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Emerging Markets Daily - May 5
Africa Ports Improving, Argentina Populism Overwhelms Pragmatism, Mexico Metro Tragedy Sparks Anger, Consumer Trends in Asia, MENA Energy Investments, US Pushes TSMC To Deliver More Chips, and More...
The Top 5 Emerging Market Stories from Global Media - May 5
Africa’s Ports Improve as Focus Turns to Hinterlands
“If Africa is to develop a coherent internal market, improved logistics will be vital. Alongside wages and the cost of power, logistics determine the competitiveness of Africa’s goods. The success of the African Continental Free Trade Agreement (AfCFTA), which came into effect at the start of this year, is dependent on the efficient and cheap movement of goods, and requires huge investments to ensure functioning infrastructure.”
“A lack of natural deep-sea harbours, long navigable river systems and the presence of dense vegetation have been natural obstacles to trade flows and have historically isolated Africa’s populations from one another. But fast-growing populations and economies, a more integrated global economy, and insatiable resource demand from Asia are once again changing Africa’s economic dynamics, and there is a renewed scramble to develop ports, transport and logistics.”
“Traditionally there has been an underwhelming appetite from investors and banks in developing African logistics infrastructure…But things are improving, particularly in ports capacity…Africa’s ports infrastructure has seen huge improvements but an integrated trading system will rely on inland projects.” Richard Ndem reports
Argentina Economy Buckles as Pragmatism Gives Way to Populism
“In late March, Argentine President Alberto Fernandez sent his guy to Washington to smooth things over. With negotiations stalled, Economy Minister Martin Guzman had meetings with U.S. officials and the International Monetary Fund over its $45 billion loan.”
“Back home, Fernandez’s populist vice president took to the microphone to make one thing clear. ‘We can’t pay because we don’t have the money,’ said Cristina Fernandez de Kirchner, who held the nation’s top job from 2007 to 2015. The IMF’s terms are ‘unacceptable.’”
“It was a telling moment. When Fernandez, 62, took office in the final days of 2019, he presented himself as pragmatist. True, he’d briefly been Kirchner’s chief of staff within the Peronist left but he accepted a role for capitalism and wouldn’t allow Kirchner and her loyalists to set the agenda.”
“Few would argue that he has succeeded. ‘It’s evident that the president is backing the core Kirchner wing of his coalition,’ says Jimena Blanco, director of Latin America research at consulting firm Verisk Maplecroft in Buenos Aires.”
“Indeed, six months before midterm elections, pragmatism is a distant memory. A strategy that puts political decisions above everything has squashed any plan to boost exports, lower inflation and kick-start growth. Exacerbated by the pandemic and too few vaccines, a rudderless economy is having its revenge.”
“Social unrest, closed schools, packed hospitals, cabinet disputes and a deteriorating business climate loom. Nearly 70% of ICU beds are occupied. About 42% of Argentines live in poverty, up from 26% in 2017.” Jorgelina do Rosario and Patrick Gillespie report.
Mexico Metro Tragedy Sparks Anger, Questions
“The death toll from the collapse of an overpass on the Mexico City metro has climbed to 24, as crews worked to clear the wreckage – and anger grew over the latest in a string of catastrophes to hit one of the world’s largest mass transit systems.”
“Officials refused to speculate on the cause the disaster which sent two carriages crashing into passing traffic on the street below on Monday night. The city’s mayor, Claudia Sheinbaum, promised a thorough investigation by an outside firm and the federal prosecutor’s office – though she stood by the embattled director of the metro, Florencia Serranía.”
“‘We’re going to get to the truth. We’re not going to cover anything up. This is the request we’re making to the prosecutor’s office. There will be accountability,’ she said at a tense press conference on Tuesday…”
“The collapse followed a spate of calamities in the metro, including trains crashing into each other and a fire tearing through the system’s central command centre. It also occurred on Line 12 – the ‘Golden Line’ – which opened to fanfare as a modernization of Mexico City’s metro, but was beset by closures and construction problems.”
“Mexican social media resurfaced old tweets and posts from people warning something was amiss with the elevated metro line.” David Agren reports.
Three Key Trends Set to Dominate Consumer Behavior in Asia in 2021
“The coronavirus economic recovery, continued tech adoption and increased demand for health products are three trends set to dominate consumer behavior in Asia in 2021.”
“‘…Consumer sentiment is better now than it was back in January,’ Chinta Bhagat, managing partner for Asia at the firm, told CNBC’s “Street Signs Asia” on Wednesday. ‘Though this is not over yet.’”
“In its latest consumer insights report, which surveyed more than 15,000 people in 16 countries globally, L Catterton found consumers in Asia are the most optimistic about the prospect of an economic recovery.” Karen Gilchrist reports
MENA Energy Investments to Exceed $805bn by 2025
“Energy investments across Middle East and North Africa could exceed $805 billion over the next five years amid rising demand in the region and the revival of crude output in places such as Libya.”
