Frontier Markets Weekly, January 21st 2023

Uganda looks to Turkey | Vietnam’s president steps down | Azerbaijan tests Russia’s resolve | US firms sap LatAm talent

 By Dan Keeler, Ken Stibler, and Noah Berman 

Hey frontier friends, if you haven’t already listened in, check out this week’s podcast with Morgan Stanley‘s co-head of emerging markets debt, Marshall Stocker. Here’s a taste: “Democracy is good for emerging markets. It’s bad for developed markets. That’s what the data shows us.”

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Yellen in Africa. US Treasury Secretary Janet Yellen kicked off a 10-day visit to Africa this week with a speech in Senegal that called out Russia for the stress its war on Ukraine was putting on African nations, and China for its reluctance to offer debt relief to struggling African economies. Her trip, which will include stops in Zambia and South Africa, is aimed at demonstrating how the US government and businesses can support the continent. 

In Senegal’s capital Dakar Yellen met with a group of female entrepreneurs, Axios reports. In Zambia, she is expected to address the country’s debt crisis. And in South Africa, she will address US efforts to assist the country with its transition to renewable energy.

Janet Yellen with women entrepreneurs in Dakar, Senegal. Photo: Annika Hammerschlag, VoA

The trip comes as the US attempts to counter growing Chinese and Russian influence. China owns 12% of Africa’s public and private external debt, according to London-based think tank Chatham House, significantly more than any other lender. And Russia has won influence with its mercenary Wagner Group, which some African countries have brought in to enforce stability.

Uganda abandons Belt and Road project. Uganda canceled a deal this week that would have built a railway from its capital, Kampala, to the Kenyan port city of Malaba. The $2.3 billion contract with China Harbour Engineering Company, a subsidiary of a large Chinese state-owned construction business, will be replaced by a deal with a Turkish construction firm.

Uganda has grown frustrated with China after nearly a decade of financing delays, including two years without a response from the country’s powerful Export-Import Bank, the South China Morning Post reports.

A standard gauge railway linking the port of Mombasa in Kenya with three other East African countries through China’s Belt and Road Initiative might not proceed as planned. Photo: Bloomberg

The move marks the latest challenge for China’s troubled Belt and Road Initiative (BRI), an ambitious infrastructure development project that has been criticized for creating debt traps for low-income countries. Kenya joined BRI in 2017, and Uganda joined in 2019.

Sudan and South Sudan pursue joint security operations to secure porous border. Sudan’s military ruler, Abdel Fattah al-Burhan, and South Sudan’s President Salva Kiir agreed this week to create a “joint security force” to combat weapons smuggling and crime along their shared border. In a December report, the UN estimated that nearly 20,000 people had been displaced in the region since August due to violence between armed groups and military forces.


Sri Lankan debt plan earns Indian support. India told the IMF it would support Sri Lanka’s restructuring plan, bringing the embattled island economy’s debt saga one step closer to resolution. The IMF requires support from Sri Lanka’s bilateral creditors before it unlocks an agreed-upon $2.9 billion bailout.

Colombo still needs to earn the support of its other creditors, including JapanChinaand the so-called Paris Club group of major lender nations. Sri Lanka’s President, Ranil Wickremesinghe, who doubles as the country’s finance minister, said that debt negotiations with Japan concluded last week.

Sri Lanka’s Prime Minister Dinesh Gunawardena with the Chinese delegation. Photo via

Analysts expect China to be the deciding factor in Sri Lanka’s receipt of the IMF bailout. This week, after a meeting with a Chinese delegation Wickremesinghe reportedly said Sri Lanka would “have good news soon.”

Kazakhstan’s president dissolves parliament. Kazakh President Kassym-Jomart Tokayev announced that he had dissolved one of the houses of parliament this week, with new elections to be held in two months. Tokayev had previously said that he would dissolve parliament after cementing his power in a snap presidential election last November.

Tokayev claims he’s looking to modernize the country’s political system, but analysts have said his dissolution of parliament follows an authoritarian playbook, Al Jazeera reports.

Kassym-Jomart Tokayev during his inauguration ceremony in November 2022. Photo: Press service of the President of Kazakhstan

Kazakhstan also made waves this week with a round of visa restrictions that is expected to make it more difficult for Russians to stay in the country. The new rules will prevent citizens of the Eurasian Economic Union, which includes Russia, from staying in Kazakhstan more than 90 days in a 180-day period. Kazakhstan had become a popular destination for Russians fleeing last September’s partial military mobilization.

