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Welcome to the latest edition of Frontier Markets News. As always, I would love to hear from you at dan@frontiermarkets.co with news ideas, feedback and anything else you find interesting.
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Africa
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Coca-Cola opens ‘mega factory’ in Ethiopia. Coca-Cola opened a $100 million factory on the outskirts of Addis Ababa this week that is expected to create 30,000 jobs in the strife-torn East African nation, AfricaNews reports.
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Coca-Cola’s investment will make Ethiopia a stronghold of the beverage powerhouse’s presence in Africa, according to AfricaNews. It also represents a welcome boost for the country after it saw other major companies cease operations there in the past two years.
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Ethiopia’s economy grew at a rate of nearly 10% per year between 2010 and 2020, but GDP growth slowed to 6.1%, throttled by the pandemic and civil war, according to data from the World Bank.
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Nigeria and Morocco to build gas pipeline. Nigeria’s federal executive council approved a plan on Wednesday to construct a gas pipeline that would traverse 15 African countries to Morocco and Europe. The new Nigeria-Morocco pipeline will extend the existing West African Gas Pipeline that feeds Nigerian gas to Benin, Togo and Ghana.
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Photo: Morocco World News
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The project, which is being coordinated by the Economic Community of West African States (ECOWAS), has not begun construction but is envisioned to be 7,000 kilometers, making it one of the world’s longest onshore pipelines, Morocco World News reports. African gas has become increasingly attractive in Europe as countries try to wean themselves off Russian energy.
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Nigeria is Africa’s largest oil producer and a major supplier of oil and natural gas. The pipeline is expected to bring Nigerian gas to every coastal country in Western Africa, Premium Times Nigeria reports.
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Asia
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Pacific states rebuff China. China failed to deliver its proposed multilateral security and development deal at a summit in Fiji on Monday. China had hoped to follow the meeting with a joint communiqué that would establish a multilateral pact.
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The deal was shelved after some Pacific states questioned whether it would spark confrontation between China and the West, where the proposal was met with criticism and dismay, the Washington Post reports. “The Pacific needs genuine partners, not superpowers that are super-focused on power,” Fijian Prime Minister Frank Bainimarama wrote on Twitter.
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Chinese Foreign Minister Wang Yi, with Fijian Prime Minister Frank Bainimarama. Photo: Leon Lord/Fiji Sun/AP
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Despite multilateral reluctance, Pacific states were keen to cooperate with China on a bilateral basis. Over the course of the week, China struck bilateral arrangements with Kiribati, Samoa, Fiji, Timor-Leste, Papua New Guinea, and Tonga as Wang toured the strategically important region. China previously announced a security arrangement with the Solomon Islands.
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Economic and political uncertainty deepens in Pakistan. Investor uncertainty around Pakistan’s ability to secure the financing it needs to prevent a debt default increased this week after Moody’s downgraded the South Asian Nation’s credit rating, Bloomberg reports.
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Pakistan has been mired in economic and political turmoil since former prime minister Imram Khan was ousted in April. After calling last week for new elections to be held by May 31st, Khan this week warned of civil war if new Prime Minister Shehbaz Sharif does not hold general elections immediately, Hindustan Times reports.
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Pakistan’s former prime minister Imran Khan. Photo: AFP
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Inflation in Pakistan hit 13.8% in May, a two-year high, and the rupee has fallen 10% this year, making it the worst performing currency in Asia, according to Bloomberg data. Foreign reserves fell to $10 billion in May, the lowest point since Pakistan last sought IMF assistance in 2019 and enough cash to cover only two months of imports, the Economist reports.
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Malaysia bans live chicken exports. Malaysia became the latest country to nationalize food supplies this week, suspending exports of live chickens in an effort to depress soaring domestic prices.
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As of Wednesday, Malaysia will forbid the monthly export of 3.6 million live chickens. The export ban will last until domestic prices and production stabilize, expected within one month, the Associated Press reports. The ban is most likely to affect Singapore, which gets one third of its chicken from Malaysia and whose national dish is chicken rice, the Singapore Straits Times reports.
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The restriction follows a growing trend of food protectionism, as large producers struggle to tamp down domestic prices of staple foods. In the past several months, Indonesia enacted a ban on palm oil, and India capped most wheat exports. Palm oil and wheat are key ingredients in chicken feed, and their rapidly rising prices have increased input costs for the poultry market.
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Middle East
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Iranians protest over economic meltdown, building collapse. Economic turmoil from sanctions and government mismanagement have boiled over into street protests following a collapse of a 10-story building that has driven anger across Iran. Sporadic protests have broken out in several Iranian cities as the death toll has continued rising from one of Iran’s deadliest such disasters in years, Radio Free Europe reports.
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Authorities have blamed the disaster on loose safety standards and isolated corruption. However, the May 23 accident is widely seen as symbolic of the country’s corruption and negligence, sparking eight days of protests as the country reels from unrest over rising food prices and other economic issues.
