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By Ken Stibler, Noah Berman and Nojan Rostami. Executive editor: Dan Keeler
US warns businesses against operating in Uganda
The US State Department issued a business advisory for Uganda on Monday, citing risks stemming from a newly passed anti-LGBTQ+ law.
In May, Uganda’s President Yoweri Museveni signed a bill imposing life sentences for same-sex relations and mandating reporting of LGBTQ+ individuals. Since the bill’s passage, violence against LGBTQ+ people in Uganda has increased, according to Human Rights Watch. The law also includes financial penalties for “promoting or encouraging homosexuality,” and has drawn condemnation from international rights groups, Western governments and major companies, including those with operations in Uganda.
Businesses in the media, broadcasting, advertising and related industries are at heightened risk. Ugandan government officials have taken a broad definition of “promoting and encouraging,” and the law is not explicitly limited to activities within Uganda, the US business advisory warned.
Meanwhile, all firms may face conflicting obligations between US and Ugandan law, especially with regard to US restrictions on discrimination based on sexual identity.
Tanzania signs controversial ports deal with UAE
Tanzania and Dubai-based DP World signed a 30-year agreement on Sunday that will give the Emirati multinational logistics company control of four of the 12 berths at the Dar Es Salaam port, AP reports.
The $250 million deal has not been popular, with many Tanzanians protesting against the deal ahead of its signing. Authorities have been arresting critics, including former government officials, according to Human Rights Watch.
Opponents of the deal, including the jailed former Tanzanian Ambassador to Sweden, have argued that a foreign company should not manage Tanzania’s ports, while the government has said it will improve efficiency and help grow the economy.
The deal is the latest for DP World in Africa, where the firm—and the UAE, whose ruling families own DP World—has made significant inroads in recent years. The company also runs port operations in Angola, Djibouti, Egypt, Morocco, Mozambique, Senegal and Somalia, BBC reports, and the UAE has invested almost $60 billion in infrastructure and energy on the continent over the past decade.
African currencies fall to record lows
Kenyan and Nigerian currencies each fell to all-time lows against the US dollar this week, threatening further turbulence in two of Africa’s largest economies.
The Kenyan shilling has depreciated 18% this year, the East African reports. Some economists have attributed its recent fall to the outbreak of conflict in the Middle East, which has pushed investors toward “safe havens”, such as US treasury bonds, and away from emerging-market currencies, the North African Post reports. The shilling’s slide could continue through the end of the year as high oil prices press on Kenya’s current account and foreign capital inflows continue to slow, Bloomberg reports.
Meanwhile, Nigeria’s black-market exchange rate fell to 1,100 naira to the dollar. Nigeria’s government has made efforts in recent months to remove an artificial exchange rate that propped up its currency, causing the official exchange rate to tumble. However, dollar demand still exceeds what the official market can provide, resulting in further devaluation, Africanews reports.
Fund manager DWS said this week it was removing Nigerian firms from its frontier fund and writing the value of the investments down to zero in response to index-provider S&P Dow Jones’ proposal to drop Nigeria from its frontier markets index.
Philippines-China tensions rise in South China Sea
The Philippines accused China on Monday of deliberately causing two collisions between the countries’ ships in the South China Sea.
The Philippines’ defense secretary said the Chinese Coast Guard and maritime militia vessels “harassed and intentionally hit” a Philippine Coast Guard boat, Deutsche Welle reports. Chinese officials said the Chinese Coast Guard took “lawful” action to prevent “trespassing” near the Spratly Islands, Al Jazeera reports. Philippines and China share overlapping claims to the area, as do Malaysia, Taiwan and Vietnam.
The incident marked the latest escalation of tensions in the South China Sea, which is home to trade routes that transport trillions of dollars of goods annually. Responding to the incident, US President Joe Biden said on Wednesday that China had acted “unlawfully,” and that the US would defend the Philippines if China attacked, BBC reports. “The United States defense agreement with the Philippines is ironclad,” he said.
Sri Lanka looks to tourism to revive its economy
Sri Lanka’s cabinet approved free tourist visas for seven countries on Tuesday in a bid to resuscitate its embattled economy. Tourists from China, India, Indonesia, Japan, Malaysia, Russia and Thailand will be eligible for free visas beginning in the second quarter of next year.
Before the Covid-19 pandemic disrupted international travel—and before a financial crisis triggered mass protests that resulted in the ouster of Sri Lanka’s president and prime minister—tourism was a major component of Sri Lanka’s economy. In 2019, tourism generated $3.6 billion, directly contributing more than 4% of GDP, according to the national tourism authority. Amid pandemic recovery and political and economic unrest in 2022, tourism generated just $1.1 billion.
