Emerging Markets Monitor - April 19
Israel Launches Limited Strike on Iran, Argentina Bonds Pop, Zambia: Era of China Debt Over, Ukraine to Get New Weapons from U.S, India Elections Kicks Off
The Top Stories Shaping Emerging Markets from Global Media - April 19
Israel Launches Calibrated Retaliatory Strikes on Iran
Financial Times
“Israel launched a strike against Iran in the early hours of Friday in what appeared to be a limited, targeted retaliation to last weekend’s drone and missile attack by Tehran.”
“Both sides were muted in their response to the assault, signaling that neither country wanted a further escalation that risked triggering a full-blown regional conflict.”
“Iranian commanders said there was no damage and that explosions near the central city of Isfahan were caused by air defence batteries taking out unidentified objects. Iranian officials made few public comments about the attack.”
“Israel, which spent six days weighing a response to Iran’s missile barrage last weekend — the first direct strike against Israel from Iranian soil — made no public comment about the strike.”
“A senior EU official described Friday’s strike as ‘a very limited attack’, with ‘no human consequences or huge damage.’ They added: ‘Of all the options, it is clear that this is a very minor action on the side of Israel.’ Oil prices jumped in the immediate aftermath of the attacks before giving up most of their gains as traders bet against further escalation.” The FT reports.
Argentine Bonds Pop on Economy Minister Washington Speech
Bloomberg
“Argentina’s Economy Minister Luis Caputo told investors that President Javier Milei is committed to a dramatic fiscal adjustment, helping fuel a rally in the nation’s bonds late on Wednesday.”
“Caputo’s comments were made at a private seminar led by JPMorgan Chase & Co. during the International Monetary Fund’s spring meetings in Washington... Benchmark dollar bonds due in 2030 rose 2.9 cents to trade at about 56 cents on the dollar, according to data compiled by Bloomberg. The move is the biggest one-day jump since the notes were issued in 2020. It was the best performance in emerging market debt, which largely rebounded from a massive selloff earlier in the week.”
“Caputo told his audience that Argentina’s fiscal adjustment is bigger than is generally understood locally, according to two people in attendance, who asked not to be named since the event was private. The process involves more ‘chainsaw’, the symbol for slashing a bloated budget, than ‘blender’, the process of cutting costs by not raising wages and pensions in line with inflation, Caputo said, according to the people.”
“…Investors have expressed concern about the government’s weakness in congress, where Milei’s party holds 15% of seats, but Caputo sounded confident that they would hit their fiscal targets with or without the bill’s approval, according to one of the people.”
“In four months in office, Caputo has achieved fiscal surpluses in January and February, something not seen in the South American economy in over a decade. Monthly inflation cooled for three consecutive months, though annual rates remain close to 300%. Milei’s shock therapy has hit consumption, and the economy is forecast to suffer a sharp recession this year.”
“Milei’s government has said it doesn’t rule out the possibility of requesting a new program with the Fund, with fresh funds in order to exit capital controls.” Bloomberg reports.
Zambia Says the Era of Too Much Debt From China Is Over
The Wall Street Journal
“Zambia is ready to move on from a failed economic development model based on borrowing billions of dollars of debt from creditors like China, the country's finance minister said.”
“‘The level of debt that Zambia acquired from China was way, way too high,’ Minister Situmbeko Musokotwane said in a Thursday interview. Zambia has been negotiating a $17 billion debt restructuring with creditors including China and Wall Street bondholders since November 2020, the outcome of which is widely seen as a bellwether for how Beijing will act now that it the biggest lender to developing countries, outweighing Western powers that dominated such matters for more than 50 years.”
“Infighting among creditors has led to delays. China has often dragged its feet in debt negotiations and blocked bondholders’ deal to salvage their investments in defaulted Zambian debt. China relented in February, paving the way forward for the country to exit default and emerge from its three-and-a-half year debt restructuring.”
“‘Already you can see that we are removing debt from our development model,’ he said.” Alexander Saeedy reports.
Ukraine on Verge of Getting Large, New Supply of U.S Weapons
CBC
“The U.S. Congress has taken a long-awaited leap toward rearming Ukraine, setting up votes Saturday that will have myriad international consequences. An informal coalition of like-minded lawmakers from both parties in Washington stuck together and busted through a procedural barrier that had been blocking a vote for months.”
“It happened after the Republican Speaker Mike Johnson declared he was willing to risk the wrath of the far right and its threats to oust him….After more than six months of stasis, the House of Representatives finally got to weigh in on the issue Friday. When it did, the initial result was overwhelming, with three-quarters agreeing to advance the package.”
“Four bills that arm American allies and sanction U.S. rivals are now scheduled for final votes in the chamber on Saturday afternoon. The bills would supply weapons to Ukraine, Taiwan and Israel, sanction Iran, Hamas and Russia, and potentially ban the popular social media site, TikTok.”
“This 316-94 vote suggests the bills have enough support to pass the House, then the Senate, and become law. Adoption is not guaranteed, but highly likely. The package actually received slightly more votes from the minority Democrats than from Republicans, something that rarely happens in Congress.” Alexander Panetta reports.
India Kicks Off Mammoth, Six Week-Long Election
The Guardian
“India, home to more than 1.4 billion people, will begin its mammoth election on 19 April. The country prides itself on the scale of its parliamentary elections, ensuring that even those in the remotest corners and highest peaks of the vast country are able to cast their vote.”
“Due to its colossal geography, voting is not on a single day but is instead split into seven phases across the different states, lasting nearly six weeks in toal. It will take place using electronic machines in more than a million polling booths, and the Election Commission of India will deploy 15 million people to oversee the operation. Voting will close on 1 June and results will finally be counted and declared on 4 June.”
“…This time round India will have 969 million eligible voters – more than 10% of the world’s population. They represent the largest electorate anywhere and will include 18 million first-time voters.”
“…The Hindu nationalist policies of Modi and the BJP government are widely seen to have reshaped the political and cultural landscape of the country over the past decade, shifting it away from the secularism enshrined in the constitution – which guarantees equality for all religions – and towards Hindu majoritarian rule.”
“As the world’s most populous country, with one of the fastest growing economies, the outcome of the election will also have an impact internationally. India has become an increasingly important partner for countries including the UK, the US and France, which have all recently signed deals and pursued closer relationships with Delhi as a counterbalance to China.” The Guardian reports.
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