By Dan Keeler, Ken Stibler, Noah Berman and Nojan Rostami
Protests erupt in Senegal after sentencing of opposition leader
Protestors and state security forces clashed in Senegal this week after one of the country’s opposition leaders was sentenced to two years in prison. At least 16 people have died since the protests broke out last Thursday, CNN reports.
- Senegal government cuts mobile internet access amid protests (Reuters)
The protests pose the greatest threat in decades to the Muslim-majority democracy long lauded as a beacon of stability, CNBC reports. The opposition leader, Ousmane Sonko, was convicted of corrupting young people, a result that could disqualify him from participating in next year’s general elections in which he was a favored candidate among Senegalese youth.
Protestors are concerned that incumbent President Macky Sall will not allow serious challengers as he runs for a constitutionally-questionable third term, according to the Council on Foreign Relations. Sonko placed third in 2019’s presidential election, accruing 15% of the vote, and has said he intends to run in 2024.
DRC and Angola to finalize oil deal with Chevron
The Democratic Republic of the Congo and its southern neighbor Angola are finalizing an agreement to split up an offshore oil block that they have been fighting over for 50 years. Under the proposed agreement, DRC and Angola would each take 30% of the block, and the US company Chevron, which operates the block, would take 40%, Reuters reports.
As part of the agreement, Angola’s state-owned oil company would write off $200 million in debt that DRC’s state-owned oil company owes it, Bloomberg reports. A completed deal could also facilitate negotiations between the two states over other disputed offshore oil blocks that Angola has controlled for the past half-century.
The deal comes amid growing international pressure on the DRC to rein in its carbon-intensive energy projects. Last year, the US and several environmental groups denounced the DRC for auctioning oil blocks in the east of the country that, if developed, would diminish the country’s peatlands and release millions of tons of carbon dioxide into the atmosphere.
- Listen in to our podcast with investor Matthias Pitkowitz who is hoping to persuade the DRC not to extract the oil under its rainforest.
Africa’s cocoa giants ‘want to be paid for sustainability’
Côte d’Ivoire and Ghana, the world’s two largest cocoa producers, want to be compensated for the costs of complying with EU rules on child labor and deforestation, Bloomberg reports. At the fourth annual Africa CEO forum this week in Abidjan, the economic capital of Côte d’Ivoire, the head of a group representing cocoa producers in the two countries said they were still assessing the financial impact of the new EU rules aimed at ensuring cocoa production doesn’t cause deforestation or employ child labor.
Fellow cocoa producers Cameroon and Nigeria were also involved in the talks, Bloomberg reports.
Also at the conference, Gabon’s prime minister said his government was targeting investment in critical industries including mining, agribusiness and green energy, and the CEO of Kenya’s second-largest publicly traded investment firm warned that higher taxes and a lack of access to US dollars could spook investors.
And Côte d’Ivoire announced three deals worth a total of $450 million to increase sustainable economic growth, job creation and private sector development, North Africa Post reports.
Kazakhstan turns to China amid Russia sanctions
Russia has been Kazakhstan’s largest trading partner every year since the collapse of the Soviet Union cleaved Central Asia into several countries. Now, as Western sanctions complicate trade with Moscow, Kazakhstan is turning to the east.
China could soon eclipse Russia as Kazakhstan’s biggest trade partner, Kazakhstan’s trade minister told Bloomberg. By 2030, Kazakh trade with China could surpass such trade with the entire EU, which has also boosted economic ties with Kazakhstan in the past year. Last year, Kazakh trade with China reached $24 billion, a 34% increase over the previous year, Astana Times reports.
Cooperation with Central Asia has long been a pillar of China’s economic agenda. Chinese President Xi Jinping chose Kazakhstan as the place to announce in 2013 the massive infrastructure project known as the Belt and Road Initiative. Last year, Xi selected Kazakhstan and Uzbekistan for his first foreign trip since the Covid-19 pandemic disrupted international travel.