There are signs that tourism is recovering. This year, Sri Lanka recorded more than one million arrivals and $1.3 billion in tourism revenue by September for the first time since before the pandemic, Reuters reports. India and Russia are the two largest sources of tourists.
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US moves to deter Iran as Israel escalates offensive in Gaza
The US is moving to proactively deter Iran from getting more involved in the conflict in Gaza and Israel after strikes by its proxies wounded some two-dozen American personnel on bases in Syria and Iraq, the FT reports. On Friday, the US carried out airstrikes on two facilities in Syria used by Iran’s Revolutionary Guards, a known sponsor of Hamas, Hezbollah, and Palestinian Islamic Jihad.
US defense secretary Lloyd Austin said the strikes were a “response to a series of ongoing and mostly unsuccessful attacks against US personnel in Iraq and Syria by Iranian-backed militia groups.” The strikes follow a trilateral meeting between the heads of Hamas, Hezbollah, and Palestinian Islamic Jihad—who call themselves the “Axis of Resistance”—at which they agreed to “continue coordination” to “achieve real victory.”
Iran has denied specifically directing any of its proxies to attack the US or even Israel, but warned that “new fronts will be opened up against the United States”if it continues to support Israel’s Gaza offensive. Meanwhile, on Saturday, Israel significantly expanded ground operations in Gaza after the largest aerial bombardment since the war began, knocking out communications in what Israel described as an “advancing in the phases of the war.”
Saudi Arabia confirms deadline for companies to move Middle East HQs to Riyadh
Saudi Arabia’s finance minister Mohammed al-Jadaan confirmed in an interview that the kingdom will stick to its January 1 2024 deadline requiring international firms seeking Saudi government contracts to locate their regional headquarters in Riyadh, Reuters reports. The plan to cease government contracts with non-Riyadh-based companies was first announced in 2021 as part of an effort to boost local jobs and non-oil sector economic diversification in the kingdom.
The move could cause tension with neighboring UAE, which has long been the hub for international companies seeking to do business in the Middle East—and it raises regulatory and tax concerns for companies forced to choose between the two countries.
Saudi economy minister Faisal al Ibrahim said the kingdom would also be aggressively seeking new free-trade deals with an “ambitious” list of countries to grow non-oil exports faster, with a specific focus on exploiting new BRICS relationships.
Ukraine aims to turn war-time innovations into a domestic defense sector
Ukraine is intensifying efforts to develop its domestic arms industry as it seeks to reduce its reliance on Western allies in the face of Russian aggression, the FT reports. As it faces a worldwide shortage of key components and equipment, Ukraine is turning to innovation and adaptation.
A cornerstone of Ukraine’s strategy is repurposing surplus weaponry, including converting redundant US air-to-air missiles into surface-to-air missiles to address critical defense needs. These innovations are vital as Ukraine anticipates a prolonged conflict and the looming threat of Russia targeting its energy infrastructure.
- Slovakia’s Fico to halt military aid to Ukraine (Politico)
The shift toward prioritizing domestic arms procurement comes against growing uncertainty around American support and the depth of Western arms stockpiles, that is prompting Ukraine to also seek joint ventures with European and American defense companies. Some of those companies have voiced concern that partnering with Ukraine could make them potential targets for Russian attacks, though.
Conflict drives divergence of European economies
Emerging Europe’s economic prospects are diverging as the longer term impacts of the war in Ukraine become clearer, Fitch Ratings concluded in a research note. Countries in Central and Eastern Europe grappling with soaring energy prices and high inflation are likely to see sluggish growth, with potential contractions in some cases in 2023.
Meanwhile, countries in the Caucasus and Central Asia, which have been benefitting from inflows of funds and people from Russia, are experiencing above-trend growth, lower inflation, and currency appreciation.
In the context of this economic disparity, sovereign credit rating outlooks in the region are unusually dispersed, the ratings firm wrote, with some in Central Europe leaning negative and some in the Caucusesseeing positive change.
Protests grow over Panama mining deal
Large-scale protests erupted in Panama—traditionally one of Latin America’s most stable countries—this week in response to the government’s decision to grant a Canadian company a 20-year extension to exploit Central America’s largest open-pit copper mine. Protests have been taking place for months over the proposed extension of First Quantum’s contract for the Cobre Panama mine, but intensified this week after the government officially approved the contract.
The protest do seem to have had an impact: According to Reuters, Cortizo on Friday ordered a halt to new mining projects.
Critics of the deal argue that the contract overly favors the Canadian miner and infringes on Panama’s sovereignty over its mineral resources, and have also raised concerns about the mine’s growing environmental impact. Restricting mining would also be controversial, though, as Cobre Panama is responsible for as much as 5% of Panama’s GDP by some estimates.
