Frontier Markets Weekly, May 12th 2024

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By Ken Stibler, Noah Berman and Nojan Rostami. Executive editor: Dan Keeler


Chad’s military leader wins presidential election

Chad’s military leader Mahamat Idriss Déby won the country’s presidency this week in an election that international observers described as highly stage-managed. Chad’s election commission said Déby had won 61% of the vote, compared to opposition leader Succès Masra’s 18.5%.

The runup to the election had been tainted with controversy, and just hours before the official result was announced Masra had declared his own “resounding victory,” the New York Times reports.

President Mahamat Idriss Déby of Chad at a campaign rally in Ndjamena, the capital, last week. Photo: Issouf Sanogo/AFP

Déby took power in 2021, not long after his father, the military leader Idriss Déby Itno, died after ruling Chad for 30 years. He had earlier promised to step down as leader within 18 months and not to run for election.

Angola turns to China to ease debt woes

Angola has found a creative solution to avoid restructuring its mounting debt load: work with its single largest lender, the China Development Bank, to earn concessions that fall short of a haircut. 

The second-largest oil producer in Africa has reached a deal to unlock cash held as collateral by the CDB, Angola’s finance minister Vera Daves de Sousa told the FT. Angola will use that cash to pay interest on a multibillion-dollar loan owed to CDB. 

Vera Daves De Sousa said the deal would make $150m to $200m available a month. Photo: Susana Vera/Reuters

Most CDB loans to Angola are backed by oil. The lender required Angola to pay additional funds when oil traded for more than $60 a barrel, Daves de Sousa said. The new deal will see China release between $150 and $200 million a month of those additional funds. 

Angola owes $17 billion to China—which represents a third of its total debt and is more than any other country in Africa’s debt to China.


Myanmar pulls back from ban on overseas work permits

Myanmar resumed offering overseas work permits on Monday, ending a four day halt that drew international condemnation, Myanmar Now reports. However, it is unclear if the labor agencies tasked with processing those permits continue to do so at the same pace as previously, Nikkei writes.

Last week, Myanmar said it would prevent military-aged men from working abroad. The ban was imposed after thousands of young men had fled the country in the wake of a conscription order issued by the ruling military junta in February.

People queuing at a passport office in Yangon. File photo/Myanmar Now

Myanmar has been embroiled in civil war since February 2021, when the military took power in a coup. The conflict has become increasingly deadly in recent months.

Almost 19 million people in the country are in need of humanitarian assistance, and 2.6 million are internally displaced, according to the United Nations. Clashes in recent weeks have forced an additional 20,000 people, mostly in the country’s north, to flee their homes, Radio Free Asia reports.

Japanese investment to boost Cambodia and Thailand’s renewable energy output

Japanese manufacturer MinebeaMitsumi announced this week it plans to invest $321 million raising solar power generation capacity at its factories in Thailand and Cambodia, as well as building a new car parts facility.

The infusion into existing MinebeaMitsumi factories in Thailand is focused on adding more capacity for solar power generation. When the project is completed next year, the company expects its solar capacity in Thailand will increase by more than 10 times, supplying half the company’s electricity needs there, Nikkei reports. 

MinebeaMitsumi’s existing factory in Cambodia. Photo: MinebeaMitsumi via Nikkei

The investment in Cambodia will similarly finance solar power installation, as well as fund the construction of a factory that makes parts for cars and other machinery. The factory is expected to be operational by 2026. MinebeaMitsumi is also investing in solar power at its plants in the Philippines.

Sri Lanka ups engagement with India as both countries crack down on Russia recruitment 

Sri Lanka has struck a 20-year deal to buy renewable energy produced by a $442 million, 484 MW wind power plant that Indian firm Adani Green Energy is building in the north of the island nation, Reuters reports. The move is part of Sri Lanka’s effort to increase its renewable energy capacity, partly to reduce its reliance on imported fuel.

The cooperation was soon followed by both Sri Lanka and India’s arrests of citizens charged with recruiting for Russia amid the war in Ukraine, although the arrests did not appear to be coordinated. Sri Lanka apprehended two veteransof its army on Thursday, including a former general, over human trafficking charges, Anadolu Agency reports. India arrested four men on similar charges on Wednesday.

The arrests come ahead of Sri Lankan elections scheduled for later this year. On Thursday, the country’s election commission announced that a presidential election would take place in either September or October. 

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Middle East

Saudi Arabia floats US defense pact and signals desire for civilian nuclear program

The US and Saudi Arabia are reportedly nearing a deal that would see Saudi Arabia recognize and officially open relations with Israel in exchange for a formal, binding security guarantee via a defense pact with the US, Bloomberg reports. The deal also includes provisions on supporting a Saudi Arabian nuclear program, which the country has long sought both as a deterrent against Iran but also as part of its transition away from fossil fuels.

