of Asia’, is the capital and largest city of Cambodia.

  • Located at the confluence of three major rivers –  the Mekong, the Tonle Sap River, and the Bassac River -, the city serves as Cambodia’s major economic, business, and trading destination.

  • Though the city is located 120 miles away from the sea, its proximity to the Mekong river valley makes it an ideal port – connecting the landlocked region to the South China Sea via Vietnam by the Hau Giang channel of the Mekong Delta.

  • Phnom Penh is home to 1.5 million people, and serves as a major global and domestic tourist destination in Cambodia. Khmer, the most popular and official language of the country is the main language; English and French are also widely spoken.


Argentina Unveils Plan to Slash Corporate Income Taxes to Promote Investment


  • Argentina plans to cut corporate income taxes to 25% by 2021 for companies that reinvest profits, it said on Tuesday, part of a wide-reaching tax reform bill intended to accelerate investment in Latin America's no.3 economy.

  • The bill, which would slash taxes for companies willing to reinvest in Argentina from 35%, will be sent to Congress in the coming days, Treasury Minister Nicolas Dujovne said.

  • The proposal marked the first concrete step President Mauricio Macri's administration has taken toward deepening its business-friendly reform agenda since his “Let's Change” coalition swept to victory in midterm legislative elections last week.

  • The bill, which also includes some tax hikes, including a new capital gains tax, highlights the difficult balance the government faces in seeking to lower costs to attract investment, while also reducing a fiscal deficit seen at 4.2% of GDP this year.


Top Three IPR Mistakes that SMEs Should Avoid in Southeast Asia

ASEAN Briefing

  • A wide range of foreign industries are now looking to Southeast Asia not just to take advantage of an abundance of cheap labor for production of goods for export, but also to tap into new consumer markets formed from a growing middle class population.

  • While these opportunities can lead to substantial returns for Western, including European businesses, via both the production and sales side, the less developed nature of business-related legislation means the dangers of intellectual property (IP) infringement are often great.

  • There are very few SMEs who would not take the issue of intellectual property rights (IPR) seriously in their business strategies, nevertheless there are some issues that are commonly overlooked and can even lead to commercial disaster.

  • Here we take a look, in no particular order, at the top three IPR mistakes SMEs make.


Brazil’s Central Bank Puts Off Signals About Next Year’s Interest Rate Policy


  • Brazil’s central bank has decided to put off any signals about its 2018 interest rate decisions, the bank said on Tuesday, leaving the door open for lower rates next year as the economy recovers with inflation under control.

  • In the minutes of the central bank’s Oct. 25 monetary policy meeting, in which it reduced the benchmark interest rate to 7.50 percent, policymakers said they wanted to maintain leeway for action as they monitor inflation expectations and the incipient recovery from a deep recession.

  • The bank reiterated that a moderate reduction in the pace of easing seems appropriate at its Dec. 6 meeting, signaling it remains likely to cut the Selic rate by 50 basis points, to a record-low 7%, after reducing it by 75 basis points last week.

  • Most economists have been expecting a December rate cut to be the last in the current easing cycle that has nearly halved rates from a decade-high of 14.25% in just one year.


Venezuela’s Maduro Warns Opposition Against Election Boycott


  • On 2 November Venezuela’s President Nicolás Maduro announced that the pending municipal elections would be held in the country on 10 December.

  • He also criticised the announcement by the three main opposition parties that they would boycott them, threatening to bar them from taking part in the presidential election due next year if they do so.

  • President Maduro’s announcement comes two days after representatives of Primero Justicia, Voluntad Popular and Acción Democrática, three of the largest parties that make up the Mesa de la Unidad Democrática main opposition coalition, announced that they would not be fielding candidates in municipal elections.

  • Maduro also described the MUD’s approach to resolving the country’s deep political crisis as incoherent.


Did Xi set a New Direction for Tax Reform in China?

China Briefing

  • Chinese President Xi Jinping hinted at a new direction for tax reform during the 19th Party Congress, which ended last week in Beijing.

  • Although the statements made during Xi’s speech were broad, and had little in the way of specifics, the speech could signal a new direction of reforms for China’s tax system.

  • Xi stressed the importance of “law-based governance” throughout his speech, and this extends to taxation.

