In recent years Brazil has experienced significant depreciation of its nominal exchange rate. Compared with its average in 2013, the Brazilian real lost 38 per cent of its value against the US dollar in 2016. At its weakest, in January 2016, it lost as much as 47 per cent.
A year ago, we saw that depreciation as a silver lining for Brazil amid its deep recession, as a source of support for exports. But Brazil’s recent GDP data (particularly for the second quarter of 2016) show a negative contribution of net exports to growth. Read more
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The global mood has shifted since Donald Trump’s surprise victory in the US presidential election. Europeans are fretful and Mexicans are panicking but many of the US investors we met in mid-November have become intensely optimistic about the prospects for their own economy. No one is quite sure whether this will benefit emerging markets or not and many Trump supporters probably don’t care. Their vote was to make America great again, not to lift up emerging or frontier economies in East Africa.
Yet US investors should still focus on economies in the East African Community (EAC), because something pretty special is brewing there. From Tanzania to Ethiopia, the region is ripe for industrialisation and growth that should easily exceed the best the US might produce in coming years. There is no doubt that US growth can accelerate in the short term but East Africa, and Kenya in particular, should grow faster. Read more
By Matthew Reed, Ovum
The number of mobile subscriptions in Africa will reach one billion by the end of 2016, according to figures from research firm Ovum. But even as the continent nears this landmark, its telecoms market is changing fast, and data and digital services rather than mobile voice and SMS will lead the next phase of development.
In the first decade of the 2000s, Africa underwent a mobile revolution as the roll-out of mobile networks across the continent brought communications technology to many for the first time. By the end of the decade, the mobile-money service M-Pesa was showing that mobile services might be able to plug some of the other gaps in Africa’s infrastructure, such as in financial services. Read more
Vladimir Putin will look back on 2016 as an annus mirabilis. Isolated and straining under the impact of western sanctions 12 months ago, the president has managed to transform Russia’s international fortunes thanks to an extraordinary run of good luck. Brexit, the migration crisis and the current surge of right-wing populism have enfeebled Europe and weakened its resolve to maintain a tough collective stance towards Russia. Putin’s military intervention in support of Bashar al-Assad has put his ally within sight of victory in the Syrian civil war. Best of all, Donald Trump is about to enter the White House on a promise to repair US-Russia relations on the Kremlin’s terms. On every front, the tide of events appears to be flowing strongly in Putin’s direction.
The new mood was apparent last month when he met Rodrigo Duterte, his counterpart in the Philippines, at the Asia-Pacific summit. Duterte used the occasion to complain about western “bullying” and declared his desire to be part of a “new order” led by Russia and China. When you consider that the remarks come from the leader of a country that has been a mainstay of the US alliance system in Asia since the early years of the Cold War, it is clear that something significant is afoot. Putin is managing to extend Russia’s diplomatic reach beyond its traditional constituency among the world’s radical and anti-American regimes. Read more
Nigeria was fortunate in the first half of this decade. Gross domestic product increased from $412bn in 2011 to $568bn in 2015 and GDP per capita more than doubled from about $1,500 to $3,100. This is made all the more impressive by the fact that the population increased by about 10 per cent in the same period.
However, this was more a function of good fortune than of dextrous macroeconomic management. Now, fortune has changed and it is hard to see how the current monetary policy effectively serves the national interest. GDP is falling, at an annualised rate of -0.6 per cent in the first quarter of 2016, -2.06 per cent in the second and -2.24 per cent in the third. Nigeria’s recession is deepening. Read more
You walk into your local pharmacy to pick up a prescription. How much of what you pay is the manufacturer’s price, and how much is mark-up grafted on by other players as the medicine moves along the supply chain? It depends where you are.
In Kenya, for example, if you buy a course of antibiotics, the price you pay, on average, is close to double the manufacturer’s wholesale price. If you buy it at your local CVS in the US, or Boots in the UK, the manufacturer’s price will be 85-90 per cent of the retail price. Thus, assuming the manufacturer sells an antibiotic for $10 globally, you may pay about $20 in Kenya, compared with $11-12 in the US or UK. Read more
When accepting his hard-earned peace prize at the Nobel ceremony in Oslo last Saturday, President Juan Manuel Santos predicted that “one of the great legacies” of Colombia’s peace process would be “a model of transitional justice that allows us to obtain maximum justice without sacrificing peace”. If only that were true.