In addition to the security guarantee, the agreement would include pledges of investment and technology transfer from the US to help Saudi Arabia develop its artificial intelligence and quantum computing industries—two areas targeted for aggressive investment in the country’s Vision2030 economic diversification plan.

Saudi Arabia recently rolled out its “Quantum Economy” strategy, and  launched a $100 billion domestic AI company “Alat” and a $40 billion AI investment fund in partnership with US venture capital firms. AI ambitions come with a hefty energy price tag, and leaders in the sector are increasingly promoting small modular nuclear plants as a solution. 

US oil supermajor Chevron denied insurance claim for tanker seized by Iran

Three US insurance firms have taken Chevron to court this week to support their refusal to pay the company’s $57 million claim stemming from the seizure of one of its tankers by Iran in the Gulf of Oman in April 2023, Reuters reports. The insurers claim that the seizure did not constitute “warlike operations” that would normally be covered, raising questions as to what exactly is insurable at a time when shipping is under increasing threat in the region. 

A container ship heading toward the Red Sea. Photo: Mohamed Abd El Ghany/Reuters

This growing uncertainty over security is reducing shipping capacity to Europe and, according to two major industry indexes, driving up prices. Global shipping capacity appears to be relatively unaffected, however, Port Technology reports.

Saudi Aramco to pay increased dividends despite profit drop

State-owned oil company Saudi Aramco is set to pay a $31 billion dividend this quarter despite recording a 14% drop in profitability, Reuters reports. Keeping the dividend in place has largely been understood as a move by the Saudi government to use Aramco to boost its cash reserves, as the company has also announced it will scale back an ambitious investment plan to grow capacity and likely issue a bond (despite the current high interest-rate environment) later this year. 

Saudi Arabia’s stock market looks set to deepen this year. In an interview with Bloomberg this week, CEO of the Saudi stock exchange Mohammed Al-Rumaih said 10 companies are currently approved and waiting to go public this year, with a further 50 having applied for listings. The announcement follows a flurry of IPO activity in Saudi Arabia last quarter after a relatively uneventful 2022-2023 period. 


Hungary inks deals with China as Xi tours Eastern Europe

China’s President Xi Jinping visited Hungary on Thursday as part of a five-day European tour, securing support from Prime Minister Viktor Orban in the face of Western accusations of “overcapacity” in Chinese industries, Bloomberg reports. Xi pledged to invest in rail and energy infrastructure in Hungary, which he sees as a gateway to the EU for Chinese products.  

The cash-strapped Hungarian government has been eager to secure financing and fresh stimulus for its economy, with Chinese companies having already committed billions of dollars in recent years, particularly in the electric vehicle sector.

During his visit, Xi praised Orban’s “independent” foreign policy and Hungary’s defiance of “power politics,” a reference to the country’s friendly relations with Russia and China despite pressure from the EU, US, and NATO. At least 16 deals are expected to be signed between the two countries, covering infrastructure, construction, energy, and industrial sectors, including a cooperation program in nuclear energy.

North Macedonian nationalist election win undermines hopes to join EU

North Macedonia’s right-wing nationalist party, VMRO-DPMNE, secured a decisive victory in both the presidential and parliamentary elections, raising concerns about the country’s future relations with its Balkan neighbors and its European Union membership prospects. Gordana Siljanovska-Davkova, backed by VMRO-DPMNE, will be the nation’s first female president, and the party is set to control 58 out of 120 seats in parliament, ending the Social Democrats’ (SDSM) seven-year rule.

Gordana Siljanovska-Davkova addresses a press conference announcing her victory in North Macedonia’s presidential election. Photo: Reuters via RFE

The election results have cast doubt on North Macedonia’s EU accession process, as the VMRO-DPMNE has been critical of the constitutional changes required to recognize the country’s ethnic Bulgarian minority, a precondition for Bulgaria to lift its veto on EU accession talks. Siljanovska-Davkova has also expressed reservations about the country’s name change to North Macedonia, which resolved a long-standing dispute with Greece and paved the way for NATO membership in 2020.

Voters appear to have been swayed by frustrations over the country’s sluggish economic growth, high inflation, and pervasive corruption. The World Bank forecasts that North Macedonia will be the worst economic performer among the so-called Western Balkan Six by the end of 2024.