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Despite the arrest of 13 people for construction violations, the protesters say government negligence and endemic corruption are behind the accident. Photo via Radio Free Europe
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Iran’s currency, the rial, has continued to weaken as unrest and economic crises self-perpetuate. The rial fell as low as 31,500 against the dollar in June from 28,150 a month before. High inflation and the currency’s sustained collapse have rapidly eroded purchasing power and wiped out savings for the many in the country of 80 million people.
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Europe
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Croatia approved to join Eurozone amid demographic collapse and spotty recovery. European Union regulators certified Croatia's eligibility to adopt the euro next year, reports the WSJ’s Tom Fairless. The European Commission said it would propose that Croatia join the eurozone in January 2023, a decision the region’s governments are expected to approve at a meeting in July.
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Croatia could become the 20th member of the eurozone at the beginning of next year. Photo: Antonio Bat/Shutterstock
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Bulgaria, which entered the exchange-rate mechanism along with Croatia, didn’t meet all the criteria to join, the ECB and European Commission said. With a 2022 per-capita GDP of roughly $17,000 Croatia will become the poorest eurozone member.
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Croatia’s economy has been one of the most dynamic in the Eurozone in recent years, but the loss of independent monetary policy, which countries like Poland credit for their strong economic performance, risks exacerbating Croatia’s challenges and undermining growth. The country has faced a mix of high debt and deficits and low productivity similar to that which triggered Greece’s sovereign debt crisis in 2009.
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European Union announces oil embargo. Following weeks of negotiation, the European Union officially announced an import ban on most Russian oil. Part of the bloc’s most recent sanctions package, the ban will cover crude oil and refined products, but not natural gas.
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The EU expects the import ban to eliminate two thirds of its purchases from Russia in the near term, the New York Times reports. The embargo is expected to apply to 90% of the EU’s Russian oil imports by the end of 2022, NPR reports.
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Photo: An Rong Xu for The New York Times
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The embargo makes an exception for Russian oil that flows by pipeline into Europe, only prohibiting oil imported by tanker. The pipeline exception is widely seen as a compromise to appease Hungarian Prime Minister Viktor Orban, who has referred to Russian oil as vital to his country’s economy.
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Latin America
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Surprise first round results make victory likely for ‘Colombian Trump.’ In a surprising upset, right-wing populist Rodolfo Hernández won 28% of the vote in Colombia’s presidential primaries, comfortably clinching a spot in next month’s run-off against former leftwing guerrilla Gustavo Petro. Hernández beat the more established center-right candidate Federico Gutiérrez, who was third with 24%, and whose supporters are likely to back Hernández in the second round.
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Analysts predict a likely Hernández victory as the two right-wing candidates took nearly three million more votes than Petro, despite his winning over 40% of the vote.
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A billboard showing Rofoldo Hernández. Photo: Mario Caicedo / EFE
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Hernández’s age, wealth and tirades against traditional politicians have led observers to label him as “Colombia’s Trump.” When he launched his campaign last year, few gave him a chance, and as recently as March he was polling at about 10%.
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Despite his lack of a political party, his extensive use of social media—primarily TikTok—has amplified his simple message of ending corruption by slashing state budgets.
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What we’re reading
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Senegalese refugees flee to Gambia after separatist crisis. (AlJazeera)
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Uganda hikes rates first time since 2018 to tame inflation. (Bloomberg)
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Rwanda accused of stalking, harassing and threatening exiles in US. (The Guardian)
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Angola’s biggest bank raises $94 million in nation’s first IPO. (Bloomberg)
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Russia stake in biggest Zimbabwe platinum project deters backers. (Bloomberg)
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Floods, power outages pile pressure on South African economy. (Bloomberg)
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Tunisian president purges judges after instituting one-man rule. (Reuters)
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China-led AIIB drops Russia as venue for annual gathering. (Nikkei)
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Sri Lanka can’t use $1.5 billion swap on China IMF concerns. (Bloomberg)
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Crisis-hit Sri Lanka hikes tax rates to maximize government revenues. (Reuters)
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Tajik authorities say more killed in restive Gorno-Badakhshan region. (Radio Free Europe)
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In Turkey’s economic crisis, violence against Syrians rises. (BalkanInsight)
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Turkey breaks off high-level talks with Greece as rift grows. (Washington Post)
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Ukraine’s central bank raises rates to 25%. (FT)
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US lifts Cuba flight restrictions imposed under Trump. (Reuters)
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Surging gang violence in Haiti’s capital leaves nearly 200 dead in one month. (CNN)
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El Salvador accused of ‘massive’ human rights violations with 2% of adults in prison. (The Guardian)
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Weak economic outlook clouds Bolsonaro’s election prospects in Brazil. (FT)
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Boric's negative image keeps growing among Chileans. (MercoPress)
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More prosecutors killed in Latin America. (MercoPress)
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