After the prize was announced in October, the president’s negotiators had indeed worked with the Revolutionary Armed Forces of Colombia (Farc) to improve the justice provisions of the original deal, which had been narrowly defeated in a national plebiscite on October 2 due in part to concerns that Farc war criminals wouldn’t face meaningful punishment for their crimes. The new agreement that emerged in November included language that could salvage the justice provisions, with the passage of appropriate implementing legislation, and secure at least a minimal degree of justice for their victims. Read more
The consent of Russia and other non-Opec oil producers to production cuts of 558,000 barrels a day to support Opec members’ agreement on a 1.2mbd cut for the first six months of 2017 represents an important breakthrough whose strategic significance, both for the oil market and for Middle East geopolitics, should not be underestimated.
Three aspects of this agreement underlie its significance. First, it is clear that Saudi Arabia has permanently abandoned its market share-focused strategy and gone back to defending the price of oil. Second, all indications are that this agreement, in contrast to other Opec agreements in the past, will be sustained, perhaps even beyond the agreed period. And finally, the agreement may have opened an exceptional opportunity for President Vladimir Putin to further deepen Russia’s involvement in the Middle East. Read more
India is a land of extremes. Its fast-growing economy will rank beside those of China and the US as the world’s third largest by 2030. Its global diaspora is famed for its people’s prowess in business, technology and entrepreneurism.
But the country faces one serious problem that is not abating: alarmingly high rates of hunger and malnutrition. This month, a new food sustainability index produced by the Economist Intelligence Unit with the Barilla Center for Food and Nutrition shows that India continues to suffer widespread nutritional challenges that belie its status as an emerging market giant. Read more
By Nick Kochan
The election of a majority Social Democratic PSD party in Romania this past weekend gives the country a chance to push the reset button on its relations with foreign investors.
After a year when the government has been drawn into fruitless squabbles in commercial courts and arbitrations with no less than five international companies, now is the time to reassure investors that Romania is open for business. The time to close the book on introspective and opaque government is long overdue.
Energy companies have been in the forefront of these battles with Romanian officialdom. So the government took Enel, the Italian energy company, to court over a breach in a privatisation contract but ended in July 2016 facing a €1bn bill. E.on, the German energy company, won an arbitration dispute in Paris and the government was forced to pay its legal costs. Read more
By Jon Fredrik Baksaas, GSMA
There are a myriad of social and economic benefits made possible by bringing communication services to previously unconnected populations. This commitment to “Digital Inclusion” – the ability to extend connectivity to all corners of the globe – is driving internet access and usage, and providing access to vital services such as healthcare, education and commerce.
One barrier to digital inclusion is the availability of networks. To address this mobile operators have invested billions rolling out 3G/4G mobile broadband across the globe. Today mobile broadband networks cover 80 per cent of the world’s population, providing internet access to many markets where fixed access is either prohibitively expensive or non-existent. Read more
A month before his official inauguration, Donald Trump is already tossing diplomatic grenades in China’s direction. It is a sign of things to come. 2017 is shaping up to be a highly eventful, taut and precarious year for China-US relations. This is partly due to a simple scheduling coincidence.
2017 will be the first time ever when both the US and the PRC in the same year will usher in new governments. The US will kick things off on January 20th by swearing in Donald Trump as President. China, meanwhile, will undertake its own large political upheaval, its five-yearly change in political leadership, culminating in the 19th Communist Party Congress sometime late in the year. Virtually the entire government hierarchy, from local mayors on up, will be changed in a monumental job-swapping exercise orchestrated by Xi Jinping, China’s president. Read more
Turkmenistan is doing its best to attract foreign investors to what President Gurbanguly Berdymukhammedov (pictured above) says is his country’s “colossal economic potential and stability”. But while the potential is certainly there, the stability, at least for investors, is lacking. Turkenistan is ruled by an idiosyncratic form of authoritarianism and is permeated by arcane institutions and bureaucratic practices that pose big challenges to investors.