“Renewables, which are increasing as a share of the power mix, particularly in the oil-exporting countries of the region, will rise to 40 per cent of the overall share. Cleaner energy will account for $250bn worth of investments in the utilities sector over the next five years.” Jennifer Gnana reports
What We’re Also Reading….
US Presses Taiwan Semiconductor to Send More Chips to US Car Makers
South China Morning Post
“The US Commerce Department is pressing Taiwan Semiconductor Manufacturing Co Ltd and other Taiwanese firms to prioritise the needs of US automakers to ease chip shortages in the near term, Commerce Secretary Gina Raimondo said on Tuesday.”
“Raimondo told a Council of the Americas event that longer term, increased investment was needed to produce more semiconductors in the United States and that other critical supply chains needed reshoring, including to allied countries.”
“‘We’re working hard to see if we can get the Taiwanese and TSMC, which is a big company there, to, you know, prioritise the needs of our auto companies since there’s so many American jobs on the line,’ Raimondo said in response to a question from a General Motors Co executive. ‘As I said, there’s not a day goes by that we don’t push on that.’”
“Raimondo added that ‘the medium- and long-term solution, though, is like very simply making more chips in America.’…Last week, Ford Motor Co warned the chips shortage may slash second-quarter production by half, cost it about US$2.5 billion and about 1.1 million units of lost production in 2021.” South China Morning Post reports.
As Cars Go Electric, China Builds a Big Lead in Factories
The New York Times
“…China is erecting factories for electric cars almost as fast as the rest of the world combined. Chinese manufacturers are using the billions they have raised from international investors and sympathetic local leaders to beat established carmakers to the market.”
“Success is far from assured. The players include start-ups, electronics manufacturers and other car industry rookies. They are betting that drivers in China and beyond will be willing to spend $40,000 or more for brands that they had never heard of.” Keith Bradsher reports
Emirates Plans to Operate at About 70% Capacity By Winter
“Emirates plans to operate around 70% of its normal capacity this winter thanks to an expected increase in international travel as countries ease coronavirus restrictions and reopen borders.”
“Emirates, the world's biggest long-haul airline before the pandemic, has been gradually rebuilding its network of 157 passenger destinations since flights were grounded in March 2020.”
“It is currently operating to around 120 destinations, though capacity remains limited due to the continued grounding of most of the airline's 118 Airbus A380 superjumbo. ‘We already have a plan to get back to almost 70% of our capacity to be recovered by winter 2021,’ Emirates Chief Commercial Officer Adnan Kazim told reporters on Tuesday.” Asharq Al-Awsat reports.
Uzbekistan and Saudi ACWA Power Sign Deal For Largest Wind Project in Central Asia
Tashkent Times and Arab News
“A wind farm project implementation agreement was signed on May 3 between the Ministry of Energy of Uzbekistan, the Ministry of Investment and Foreign Trade and the Saudi energy company ACWA Power, the Ministry of Energy said in a statement.”
“The project includes the development, construction and operation of a 1,500 MW wind power project in Karakalpakstan, which after commissioning will become the largest wind farm in the Central Asia region and one of the largest in the world, the statement added.” Tashkent Times reports.
“Saudi Arabia’s ACWA Power has struck a deal to build the largest wind power plant of its kind in Central Asia and one of the largest in the world.”
“The plant has a production capacity of 1500 MW in Karakalpakstan, in the northwest of Uzbekistan.”
“‘ACWA Power now produces about 42 gigawatts of renewable energy inside and outside Saudi Arabia, and looks forward to doubling this number in the future,’ Chairman Mohammed Abunayyan told Asharq Business.”
“The agreement with Uzbekistan aims at benefiting from high global demand for renewable energy and the company’s desire to expand in Asia and Africa, he said.” Arab News reports
Central Asia Warm Water Port Access Reliant on China
“A top trade priority for Central Asian leaders is access to a warm-water port. Whether they succeed any time soon appears to depend heavily on China.”
“Policy changes and new infrastructure are already easing Central Asia’s comparative isolation from world markets. But the lack of cost-efficient access to a deep-water port remains a major impediment to export growth. Projects in Pakistan and Iran represent two possible solutions to the port conundrum, but both options are saddled with complicating factors that raise questions about their viability.”
“Since China launched its Belt and Road Initiative (BRI) in 2013, Central Asian trade officials have expressed high hopes for the completion of a China-Pakistan Economic Corridor (CPEC), which has a price tag ranging as high as $50 billion. If fully implemented, CPEC could eventually connect Central Asian markets to the port of Gwadar in Pakistan near the Pakistani-Iranian border.”
“While Gwadar has been touted as a key part of the BRI, China’s involvement in the port predates the announcement of the grand infrastructure plan. Pakistan ceded managerial control to Chinese Overseas Ports Holding Limited in 2013 after China financed approximately 80 percent of the initial development cost. But the port project can’t operate in a vacuum; improvements to widen access to the facility are still needed. Planned Chinese investment in city infrastructure was estimated at $4.5 billion in 2016.” Nathan Hutson writes.