Emerging Markets Monitor - June 20
Leftist Wins Colombia Presidency, Globalization Not Declining: Maersk, MBS Regional Tour Pre-Biden Visit, HK Crypto Platforms Freeze Accounts, Zambia Debt and the IMF
The Top 5 Stories Shaping Emerging Markets from Global Media - June 20
Leftist with Plans to Upend Economy Wins Colombia Presidency
Wall Street Journal
“Gustavo Petro, once a member of a leftist guerrilla group that fought the Colombian state, was on Sunday elected president after pledging to battle inequality and poverty and insert the state squarely into the economy of a country that is Washington’s closest ally in Latin America.”
“A 62-year-old senator who in the 1970s and ’80s was in the M-19 rebel group, Mr. Petro is the first leftist and first former insurgent to be elected president in Colombia, a country with a long history of guerrilla conflict. Francia Márquez, a 40-year-old human-rights activist, will become vice president, the first Black politician and second woman to hold that post.”
“With nearly all voting stations reporting, Mr. Petro won nearly 11.3 million votes, or 50.4% of the total. Rodolfo Hernández, a 77-year-old provincial real estate mogul who didn’t hold rallies or give speeches, received more than 10.5 million votes, or 47.3%.”
“‘The government of hope has arrived,’ Mr. Petro told supporters at a packed concert arena here in the capital on a rainy Sunday night. In a 40-minute speech, he promised to unite a polarized country and develop a new kind of capitalism that he asserts would bring prosperity and cut into income inequality.”
“….With nearly 22 million votes cast, the results were close, with just 700,000 votes separating the two men in this country of 50 million. As the runner-up, Mr. Hernández is given a seat in the Senate, where he can press for a more austere state as he promised voters via TikTok and Facebook Live during his campaign.”
“With Mr. Petro’s victory, all but one of Latin America’s major countries would be led by anti-establishment leftists, some of which have frosty relations with the Biden administration. Polls in Brazil show that the former leftist president, Luiz Inácio Lula da Silva, leads the right wing populist president, Jair Bolsonaro, ahead of October’s presidential election.”
“Until now, Colombians have elected centrist or center-right presidents, many of them advocates of a strong security presence and a robust role for the country in fighting the cocaine trade in alliance with the U.S.” WSJ reports.
Globalization Is Not Going into Reverse, Maersk Chief Says
Financial Times
”Globalisation is not unravelling but the era of ever greater reductions in barriers to trade is at an end, according to one of the shipping world’s top executives.”
“Søren Skou, chief executive of AP Møller-Maersk, the world’s second-largest container shipping group, told the Financial Times that he saw little evidence of US or European manufacturers bringing production back home. Instead, they were looking for additional suppliers around Asia.”
“‘Global trade is where it is. It’s going to grow more or less with GDP,’ he said. ‘It’s not liberalising more, so we’re not going to see [even] more growth. It’s also not going sharply in reverse.’ The comments from the Maersk boss, whose company is a bellwether for global trade as it transports more than one in six containers across the oceans, contrast sharply with the gloom of many business executives who believe globalisation is under attack, particularly from populist politicians.”
“Last month data provider Sentieo found that mentions of nearshoring, onshoring and reshoring in company results meetings and investor briefings were at their highest level since at least 2005. Skou acknowledged the impact of populist political movements and the lack of new trade deals in the US but underscored that he saw no dramatic shift in supply chains.”
“‘We don’t see our customers moving production back to Europe. They’re spreading it around in Asia,’ Skou said. ‘It’s very difficult to see in the short term or maybe even the mid term that you will see a dramatic change in the way the world produces consumer goods.’”
“Maersk is expecting container shipping volumes to be lower in the first half of this year as world economic growth stalls. But thanks to record freight rates, congestion in ports and supply chain woes, the Danish group is forecasting record earnings in 2022.” The FT reports.
Saudi Crown Prince to Make Regional Tour Ahead of Biden Visit
Bloomberg
“Saudi Arabia’s de facto ruler is expected to hold meetings in Egypt this week at the start of a rare regional tour that will also seek to build bridges with former rival Turkey.”
“Crown Prince Mohammed bin Salman’s trip comes ahead of the first visit by U.S. President Joe Biden to Saudi Arabia next month for wide-ranging talks including on energy, investment, security and Iran. Before heading to Turkey, the prince will stop in Jordan, Saudi newspaper Okaz reported. Saudi Arabia has not officially commented on the trip.”
“…Turkish President Recep Tayyip Erdogan said last week he would welcome the Saudi crown prince in Ankara on June 22. That leg of the tour could deliver a boost to Turkey’s deteriorating economy. It comes after years of regional rivalry, exacerbated by the killing of Washington Post columnist Jamal Khashoggi at the Saudi consulate in Istanbul in 2018.”
“Erdogan is working to improve relations with Riyadh and other regional capitals as he aims to boost trade and lure investment. Turkish inflation has surged above 70%, threatening to undermine support for the longtime Turkish leader and his party ahead of elections scheduled for next year.” Sylvia Westall reports.
Hong Kong Crypto Platforms Freeze Accounts as Turmoil Deepens
Nikkei Asia
“A trio of Hong Kong cryptocurrency platforms have suspended client withdrawals on the back of a global sell-off that has plunged the digital currency sector into turmoil.”
“On Sunday, crypto trading exchange Hoo.com announced it was stopping all transactions after being hit by a heavy volume of redemption requests, just days following the collapse of Singapore-based crypto hedge fund Three Arrows Capital.”
“Hoo later said in a blog post that it would restart transactions within 72 hours so it could ‘process a large number of users' withdrawal demands and ensure the safety and accuracy of withdrawal assets.’”
“The Cayman Islands-registered company, launched in 2017, has seen its trading volume drop 10% in the last 24 hours, according to crypto index nomics. Hoo.com's problems come after Hong Kong crypto lender Babel Finance also suspended redemptions on Friday, citing ‘unusual liquidity pressures’ and market volatility, after raising $80 million in fresh fundraising only last month.”
“A third Hong Kong crypto savings platform Finblox -- backed by venture capital group Sequoia Capital -- said Friday it would cap daily withdrawals at $500 and stop registering new users. On Monday, Finblox said it was considering legal recourse to address the squeeze.” Nikkei Asia reports.
IMF in $1.4 Billion Bail Out of Zambia After Debt Default
Africa News/AFP
“The IMF's financial support to Zambia to bail out a massive debt that has put the country in default should be concluded by early September, the financial institution said Wednesday.”
“In 2020, the southern African country became the first on the continent to default on its estimated $17.3 billion foreign debt during the pandemic. In December, the government secured a $1.4 billion bailout from the International Monetary Fund, but the three-year agreement in principle was given in exchange for the government's commitment to undertake deep economic reforms.”
“Zambia is due to start a meeting with its creditors on Thursday to begin restructuring its debt and unlocking financing. ‘The good news is that all major creditors are ready to start discussions. This brings us closer to the IMF programme,’ Finance Minister Situmbeko Musokotwane said.”
“In past negotiations, previous governments have failed to unlock bailouts. However, since the election of President Hakainde Hichilema last year, progress has been made in restoring relations with creditors.” Africa News/AFP reports.
“The secret of genius is to carry the spirit of the child into old age, which means never losing your enthusiasm.” - Aldous Huxley