Last month, the economy ministry and the Chamber of Commerce and Industry of Turkmenistan organised the VIII International Investment Forum at the national tourist resort of Avaza, the state news agency reports. In his address to the forum, Mr Berdymukhammedov assured foreigners that their investments were secure. Read more
By Ariel Cohen, Atlantic Council
The mood is festive in the Russian capital, and expectations are high that Donald Trump’s elections may turn a new page in the difficult relationship between Moscow and Washington.
The death spiral of US-Russian ties stretches back through the Barack Obama years to George W. Bush’s second term, when Russia invaded neighboring Georgia. Things got as bad as during the darkest days of the Cold War, but now the time may have come to reverse course.
Mr Trump, Moscow’s logic goes, has a warm place in his heart for Russia’s long-serving president, Vladimir Putin. He expresses realpolitik instincts compatible with Putin’s worldview. Read more
One of the most striking features of the new cold war has been the aggressiveness with which the Russian state has turned the institutions of openness into weapons against the west while simultaneously denying its opponents the use of equivalent institutions at home.
Every facet of democratic life, from free speech to the independence of civil society, has been manipulated as part of the Kremlin’s strategy of information warfare. The same goes for western systems of justice. The rule of law doesn’t apply in Russia, especially when the interests of the governing elite are at stake. Courts function as an extension of Vladimir Putin’s power, convicting and sentencing his enemies on command. Yet the Russian state is able to avail itself of the west’s independent legal systems on the same basis as everyone else, and frequently does so to pursue its victims on foreign soil. Read more
For two decades China’s economy – second in size only to that of the US – roared ahead at annual double-digit rates of growth. This year, according to official data, it is growing at 6.7 per cent. The current rate would be significantly less were it not for the continued willingness of China’s authorities to pump increasing amounts of cash into overheated real estate, financial and state owned enterprise sectors.
The risks of this policy are substantial, not just to China’s economic prospects, but to world financial markets. Read more
By Tomasz Telma, IFC
If you want to see how quickly the developing world is urbanising—and the problems that this creates—look no further than Istanbul.
In 1990, Turkey’s commercial capital was home to about 6.5m people. By 2014, that number had more than doubled to 16m, creating an urban crush that has sparked everything from blackouts to 2 am traffic jams.
But Istanbul is far from alone. Its struggles echo those of many cities in the developing world, where a massive urban migration has stretched local infrastructure to a breaking point, entrenching poverty and driving up greenhouse gas emissions. Read more
Apple is to launch two new research and development (R&D) facilities in China, aiming to expand its presence in this burgeoning consumer market and facilitate closer working relationships with some of the world’s leading consumer electronics and hardware manufacturers. Whether this investment will reverse the trend of falling revenues, however, remains to be seen.
In September, it was revealed that Apple is planning to open a $45m research centre in Beijing, employing 500 people tasked with the development of innovative hardware. One month later, it was announced that a further R&D facility will go ahead in Shenzhen, Guangdong, an area often described as China’s ‘Silicon Valley’. Read more
By Kevin Martin, HSBC
China’s consumers are by no means the wealthiest in the world. But they are years ahead of their counterparts in many developed economies in terms of how they shop and pay for what they buy. In this, they are revolutionising the way consumer finance is conducted in the world’s second-biggest economy.
Like so many of the changes sweeping China, the uptake of internet and digital technologies has happened with head-spinning speed.
As recently as 2000, a mere 1.7 per cent of mainland Chinese were online. Now, the country has more than 700m internet users – a penetration rate of more than 50 per cent. Read more
September’s United Nations Summit for Refugees and Migrants at the General Assembly won pledges to increase official funding and resettlement to improve on 2015’s dismal record, when just over half of its appeal and one-tenth of slots were covered. Countries also endorsed preparation of a comprehensive medium-term plan detailing international community priorities and responsibilities in future emergencies.
However, the greatest breakthrough could be represented by private sector groups that organized their own support around the event, including the UN Global Compact for businesses dedicated to the Sustainable Development Goals, and President Barack Obama’s White House Call to Action, which drew initial commitments from 50 companies of hundreds of millions of dollars and innovative solutions to economic and practical challenges. Read more