Vietnam’s continued coal use threatens green transition
Vietnam’s effort to become carbon neutral by 2050 include an unusual caveat: the county will actually increase its coal-based electricity capacity until 2030.
- Power shortage hits Vietnam, a production hub for Apple and Samsung (WSJ)
While Vietnam will reduce the ratio of coal in its power mix by investing in other energy sources, coal-based electricity production is expected to reach 30,000 megawatts by 2030, Nikkei reports, marking an increase of 10,000 MW over 2020 levels. Investment in solar capacity stalled over the past three years after the country’s government discontinued subsidies for solar energy production.
The continued importance of coal in Vietnam reflects a challenge facing many frontier economies trying to balance affordable power generation with pressure from Western governments to transition to a lower carbon economy. Last December, Vietnam signeda Just Energy Transition Partnership, an EU and US-led initiative to fund decarbonization efforts in lower-income countries. South Africa and Indonesia have both signed on to similar deals.
Nepal turns to India for infrastructure investment
Nepal struck a series of infrastructure deals with India this week, including one that will see it export 10,000 megawatts of electricity to its southern neighbor within the next 10 years. Other bilateral infrastructure deals include two bridges, a railroad, and expanded oil pipelines.
Nepalese Prime Minister Pushpa Kamal Dahal signed the deals on a state visit to India, during which India also agreed to facilitate energy exports from Nepal to Bangladesh via an Indian transmission line. The agreements could stimulate foreign direct investment in Nepal’s energy sector, Deutsche Welle reports.
The energy export arrangement could also help Nepal reduce its trade imbalance with India, which is its biggest export market and its biggest source of imports. While Chinahas made inroads in Nepal in recent years, Kathmandu still depends on New Delhi for nearly all of its oil, medicine, and many other supplies, the AP reports.
Saudi Arabia spends heavily on sports franchises
Saudi Arabia is rapidly ramping up its investments in global sports, spending billions to boost its homegrown sports franchises on the world stage. On Tuesday, the country’s sovereign-wealth-fund-backed LIV Golf Tour announced it had agreed to merge with its arch-rival, the US-based PGA tour.
The merger, which reportedly could see the Saudi Public Investment Fund inject as much as $3 billion to the joint venture, ends a squabble that had seen stars such as Phil Mickleson banned from playing in PGA events after they were tempted by multi-hundred-million-dollar contracts to join the LIV tour.
Also this week, PIF took control of four state-owned soccer clubs as part of a broader strategy to raise the profile of the Saudi soccer league. Teams in the Saudi league have already signed international stars such as Cristiano Ronaldo and Karim Benzema on hundred-million-dollar-plus contracts to play in the kingdom.
US steps up engagement in Middle East
US Secretary of State Anthony Blinken visited Saudi Arabia this week for what is reported to have been an “open, candid discussion that covered the full range of regional and bilateral issues,” Al Monitor reports. Blinken is the highest level US official to have visited the kingdom since it announced its shock rapprochement agreement with Iran brokered by China.
Reportedly discussed were deepening the US-Saudi economic and security bilateral relationship, a renewed push for peace talks in Yemen, and normalization of relations between Saudi Arabia and Israel. While disagreements remain over the kingdom’s oil output and its apparent cozying-up to China and Russia, a US official said the talks resulted in “a good degree of convergence on potential initiatives where we share the same interests, while also recognizing where we have differences.
Also reported this week were rumors that the US and Iran were nearing a deal on curbing Iran’s nuclear enrichment program in exchange for sanctions relief, particularly on Iran’s oil industry. However, a spokesperson for the US National Security Council said the reports were false, a sentiment echoed by Iran as well.
Turkey allows lira to slide in partial return to economic orthodoxy
Turkey’s lira has continued to hit new all-time lows against the US dollar as the newly reelected President Recep Tayyip Erdoğan’s economic team prepares to steer a more orthodox course, the FT reports. The new finance minister Mehmet Şimşek, known for his credibility among foreign investors, has pledged to restore ‘rational’ economic policies after years of unconventional measures.