Latin America

Pro-business candidate wins turbulent Panamanian election 

José Raúl Mulino, a conservative lawyer and former security minister, emerged victorious in Panama’s presidential election, securing 34% of the vote with most ballots counted. Mulino replaced Ricardo Martinelli, a popular ex-president convicted of money laundering, on the ballot after a last-minute Supreme Court ruling allowed his candidacy. The president-elect has promised to revitalize the economy, combat corruption, and address pressing issues such as migration and water scarcity.

Panama’s sovereign bonds rallied following Mulino’s win, as investors anticipated pro-business policies and efforts to reopen the shuttered Minera Panama copper mine, which accounted for 5% of the country’s GDP. However, Mulino faces significant challenges, including a fragmented Congress, a slowing economy, and a recent downgrade of Panama’s credit rating to junk status by Fitch.

Supporters of Panama’s president-elect José Raúl Mulino celebrate his victory. Photo: Martin Bernetti/AFP

The incoming president has outlined an ambitious agenda, focusing on infrastructure projects, a new cross-country train line, and measures to bolster the tourism sector and create jobs. Economists believe that forming a national unity government and implementing fiscal and pension reforms will be crucial for restoring confidence and growth.

Colombia’s Petro intensifies investor uncertainty with push to rewrite constitution

Colombia’s leftist President Gustavo Petro has again alarmed investors and opposition politicians by suggesting he will rewrite the country’s constitution, the FT reports. Petro, who has already unnerved business leaders with his shift away from oil and mining and plans to nationalize pensions and healthcare, has proposed creating people’s assemblies to implement reforms, potentially bypassing Congress and the courts. 

The president’s frustration with legislative setbacks and criticism of his government’s record has led him to call for demonstrations to rally supporters.

Colombia’s economy has stalled under Petro, with investment drying up, capital fleeing abroad and inflation remaining high. Despite having a low approval rating, the president shows no intention of backing down, insisting that he wants to hand more power to the people and create a “real democracy for everyone.” 


EM junk bonds outperform

Emerging market sovereign bonds with “junk” ratings have been the top performers in sovereign debt markets this year, delivering a 4.9% total return compared to a 3.3% loss for US Treasury bonds, the FT reports. This strong performance comes despite high US borrowing costs, which typically deter investors from riskier economies.

The resilience of the global economy, higher commodity prices benefiting oil and copper exporters, and support from lenders such as the IMF have all contributed to the outperformance.

Although investors have pulled nearly $12 billion from emerging-market debt funds this year, some believe these outflows are set to reverse, particularly if the outlook for US corporates worsens. Progress on domestic reforms and restructuring talks in countries including ArgentinaSri LankaGhana and Zambia have also boosted investor confidence.

What we’re reading

Nigeria: Tinubu introduces new taxes amid cost-of-living crisis (The Africa Report

Côte d’Ivoire commodities exchange ‘to be launched this year’ (CNBC Africa

Congo’s $7b deal with china linked to copper price (Bloomberg

Cameroon ban deals another blow for Starlink in Africa (The Africa Report

Uganda’s new tax system faces pushback as donor funds dwindle (The Africa Report

Africa should forge path for secure data flow across borders, experts say (VOA

Myanmar’s public struggles with inflation as currency tumbles (Nikkei

Vietnam’s corruption crackdown stokes startup funding woes (Nikkei

Made-in-Indonesia rule threatens Jokowi’s move up value chain (Bloomberg

ADB boosts funding for vulnerable countries amid debt trap fears (Nikkei

Middle East’s multi-nation travel permit to be rolled out this year (Economic Times

Remittances of currency abroad rise to $278m in central bank of Iraq’s auction (Iraqi News

Rains refill Iraq’s drought-hit reservoirs (France 24

EU moves to give profits from Russian assets to Ukraine (BBC)

Belarus launches nuclear drills a day after Russia announces them amid tensions with West (AP)

IMF projects 2.8% economic growth in Romania this year and 3.6% in 2025 (Romania Insider)

Armenia stops financial contributions to Russia-led military alliance (Radio Free Europe

FDI alone ‘won’t close gap between Balkan and EU’ economies (BalkanInsight

Paraguay pushes rival bid for $1.5 billion ArgentinaBrazil gas connector (Reuters

UAE’s Mubadala Capital plans $13.5b biofuels investment in Brazil (FT

Suffering worst drought in decades, Costa Rica orders electricity rationing (Reuters

Colombia’s Ecopetrol considers joining offshore wind auction (Reuters)

We are committed to providing FMN readers with a free weekly digest of politically unbiased, succinct and clear news and information from frontier and small emerging markets. 

Please consider becoming a paid supporter to help cover some of our costs and support our continued development of sharp markets-focused coverage and new informational products. Paid subscribers will also gain exclusive access to our quarterly EM/FM report that aggregates EM insights from 25 major banks, international institutions and consultancies.

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