Corruption crackdown claims Vietnam’s president. Vietnam’s Communist Party accepted the resignation of President Nguyen Xuan Phuc on Wednesday, the latest casualty of Hanoi’s clampdown on corruption.

Nguyen Xuan Phuc in November 2022. Photo: Lillian Suwanrumpha/AFP

State media said he allowed officials in his government to act with impunity. His resignation had been expected after two deputy prime ministers were dismissed earlier this month, France24 reports.

Some Vietnamese officials have voiced concern that the disruption caused by the resignation could dampen foreign investor appetite, Reuters reports. While a new president is unlikely to alter Vietnam’s emphasis on attracting business, the change could point to growing repression of opponents of the Communist Party, the BBC reports.

Middle East

Enhanced dollar controls slam the battered Iraqi economy. Iraq’s economy is reeling after stricter controls on wire transfers targeting Iran led to a sharp rise in import costs and rapid depreciation in the dinar, reports the Wall Street Journal’s David S. Cloud. The New York Fed began enforcing stricter controls on international dollar transactions by commercial Iraqi banks in November to curb money laundering and illegal transfer of dollars to heavily sanctioned countries such as Iran.

Iraqis protested near the central bank in Baghdad as the currency weakened in early January. Photo: Ahmed Saad/Reuters

Iraqi officials, bankers and importers blame the new system for a financial jolt that is exacerbating already severe economic woes. US officials said the tighter rules, which bring Iraq in line with global standards for transparency, were implemented after two years of coordination with the central bank.

Since the procedures went into effect, 80% or more of Iraq’s daily dollar wire transfers, which previously totaled over $250 million some days, have been blocked due to insufficient information about the funds’ destinations or other errors.


Azerbaijan tests Russia’s resolve in the Caucasus, highlighting Moscow’s waning influence on its periphery. Azerbaijan is blocking Armenian access to its contested Nagorno-Karabakh enclave and testing Russia’s resolve in the process, reports the NYTimes’ Anton Troianovski. The conflict is flaring up again two years after Moscow stepped in to end a war over the enclave, but while Armenia is part of the Russian-led military alliance and hosts a Russian military base, the Kremlin has not stepped in again to aid its ally.

Azerbaijani soldiers at a checkpoint between Nagorno-Karabakh and Armenia. Photo: Tofik Babayev/AFP/Getty

In late 2020, Russia brokered the end of a war in the Caucasus between Azerbaijan and Armenia, and placed 2,000 Russian peacekeeping troops between the two sides, positioning Vladimir Putin as a peacemaker and highlighting Russia’s continuing influence in the former Soviet sphere.

Russia’s invasion of Ukraine has drained its resources, as FMN covered last week, and weakened its hold on its near-abroad in Eastern Europe, Western Asia, and now the Caucasus. Turkey and Iran have benefited from the situation as important sources of trade and weapons for Moscow, while undermining Russian influence in the Caucasus.

Fall in Hungary’s overheated property market exposes finance-sector vulnerabilities. Hungary’s housing market, the fastest growing in the EU for the past decade, is finally seeing lower prices, Bloomberg reports. Recent single-digit price contractions come on the heels of a 25% rise in house prices in 2022 fueled by record low interest rates, housing subsidies and a jump in wage growth.

The trend has begun to reverse as energy costs and public spending led to Europe’s fastest inflation and forced the central bank to raise interest rates to 18%, crimping demand for mortgages.

Hungary’s central bank says the country’s banks are facing greater risks because of the overvaluation in the housing market. An S&P report from November 2022 found that Hungarian banks projected the EU’s highest mortgage delinquency rates.

Latin America

US tech outsourcing saps talent from Latin America’s startups. Startups across Latin America are struggling to attract and retain tech workers as US outsourcing creates a shortage, Rest of the World’s Jimena Ledgard, Sandra Pérez, and Florencia Pagola report. US tech firms’ search for cheap programming talent accelerated during the pandemic and continues as market conditions force firms to cut costs.

Photo: Camillo Freedman for Rest of World

US tech layoffs aren’t easing the pressure either, with 69% of employers across the region reporting IT talent shortages in 2022. This has forced Latin American startups to become creative and competitive in training junior programmers while poaching more senior talent.

The labor shortage is a serious challenge for the region’s startups which have seen record levels of VC investment over the past few years. For firms in smaller markets like Uruguay and Peru, the pressures are immense, however in other parts of the region, alternative compensation like equity grants are becoming less taboo.

