This Week on the Frontiers, March 2nd 2019

Africa

Nigerian president prepares for daunting second term. Nigerian President Muhammadu Buhari has secured a second term helming Africa’s largest economy and top oil producer, but the former general now faces a dizzying array of challenges including a divided population, moribund economy and a rejuvenated Islamist insurgency, Joe Parkinson reports. The president’s second-term task will be to deliver on his central campaign pledges to continue fighting rampant corruption and insecurity.

Supporters of Nigeria’s President Muhammadu Buhari celebrate in Kano, Nigeria, after he won a second term, Feb. 26.REUTERS

The election was marred by delays, low-turnout, ballot manipulations and violence that left 39 people dead. The opposition rejected the results as a “sham,” alleging systemic rigging by the government and pledging to mount legal challenges.

Many analysts and diplomats say the president’s first term failed to significantly reduce corruption or improve security, and few expect Mr. Buhari to increase the pace of reform. “Buhari, is likely to maintain his previous policy stances, suggesting only slow progress on key oil sector legislation and broader reforms,” Fitch Solutions said. Capital Economics put it more bluntly: “This…sets the stage for another four years of [Mr. Buhari’s] interventionist and growth-sapping policies.”

Senegal’s president re-elected after race tested by violence. Senegal’s President Marky Sall won re-election, capping days of tense vote tallying following an unusually violent campaign in one of Africa’s most stable democracies, Nicholas Bariyo reports. The West African nation’s election commission announced Mr. Sall garnered 58% of the vote in the first round on Sunday, handing the 57-year-old former geologist a second term in office.

His two main opposition contenders, Idrissa Seck, a former prime minister, and Ousmane Sonko, a former tax inspector, have challenged the credibility of the polls, insisting their own tallies showed the president had garnered less that the 50% needed to avoid a runoff. Mr. Sall’s team rejected the claim.

Last month, the electoral commission ordered the suspension of campaigning in eastern city of Tambacounda after deadly clashes between ruling party and opposition supporters. The unrest has added to concerns that Senegal could join a growing list of African nations—from Tanzania to Uganda and Zambia—that are backsliding on democracy.

Zimbabwe set to sign on to IMF program. Zimbabwe’s Finance Minister Mthuli Ncube is headed to Washington this week to convince the International Monetary Fund to monitor his efforts to cut the country’s budget deficit and overhaul its crisis-rattled economy.

In an interview with The Wall Street Journal’s deputy Africa bureau chief Gabriele Steinhauser, Mr. Ncube said he expects an IMF Staff Monitored Program to be in place by the end of March. While an SMP doesn’t come with any money from the Washington-based fund, the minister said it should help the government secure “soft loans” to clear some $1.8 billion in arrears with the World Bank and other international financial institutions and, eventually, debt relief from the Paris Club of major creditor nations. “An SMP is a very good thing for us,” Mr. Ncube said from his office in Harare.

Mthuli Ncube believes an IMF monitoring program would help Zimbabwe solve its debt crisis. GETTY IMAGES

In recent months, the former finance professor has taken an axe to Zimbabwe’s runaway public spending, turning a budget deficit that reached around 12% of gross domestic product in 2018 into a primary surplus for the months of December and January, partly by slashing the public payroll and collecting a 2% tax on mobile payments. But there are doubts—including at the IMF headquarters in Washington—that Zimbabwe’s austerity drive will last. “The concern is that it is really too tough,” said a person familiar with the fund’s thinking. “They can stick to it maybe three to six months.”

Gold overtakes coffee as Uganda’s biggest export. Uganda’s 2018 gold exports increased 27%, boosted by higher shipments from a new plant owned by Belgium refiner Tony Goetz, Nicholas Bariyo reports. According to the East African nation’s central bank, shipments of 13.2 metric tons of gold generated $514 million for Uganda and allowed the metal to surpass coffee as the country’s leading foreign revenue earner.

Gold exports have been on the rise since 2015, after Tony Goetz, which also operates at the Dubai Gold and Commodities Exchange, commenced output at its $20 million gold plant. Uganda is Africa’s top coffee exporter, and it shipped 4.1 million bags last year worth $436 million.

Algerians stage rare protests against leader’s rule. Demonstrators poured into the streets of Algeria’s cities in the largest political protests in years, Jared Malsin writes The protestors were calling for the departure of an elderly president who is seeking a fifth term after nearly two decades in power.

Algerians protest against the fifth term of Abdelaziz Bouteflika in Algiers, the capital. EUROPEAN PRESSPHOTO AGENCY

Protest organizers urged one million people to demonstrate on Friday, after tens of thousands took to the streets during the week calling for political change in the energy-rich but economically stagnant country.

Protests against President Abdelaziz Bouteflika are rare in Algeria. Widespread protests last took place in Algeria in 2011, during the Arab Spring, but were quelled partly by state subsidies of fuel and other basic goods. But eight years after the Arab Spring, which toppled dictators and triggered civil wars but did little to change the day-to-day lives of many people, many Algerians speak of a deep disaffection with the government of Mr. Bouteflika, who is 81 years old and has rarely been seen in public since he suffered a stroke in 2013.