Şimşek and his team face significant challenges in stabilizing the economy, though, according to Goldman Sachs. Inflation is above 40%, foreign exchange reserves have been severely depleted to fund a large current-account deficit and failed efforts to support the lira. Previous policies have also discouraged holding foreign currency and added capital-control-like measures to manage business access to foreign currencies.
Balancing Erdoğan’s aversion to high borrowing costs with the need for interest rate hikes will be a crucial test for the new economic team. While Şimşek’s return to the government is seen as an attempt to bring in tighter monetary policy, investors are waiting to see if Erdoğan will have the stomach for the difficult but necessary economic adjustments.
Russia’s allies reconsider support
Banks in Kazakhstan, Armenia and Hong Kong, jurisdictions that have been accused of facilitating Russian trade, have begun blocking payments for electronics supplies, Radio Free Europe reports. The banks apparently began to block transfers for deliveries for servers, chips, processors, telecom equipment and other electronics due to fears of sanctions by the US.
The move partly reflects tighter enforcement on the myriad sanctions that have been levied against Moscow. But as Russia’s war on Ukraine looks increasingly unwinnable, peripheral players that have profited from capital and labor flows from the country appear to be distancing themselves from Moscow.
Formerly vocal supporters of Russian President Vladimir Putin are struggling to reframe their positions. In an interview with the FT, for example, Serbia’s President Aleksandar Vucic, typically seen as Moscow’s staunchest ally in the region, acknowledged that he was walking a tightrope between Moscow and western powers but said that he would not help the Russian war effort. In an apparent westward shift, he also emphasized that “we join re-export bans, such as dual-use [technology] in drones …we won’t be a hub for re-exporting something to Russia.”
Cuba ‘agrees to host Chinese spy base’
Cuba has reportedly agreed to allow China to establish a signals collection facility on the island, the Wall Street Journal’s Warren P. Strobel and Gordon Lubold report. The eavesdropping station, which would be located roughly 100 miles from Florida, would enable Chinese intelligence services to intercept electronic communications in the southeastern US, home to numerous military bases and significant ship traffic.
- China accuses US of ‘spreading rumors’ over alleged Cuba spy station (Reuters)
Sources indicate that China has agreed to pay Cuba several billion dollars for the construction of the facility, although the details of the agreement have not been disclosed. Along with the much-needed infusion of cash, though, comes the risk of angering the US and further isolating the country diplomatically and economically.
Cuba is currently enduring its worst economic crisis since the fall of the Soviet Union and the regime sees China as offering a new potential lifeline.
El Salvador’s hardline anti-gang policies gain traction among region’s politicians
Drastic reductions in criminality that have accompanied El Salvador’s ‘iron fist’ strategy against gangs have garnered both regional plaudits and international condemnation. And in Guatemalan elections scheduled for later this month, building mega-prisons and suspending constitutional rights to go after criminals have become popular policiesacross the political spectrum, AP reports.
Next door in Honduras, left-wing President Xiomara Castro implemented a ‘state of exception’ to due process to enable harsher crackdowns on criminality.
- “There is enough evidence for El Salvador to be tried for crimes against humanity” (El Faro)
- El Salvador slashes size of Congress ahead of elections (Reuters)
Despite the popularity of these policies, El Salvador’s success is unlikely to be
mirrored across the region. While the homicide rate slightly decreased in Honduras, it is still the highest in Central America and the country has failed to see noticeable benefits from the policy.
Factors such as smaller police forces, more political opposition and substantially larger land areas make implementing a strategy similar to El Salvador’s effectively impossible for its neighbors. But that doesn’t stop the candidates from making promises. We will “end the scourge of homicides, murders and extortions in our country” with Bukele’s policies, Guatemala’s former First Lady Sandra Torres, who is running for president, promised to cheering supporters, according to the AP.