Chile rejects mega mining project over environmental concerns. Chile’s government has rejected a $2.5 billion iron and copper mining proposal on environmental grounds. The project would have included open-pit mining, processing and desalination plants, and a port, 30km from a Humboldt penguin reserve. 

An environmental activist protests the Dominga copper and iron mining project in Santiago, Chile. Photo: Iván Alvarado/Reuters

The decision was celebrated by President Gabriel Boric’s left-wing base and marked an end to the controversial project, which previously led to resignations in Michelle Bachelet’s government in 2017 and a failed impeachment of previous president Sebastian Piñera for corruption related to the deal.

Colombia proposes Latam corporate tax accord to supplement global tax effort.Colombia’s finance minister Jose Antonio Ocampo said his government hoped to create a minimum tax deal for Latin America in an interview with Reuters on the sidelines of the World Economic Forum this week. Ocampo said the recent OECD-brokered deal on minimum global tax levels to prevent multinationals locating in the cheapest jurisdiction for taxes did not adequately reflect the interests of many developing economies.

In a speech at the World Economic Forum in Davos, Ocampo said the deal applied only to large multinationals. Ocampo plans to pursue the deal with Brazil and Chile initially at a Mexico meeting of interested finance ministers in July.

Guess Post: José Martinez Sanguinetti

Lula set to blaze a new trail for Latin American leaders. As political turmoil and social unrest spread throughout Latin America, pragmatism is needed to confront populist extremism and find a long-term solution, José Martinez Sanguinetti writes. Brazil’s new president, Luis Inacio Lula da Silva, may be in the perfect position to provide that pragmatism.

If he can pull it off, Lula could bring his opponents out of the streets and back to the negotiating tables—and generate higher growth and economic wellbeing in the process. And by initiating a new period of political consensus built around the center of the spectrum Lula could blaze a trail that other Latin American leaders could follow. 

So … no pressure!

What we’re reading

China in Ethiopia: A new flow of investments? (The Africa Report)

Tanzania: Will new central bank boss turn around the country’s fortunes? (The Africa Report)

World Food Program chief: Somali famine slowed, not avoided. (AP)

Kenya and Nigeria tread a fine line after Ghana debt default, analysts say. (The Africa Report)

Kenya to track mobile money transactions in tax cheats purge. (Business Daily

Morocco stands to gain as Western Sahara cause fades in Washington. (The Africa Report)

South African businesses turn to diesel and solar panels as Eskom crisis deepens. (FT)

Bangladesh ‘should redirect subsidy money to help poor.’ (Nikkei)

Pakistan elections seen imminent after assembly dissolutions. (Nikkei)

The likelihood of a Pakistan debt default this year has increased substantially. (FrontierView)

South China Sea keeps Philippines’ Marcos up ‘night and day.’ (Nikkei)

Timor-Leste ‘has no obstacles’ to joining ASEAN. (Nikkei)

China returns as Thailand’s top investor through electronics and EVs. (Nikkei)

Influx of Russians gives Georgia’s economy a $2b windfall. (Radio Free Europe)

Russian buyers help to propel Dubai property sales to record. (Bloomberg)

Western banks struggle to exit Russia after Putin intervention. (FT)

Unrest and unsettled leaders bode ill for the Middle East in 2023. (FT)

Saudi Arabia ‘open’ to discuss trading in non-dollar currencies. (Al Monitor)

Saudi Arabia says a Palestinian state is key to ties with Israel. (Bloomberg)

Romania and Bulgaria to build two hydropower plants on Danube. (Balkaninsight)

Bulgaria secretly supplied Ukraine fuel and ammunition in early months of war. (The Guardian)

Dozens of Russian officials publicly denounce Navalny’s treatment in prison. (NYT)

US warms to helping Ukraine target Crimea. (NYT)

The rise of Romania’s ‘communist tourism.’ (Radio Free Europe)

Paraguay trade deficit reached $1.3b in 2022 speared by a 16% increase in imports. (Mercopress)

Maduro admits millions of Venezuelans are malnourished. (Mercopress)

Venezuela street protests return as inflation erodes wages. (Bloomberg)

Ecuador tried to curb drilling and protect the Amazon. The opposite happened. (NYT)

Colombia defends minister who led Guatemala corruption inquiry as row deepens. (The Guardian)

Colombian police seize weapons in ‘important blow’ to armed group. (Al Jazeera)

Guatemala widens prosecutions against former anticorruption officials. (WSJ)

Latin American exports ‘lose momentum in 2022 and 2023.’ (Mercopress)

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