  • “We must exercise Party leadership at every point in the process and over every dimension of law-based governance, and be fully committed to promoting socialist rule of law with Chinese characteristics.”


Is Pemex’s Monopoly Really Over?

Hydrocarbons Mexico

  • The NOC (National Oil Company) announced that it is preparing a renewal of its retail business model, with the launch of new franchises and contracts to face the newly liberalized market.

  • According to Pemex Transformación Industrial (PTI), Pemex will launch its new franchise model next month as part of a plan to renew its gas station business.

  • PTI’s director, Carlos Murrieta Cummings, said that the company will develop other types of contracts to offer a more profitable profit margin, for which they are creating a new franchise and new contracts with a different brand positioning for the franchisee.

  • Murrieta revealed that Pemex will not go to market with this model until its management reaches new commercial agreements with industry entrepreneurs, and that it is working to improve legal operations regarding fuel, mainly to deal with fuel theft and system failures.


Conflict of Interests Affect Argentina’s New Minister


  • On 1 November, Argentina’s anti-corruption office (OA) announced that it would open an investigation into a potential conflict of interest affecting the newly appointed agroindustry minister, Luis Miguel Etchevehere.

  • Following the electoral victory of the ruling Cambiemos coalition in the 22 October federal mid-term legislative elections, President Mauricio Macri launched a new ambitious economic and political reform agenda, which he also coupled with some changes in the cabinet.

  • As part of this he appointed Etchevehere, until then president of the Sociedad Rural Argentina (SRA) main agricultural business sector lobby, as his new agroindustry minister in replacement of Ricardo Buryaile.

  • But the OA, which was already investigating potential conflict of interest allegations affecting Buryaile, has warned that Etchevehere’s close links to the SRA could also represent a serious conflict of interest.


Trump’s Short-Sighted Stance on Iran Leaves the Door Open for China

Global Risk Insights

  • Earlier this month, President Trump refused to re-certify the JCPOA agreement with Iran.

  • That same week, at the 19th Communist Party Congress in China, President Xi Jinping presented a vision of his country as a guardian of international order. Amid growing energy exports from Iran to China, this is not a battle that Trump can win.

  • Amid this year’s “negotiations” with a North Korean regime hellbent on achieving nuclear weapons delivery capability, the announcement that President Trump’s new Iran Strategyinvolved walking away from the Joint Comprehensive Plan of Action (JCPOA) should not have been a surprise.

  • Trump’s position on the Iran deal not only signals America’s exit from the international diplomatic arena in regards to Iranian nuclear development, it leaves a leadership vacuum that China’s President Xi is only too willing to fill.


Make in India: Still Falling Short after Three Years

India Briefing

  • Make in India is the government’s flagship program to revitalize the country’s flaccid manufacturing sector.

  • When it was launched in 2014, Make in India stole headlines across the world – Prime Minister Narendra Modi and his government would finally make manufacturing in India viable.

  • The initiative would attract foreign investment to grow the manufacturing sector, and create jobs for those that need employment.

  • Many India hands thought Make in India would help the economy realize breakout growth.


Macri Vows Reforms to Lower Taxes and Achieve Fiscal Balance


  • Argentina's President Mauricio Macri vowed to press ahead with reforms to the country's tax, labor and retirement systems in a speech on Monday, a week after his “Let's Change” coalition swept to victory at the polls in midterm elections.

  • The government will present a tax reform proposal this Tuesday or Wednesday, and an amnesty plan for companies that hired workers informally in the coming days, Macri said.

  • He added that the government would convene a commission to propose changes to the retirement system in coming weeks.

  • The speech marked a roadmap for the second half of Macri's four-year term, as he seeks to implement business-friendly reforms to attract investors who avoided the country during more than a decade of populist rule.


Where is China Headed in Xi Jinping’s Second Term?

Global Risk Insights

  • Xi’s report to the 19th Party Congress offers valuable insight into the foundation, new direction, and priorities of China’s policy for the next five years.

  • A comparison of Xi’s report to the 19th Party Congress with Hu’s to the 18th reveals some continuities, as well as some noticeable departures under Xi’s “Thought on socialism with Chinese characteristics for a new era.”