LatAm economists urge IMF to create debt backstop fund
A group of influential Latin American economists, known as the Latin American Committee on Macroeconomic and Financial Issues (CLAAF), is urging the IMF to set up a $300 billion fund to help safeguard against potential debt crises in emerging markets, Reuters reports. With concerns about rising fragility and soaring levels of sovereign debt, the economists want the IMF to be able to buy sovereign debt that has been hit by financial contagion but is otherwise sound, as well as to exclude domestic debt from the G20 common framework and ease bailout conditions on struggling economies such as Argentina.
The proposed Emerging Markets Fund would be managed by the IMF but have its own balance sheet supported by swap lines from major central banks in wealthy nations. This fund would be capable of making temporary purchases of sovereign debt to rapidly boost liquidity.
The group argues that the IMF’s current toolkit leaves it ill-equipped to tackle financial contagion, which could adversely affect stable economies in an uncertain global landscape.
What we’re reading
Burkina Faso’s government says more than two million displaced as aid falls short (AP)
Nigeria’s naira drops to a record low as devaluation bets swirl (Bloomberg)
Initial reform steps positive for Nigeria’s credit profile (Fitch Ratings)
Ghana elections may test fiscal discipline under new IMF program (Bloomberg)
World bank sees Kenya’s economy growing 5% this year (Bloomberg)
US suspends food aid for Ethiopia, citing widespread theft (NYT)
Namibia becomes oil drilling hot-spot with 13% of Africa’s rigs (Bloomberg)
Morocco signs MoU with Chinese–European group for $6.4 billion battery factory (Utilities Middle East)
Egypt and UAE cooperate to establish Africa’s largest wind farm (Egypt Independent)
Fitch downgrades Egypt’s credit rating (Fitch Ratings)
How midnight OPEC dealmaking won Gulf unity at Africa’s expense (Bloomberg)
Ukraine promises embassies, grain to counter Russia’s influence in Africa (Bloomberg)
Sri Lankans fret over next piece of debt puzzle: Domestic reform (Nikkei)
Taliban’s alleged interference in foreign aid deprives Afghans of lifesaving help (Radio Free Europe)
Taliban appears to sharply reduce opium cultivation in Afghanistan (Radio Free Europe)
China, Pakistan and Iran ‘hold counter-terrorism talks’ in Beijing (Reuters)
Indonesia–Malaysia QR code payments get started under ASEAN system (Nikkei)
North Korean IT workers help spy from UAE and Russia, UN says (Bloomberg)
North Korea ‘gets half its foreign currency from cyber theft’ (Nikkei)
Saudi Arabia welcomes Venezuelan leader Maduro, reaching out to yet another USfoe (AP)
Iran ‘to form naval alliance’ with Gulf states (Reuters)
Turkish forces arrive in Kosovo to bolster NATO-led peacekeepers (AP)
Russia ‘buying back’ arms parts exported to Myanmar and India (Nikkei via Moscow Times)
War on Ukraine cripples Russia’s labor market (FrontierView)
Romania hit by strikes by teachers, health workers and police (BalkanInsight)
Bulgaria’s new PM prioritizes Schengen and eurozone entrance (BalkanInsight)
Poland’s state media criticized for coverage of huge anti-government march (AP)
Anti-government protests continue in Serbia (Radio Free Europe)
Belgrade to prod ethnic Serbs in north Kosovo to vote in elections (Radio Free Europe)
Former Panama president Ricardo Martinelli chosen as RM candidate for 2024 elections (Reuters)
US Congress members seek inquiry into the hidden Florida assets of Ecuador’sPresident Lasso (Miami Herald)
Cocaine trade and gang violence strike hard in once-peaceful Ecuador (WSJ)
Global leftist leaders warn ‘soft coup’ is underway in Colombia (The Intercept)
Deadly earthquake hits Haiti days after severe floods (NBC)
Aruba and Venezuela resume bilateral trade after 4 years (Mercopress)
Brazil is key to slowing global warming. but its carbon market has struggled (WSJ Pro)
Deforestation in Brazil’s Amazon falls nearly 10% in May (Reuters)
A factory exodus is hollowing out Brazil’s industrial heartland (WSJ)
Global backlash against weaponized dollar is growing (Bloomberg)