Emerging Markets Monitor - July 18
China Braced For New Lockdowns, EU Signs Gas Deal With Azerbaijan, Pakistan New Turmoil, Indian Traders Set for Nationwide Strike, BHP Rattled by Chile Tax Hikes
The Top 5 Stories Shaping Emerging Markets from Global Media - July 18
China Braced For Renewed Lockdowns as Omicron Sub-variant Spreads
Financial Times
“China is at risk of more frequent lockdowns and mass testing as officials struggle to contain the spread of the highly transmissible BA.5 Omicron subvariant despite the damage pandemic restrictions have already wrought on the world’s second-biggest economy.”
“Forty-one Chinese cities are under full or partial lockdowns or district-based controls, covering 264mn people in regions that account for about 18.7 per cent of the country’s economic activity, according to an analysis released on Monday by Japanese investment bank Nomura.”
“That marked a deterioration from the situation a week ago, when curbs were imposed in 31 cities covering 247.5mn people and representing 17.5 per cent of the economy. China’s zero-Covid policy, which aims to eradicate coronavirus completely, has heaped pressure on officials to stamp out chains of transmission and hampered economic growth.”
“The country narrowly escaped a contraction in the second quarter, expanding 0.4 per cent year on year in the three months to the end of June. That was down from 4.8 per cent in the first quarter, data showed on Friday, reflecting the sweeping costs of the recent Shanghai lockdown, supply chain disruptions and reduced mobility nationwide.” The FT reports.
EU Signs New Gas Deal with Azerbaijan Amid Fears of Russia Cut-Off
CNBC
“The EU signed a new gas deal with Azerbaijan on Monday, as officials scramble to secure future supplies amid growing fears about a Russian cutoff.”
“European officials have been preparing for a potential complete shutdown of gas supplies from Russia in the wake of Moscow’s invasion of Ukraine. Russia has for several years been Europe’s most important source of natural gas, but there’s now a firm push by Brussels to reverse this.”
“European Commission President Ursula von der Leyen and Europe’s energy chief, Kadri Simson, were in Azerbaijan on Monday to finalize the deal. In a statement, the commission said Azerbaijan had committed to delivering at least 20 billion cubic meters to the EU annually by 2027.”
“…Russia has denied it is using gas as a weapon against the West, however supplies have fallen by more than 60% in recent weeks. In addition, the shutdown of the Nord Stream 1 pipeline — a crucial transit point of Russian gas to Germany and beyond — for maintenance work has added to concerns that Moscow could potentially end its supplies of gas to the bloc altogether.”
“Azerbaijan, which borders Georgia, Turkey, Armenia, Russia, Iran and the Caspian Sea, started exporting natural gas to Europe via the Trans Adriatic Pipeline at the end of 2020. At the time, Azerbaijan said it planned to send 10 billion cubic meters of gas to Europe every year, mostly to Italy, but also to Greece and Bulgaria.” CNBC reports.
Pakistan Politics In Fresh Turmoil After Punjab By-Elections
Bloomberg
“Former Pakistan premier Imran Khan called for early national elections after his party swept the by-elections in the country’s most populous state, underscoring the risks the government faces as it seeks a bailout from the International Monetary Fund.”
“Khan was ousted in April following a protracted political drama that saw Shehbaz Sharif take over as prime minister. Since then Khan has held massive public rallies demanding the country head to the ballot ahead of the scheduled October 2023 dates. He’s now touting Sunday’s electoral win as a sign of popular support for his party.”
“‘The only way forward from here is to hold free & fair elections under a credible ECP,’ Khan said in a tweet, referring to the Election Commission of Pakistan. ‘Any other path will only lead to greater political uncertainty & further economic chaos.’”
“Khan’s Pakistan Tehreek-e-Insaf has won 15 out of 20 seats up for grabs in the Punjab state legislature and Sharif’s Pakistan Muslim League-Nawaz got four seats, Punjab Election Commission director Abdul Hameed said by phone.”
“Since coming to power, Sharif has been pushed to take unpopular decisions -- including raising energy prices and taxes as well as reducing spending -- to revive its bailout program with the IMF. The country secured a $1.2 billion loan from the multilateral lender last week to shore up dwindling foreign exchange reserves.” Bloomberg reports.
Tweet of the Day - GCC and Middle East Energy Producers and Putin’s Winter Storm
Indian Traders, Shopkeepers Plan Nationwide Protest on Tax Hikes
Reuters
“Indian traders and shopkeepers will hold a nationwide protest next week against a hike in taxes on a range of products and services, including food grains and household items, that went into effect on Monday, a top official of a leading traders' group said.”
"‘The 5% tax on a range of food products - which remained tax free so far - and hike in rates on other household items has increased the inflation burden on the public and traders,’ said Pravin Khandelwal, president of the Confederation of All India Traders, which represents more than 10 million small shopkeepers and wholesalers.”
“He said the group's members would launch a nationwide series of protest meetings on July 26, starting in Bhopal, a state capital in central India and a stronghold of Prime Minister Narendra Modi's ruling Bharatiya Janata Party.”
“Small traders and shopkeepers are a key constituency for Modi, who introduced the Goods and Services Tax (GST) system in 2017 to replace about 20 federal and state taxes and to help unify Asia's third-largest economy.” Reuters reports.
Global Miner BHP May Reconsider Chile Investments if Tax Hikes Move Forward
Mining.com
“Global miner BHP Billiton is likely to reconsider its investment plans in Chile, the world’s No. 1 copper producer, if the government moves ahead with mining tax hikes, according to a report on Sunday.”
“The company was quoted by El Mercurio newspaper as saying in a statement that higher taxes would make Chile more expensive than other top mining jurisdictions like Australia, Canada and neighbouring Peru.”
“‘We have serious concerns with regards to the new royalties,’ the company said. ‘If the proposed royalty (hike) materializes, we would have to reevaluate our investment plans for Chile.’”
“BHP is a major player in Chile, where it operates the world’s largest copper mine, known as Escondida. In April, BHP said it was willing to invest another $10 billion in Chile over the years, but only if the regulatory and fiscal conditions were appropriate.”
“Chilean Finance Minister Mario Marcel has said that raising mining royalties is his ‘priority number one’ and the top goal of the left-wing administration that was inaugurated earlier this year. The government wants to use the tax income to fund social programs.” Mining.com reports.
“Let me not pray to be sheltered from dangers,
but to be fearless in facing them.
Let me not beg for the stilling of my pain, but
for the heart to conquer it.”
― Rabindranath Tagore, Collected Poems and Plays of Rabindranath Tagore