Emerging Markets

  • Great concern remains for Brazil and South Africa.

    In the EM Space, Concern Remains High for Brazil and South Afirca

    EM ended the week on a mixed note after posting strong post-FOMC gains. The bounce in risk seems likely to continue this week, with little on the horizon to derail it. Specific country risk remains in play, however, with heightened political concerns in Brazil and South Africa.

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  • Brazil's leadership is stealing the Emerging Markets' headlines.

    Brazil Leadership's Hot Seat is Getting Hotter

    In the EM equity space, China (+5.1%), South Africa (+3.8%), and Turkey (+3.6%) have outperformed this week, while Thailand (-0.7%), Qatar (-0.7%), and Colombia (-0.3%) have underperformed.  To put this in better context, MSCI EM rose 3.3% this week while MSCI DM rose 1.2%.

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  • South Africa's welfare system still faces many challenges.

    Despite Making Strides, South Africa's Welfare System Still Needs Reforms

    Twenty years ago, South Africa embarked on a bold strategy to renew its welfare system. This was part of a larger project to transform South African society to achieve peace and social justice and overcome the social divisions of the past.

    Significant policy and legislative achievements have been made, and a rights-based approach to social welfare has been promoted. Formal racial discrimination in access to services has been abolished. In addition, a nationally integrated single welfare system has been created for all South Africans.

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  • Lula da Silva helped to put Brazil on the Development Aid map.

    da Silva's Development Aid is a Brazilian Distant Memory

    Compared to China or India, Brazil is a relatively small player in development aid. Yet it has managed to make a mark in Africa and globally, especially under the leadership of charismatic Lula da Silva.

    From 2003 to 2010, Lula led an unprecedented shift in the country’s foreign policy towards the global South. He also helped elevate Brazil to the status of a global player.

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  • The BRICS are awash in debt jeopardizing their futures.

    Building Up Debt, BRIC by BRIC

    Over the past three decades, global interest in emerging markets has soared, and when the financial crisis of 2008 hit, emerging markets were largely thought to be the next engine of global growth.

    Insofar as they have complied with this investor aspiration over the past few decades, they have also adopted a negative aspect of the developed economies to which they aspired: corporate leverage. As the corporate emerging giants of the developing world have grown, so too have they issued debt at disproportionately faster rates.

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  • Argentina's motorists are now subsidizing the oil industry.

    When the Populace Subsidizes the Oil Industry

    Argentina offers one of the few places on earth where oil companies are not suffering from the full force of the collapse in prices.

    Argentina regulates oil prices, a policy originally intended to insulate the public from the whims of the market, protecting people from triple-digit crude prices. However, with the crash in prices since mid-2014, the effect of the regulation has reversed: motorists are now effectively subsidizing the oil industry.

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  • The Fed poses a risk to EM, but specific risks are also present.

    Gauging the Fed, and other Risks to Emerging Markets

    EM enjoyed an extended rally last week, and it should carry over to the early part of the week. The Wednesday FOMC meeting poses a risk to EM, especially if markets continue to price in a more hawkish Fed. The dot plots and press conference will be very important. BOE and the Norges Bank meet this week, with the latter expected to deliver a 25 bp rate cut to 0.5%.

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  • State-owned diamond mines may not maximize government revenues.

    Is State Ownership of Zimbabwe's Diamond Mines Misguided?

    Zimbabwe, like many African countries, faces an ongoing struggle to secure fair compensation for its mineral wealth. The question of how to maximise government revenues from the mining sector is a complex matter.

    However, turning the sector over to state-owned mining companies has rarely optimised mining revenues. What’s needed instead are improvements in management practices, regulations, regulatory capacity and the investment environment.

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  • Traditional agricultural development in Africa is inadequate.

    African Agricultural Development Needs a New Approach

    After being out of fashion for a long period, agriculture has been coming back into the spotlight again as part of development policy. Amid rising concerns about food insecurity and high expectations from agribusiness, policymakers have started to emphasise the importance of agriculture as a source of employment.

    Across Africa interest in agricultural investment as a source of employment growth and profit is growing. In South Africa, the National Development Plan identifies agriculture as the potential basis of one million new jobs.

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  • Nigeria's external challenges are substantial and deteriorating.

    The IMF is not Happy with Nigeria

    As Nigeria’s economic challenges are rising, the IMF has been increasingly vocal. What is really needed are policies that are in the interest of most Nigerians.

    According to the International Monetary Fund (IMF), Nigeria’s external challenges are substantial and deteriorating. Due to the reliance on oil revenues, the general government deficit doubled to 3.3 percent of the GDP in 2015. Meanwhile, exports plunged 40 percent, which caused the current account deficit to climb to 2.4 percent of GDP.

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