  • For national development, Xi reiterates two of the country’s long-standing objectives. First, Xi asserts that China is in the final stage of elevating the country to a “moderately prosperous society” by 2020—a goal originating with Jiang Zemin’s report in 2002.

  • Second, Xi reaffirms China’s commitment to becoming a strong, modern socialist country by the 100th anniversary of the establishment of the People’s Republic of China in 2049. Xi has linked these objectives to his own ambition for the rejuvenation of the country, the “China Dream.”


Meirelles Again Mentioned as Candidate for a Presidential Ticket Next Year


  • Brazil's Finance Minister Henrique Meirelles insisted on Monday that he is not planning to run for president and told a business meeting he could consider being a vice presidential running mate.

  • But he later told reporters that it was just a joke and he was too busy working on the recovery of the Brazilian economy as minister to consider the presidential race next October.

  • Meirelles, whose political fortunes are expected to rise as the Brazilian economy recovers from its worst recession, said he had been asked to be a vice presidential candidate in 2010 and 2014 and found the position “interesting.”

  • Meirelles said he expected Brazil's GDP to grow at least 2 percent next year and the strengthening economy had created more than 1 million jobs so far this year.


Thailand’s New Customs Act: A Relief for Importers and Exporters

ASEAN Briefing

  • On May 2017, the government of Thailand published a new Customs Act B.E. 2560 (2017) in the country’s National Gazette, repealing the outdated and controversial Customs Act B.E. 2469 (1926).

  • The new Act, scheduled to come into force from November 13, 2017, will herald a new era in customs and excise control in Thailand. With an aim to modernize Thailand’s customs law, the revised Act will significantly ease customs procedure and bring transparency in the country’s customs law.

  • The changes will remove ambiguities present in the existing law and bring it closer to the international best practices in line with Thailand’s current free trade agreements.

  • The agents and businesses involved in importing, exporting and the manufacturing of excisable goods in Thailand will greatly benefit from the new law.


Brazil: The Return of Deepwater Oil


  • On a historic auction for deepwater oil assets in Brazil, the oil majors showed up on October 27 and bought several offshore blocks, indicating a high level of interest in the country after a major policy overhaul allowed private investment.

  • Royal Dutch Shell won half of the blocks that were offered, and Shell was already one of Brazil’s largest foreign investors.

  • After purchasing BG Group for around US$50 billion, Shell took a large presence in Brazil.

  • The logic behind Shell’s strategy is that the company argues it can break even with oil at US$40 per barrel, making Brazil one of the most attractive places to drill offshore in the world.


Venezuela Makes Last Minute Major Bond Payment, but 2018 Service Will Demand US$10Bn


  • Venezuelan state oil company PDVSA began making a major bond payment, easing short-term worries about default but leaving the populist government with less cash to attend to food shortages and economic depression.

  • Investors had fretted for a week that cash-flow problems and regulatory hurdles resulting from U.S. sanctions on the government of President Nicolas Maduro might leave the company unable to make the nearly US$1 billion payment.

  • Venezuela’s policies have resulted in an economic depression, soaring inflation, and shortages of food and medicine, despite being an OPEC country with among the largest oil reserves in the world.

  • Bondholders have for years shrugged off Venezuela’s economic implosion, insisting Maduro’s willingness to pay and Venezuela’s substantial offshore assets made the high-yield debt a good bet.


EU Confirms Commitment to Reach Trade Accord with Mercosur by End of the Year


  • European Union leaders have agreed to press ahead with Mercosur talks and European Commission president Jean-Claude Juncker confirmed the bloc will “continue to do everything” to conclude a deal before the end of the year.

  • “It's important,” Mr Juncker said. “We underestimate the importance of Mercosur for the European Union.

  • The EU estimates a deal with Mercosur could double EU exports to the region - mainly cars and chemicals - which stand at €66bn a year.

  • It says the deal would eliminate €4bn a year in tariffs and knock down regulatory barriers to the lucrative market.

Tags: argentina, bonds, default, emerging markets, emia, eu, frontier markets, growth, infrastructure projects, macri, maduro, mercosur, tax reforms, venezuela, vietnam, weekly roundup
Posted in Global, Macro Economics, Macro Economics