Fuel shortage adds to Argentina’s woes
Argentina is facing an acute fuel shortage, that could persist for several weeks, potentially affecting the presidential runoff scheduled for November 19, Mercopress reports.
A shortage of foreign currency is exacerbating the problem, leading to ships loaded with fuel being unable to dock, Bloomberg writes. Other key consumer and business goods have also become scarce, Bloomberg reported last week.
- Argentina’s macroeconomic outlook remains negative given increasing imbalances (FrontierView)
- Argentina investors burned by politics dread what comes next (Bloomberg)
Starved of fuel, agricultural groups have raised concerns about potential losses, especially after a continuing drought, while transport companies are also threatened.
Colombia tightens ties with China
China has elevated Colombia to a ‘strategic partner’ making it the 10th South American nation to have strategic ties with Beijing, Reuters reports. The move, announced during a trip by as President Gustavo Petro to Beijing, strengthens China’s already growing influence in Latin America.
The two countries signed 12 cooperation agreements during Petro’s visit, focusing on trade and commerce, including Colombian beef imports and quinoa shipments. Despite being one of the US’ closest allies in Latin America, Colombia is expanding its economic ties with China.
The Long Read: LatAm interest rates
Interest rates across Latin America are likely to fall fast, but the positive impact might be muted, Jose Pedro Martinez Sanguinetti, chief investment officer at Rimac Seguros, writes in a guest post this week. With Brazil, Chile, Peru, Argentina, Venezuela, Ecuador and Colombia already either officially in recession or experiencing their lowest growth rates in many years pressure is growing for easier monetary conditions.
There’s a catch, though: with the US expected to hold “higher rates for longer” the region’s currencies look fragile.
Read more at Frontiermarkets.co.
What we’re reading
Kenyan businesses are dropping the world’s favorite mobile money service (Semafor)
Zambia reaches agreement in principle on debt restructuring (LSE)
Iran–Sudan rapprochement threatens to deepen deadly civil war (Bloomberg)
Sudanese military rivals travel to Saudi Arabia for renewed peace talks (France 24)
Namibia orders police to stop Chinese firm’s lithium exports (South China Morning Post)
EU agrees on framework for Niger sanctions (Reuters)
Nigeria seeks to tighten rules to curb raw mineral exports (Bloomberg)
Nigeria sees $10b inflows easing liquidity crunch (Bloomberg)
EBRD shareholders approve Benin and Côte d’Ivoire to join as members (Reuters)
EU accelerates Egypt aid package as it fears fresh wave of refugees (FT)
South Korea to tap Africa as China tightens graphite controls (Bloomberg)
Green Climate Fund approves $50m for African renewables (Renewables Now)
EU courts Africa in push to counter Chinese spending (Bloomberg)
Vietnam eyes China model to seek index upgrade and boost investment (Reuters)
Vietnam power crunch fears darken business outlook (Nikkei)
China’s Xi tells Vietnam not to forget roots of their friendship (Reuters)
Singapore taps Vietnam, Indonesia and Malaysia for low-carbon energy (Nikkei)
Pakistan sets up deportation centers for illegal migrants (AP)
China and Bhutan push to solve border dispute (SCMP)
India cuts floor price for basmati rice exports to revive shipments (Reuters)
Maldives exposes India’s backfiring China containment strategy (Nikkei)
Oman’s OQ Gas Networks soars 14% on trading debut after $750m IPO (The National)
South Korea snags 46 Saudi Arabia energy and infrastructure projects (Nikkei)
Saudi mega-city NEOM sets up $10b JV with Denmark’s DSV (Reuters)
Iraq sentences Saddam Hussein’s daughter for promoting political party (Times of India)
Iranian official says lagging oil revenues causing budget gap (Radio Free Europe)
Is the Czech economy running out of steam amid a decline in EU manufacturing? (BalkanInsight)
Grants and loans to Kosovo hostage to opposition election demand (BalkanInsight)
Montenegrin NGOs urge EU not to support gas terminal project (BalkanInsight)
Romania increases taxes and avoids slashing public expenditure (BalkanInsight)
Brazilian lower house approved Bolivia’s entry to Mercosur, pending since 2018 (Mercopress)
US steps up Guatemala sanctions threat over election dispute (Reuters)
Nicaragua cracks down on Catholic groups (Tico Times)
Ex-lawmaker María Corina Machado dominates opposition’s presidential primary in Venezuela (AP)
Suriname proposes exchange of $675 million bonds for oil-linked debt (CNA)
Long Neglected, Colombia’s Caribbean Is Growing in Influence (Americas Quarterly)
As policies and investments lag, Chile risks falling behind on green hydrogen (Americas Quarterly)
How Argentina’s Massa pulled off election upset with tax cuts and bus fares (Reuters)
Developing world sees double standard in West’s actions in Gaza and Ukraine(NYT)