Asia

‘It’s all capitalism there now.’ North Korea’s economy shrugs off sanctions. The U.S. has been leading a world-wide campaign to pressure North Korea into giving up its nuclear arsenal through an increasingly stringent sanctions regime. Available evidence suggests it’s not working, Eun-Young Jeong and Dasl Yoon report. Economic indicators show day-to-day commerce in the country has remained resilient. And many residents, having lived through much harsher conditions in the 1990s, appear to be adapting as market forces take deeper root, according to three dozen defectors, humanitarian workers, government officials and other visitors interviewed by The Wall Street Journal.

A hair salon at the Hungnam Fertilizer Complex in Hamhung, North Korea. GETTY IMAGES

Tougher sanctions, including new restrictions on foreign trade approved in 2016 and 2017, have caused North Korea some pain, depriving the regime and elites of revenue from commerce with other countries, including China. In other ways, North Korea’s economy appears to be holding up well. Rice prices have remained stable, and gasoline prices, which rose after sanctions were tightened, have fallen significantly from highs in the fall of 2017.

North Korea’s currency, the won, has held steady against the U.S. dollar. Construction projects continue in the capital. Several visitors to Pyongyang and a few other major cities said they even observed some improvements in daily life, including more electricity and cheaper coal, which makes it easier to heat homes.

Vietnam gives U.S. aviation industry $21 billion boost. Vietnamese air carriers signed more than $21 billion in airline orders and service contracts with U.S. companies on Wednesday on the sidelines of this week’s summit between President Trump and North Korean leader Kim Jong Un, Vivian Salama and James Hookway report. Representatives of the Vietnamese carriers and U.S. firms signed the deals with Mr. Trump and Vietnam’s President Nguyen Phu Trong looking on, underscoring the growing commercial relationship between the former wartime foes.

President Trump and Vietnamese President Nguyen Phu Trong at a signing ceremony between VietJet’s Nguyen Thi Phuong Thao and Boeing’s Kevin McCallister. REUTERS

Some of the deals had been announced before, including VietJet Air’s plans to buy 100 Boeing 737 Max jets valued at $12.7 billion. It added to the package a $5.3 billion agreement with General Electric Co. to provide and service the company’s Leap-1B engines. Bamboo Airways, a new player in the Vietnamese market, will buy 10 Boeing 787-9 Dreamliner jets valued at $3 billion.

The U.S. is now Vietnam’s single biggest export market, and the communist state’s economic boom in recent years has prompted some diplomats to hold it up as a model that North Korea might one day follow.

Latin America

Evolving Venezuela sanctions pose problems for banks. Recently imposed sanctions on Venezuela pose new compliance risks for U.S. and international financial institutions as they seek to untangle business ties between the two countries to meet evolving requirements, Mengqi Sun writes. Gradually increasing U.S. measures targeting the government of Venezuela, and the country’s state-owned oil giant in particular, have made banks more reluctant to touch accounts that might relate to Venezuela for fear of sanctions violations.

The scenario is complex because the economic and business connections between the two countries have a foundation in the oil-and-gas industry, which can affect automobile and heavy machinery manufacturing, as well as elements of insurance and finance, said Cari Stinebower, a sanctions lawyer at Crowell & Moring LLP. “Anyone that touches the petroleum industry is affected by the sanctions,” Ms. Stinebower said.

The sanctions on Venezuela’s financial and oil sectors are designed to cripple the Maduro regime, which the U.S. has accused of human rights abuses and curtailing freedom of speech. But the interconnectedness of the U.S. and Venezuelan economies might make it more challenging for banks to stay compliant, sanctions experts said.

Cuba’s reliance on Venezuela for cheap oil presents potential threat. The potential collapse of Venezuelan President Nicolás Maduro’s regime poses a threat to Cuba, which relies on Caracas for about 28% of the its oil needs, John Otis writes. If Juan Guaidó, who is recognized by the U.S. and about 50 other countries as Venezuela’s legitimate head of state, wrests control of the country from Mr. Maduro, his government is expected to quickly halt oil shipments to Cuba that have been taking place under a longstanding oil-barter agreement.

A gas station in Havana. GETTY IMAGES

The result would be power outages, fuel shortages and government spending cuts that would cause the Cuban economy to shrink by as much as 10%, according to Omar Everleny Perez, an independent Cuban economist in Havana. Ted Henken, a Cuba expert at Baruch College in New York, said the end of bargain-basement-priced oil for Cuba would cause a seismic shift on the island. “Cuba has limped along for the past 15 years thanks, basically, to the relationship with Venezuela,” he said.

Global

Frontier markets continue strong 2019 performance. Investors in many frontier markets had an exceptionally good month in February, according to Hasnain Malik, head of equity research at frontier-focused investment bank Exotix. Egypt, Kazakhstan and Vietnam were all up 7%, while Kenya’s market managed to climb 4%. Romania, recovering from a sell-off prompted by onerous new tax proposals late last year, rose 15% on the back of optimism that the tax proposals would be diluted.

Vietnam has been performing strongly across multiple measures, Mr. Malik said. “Vietnam benefited from tentative progress in US-China talks, and benign January macroeconomic data, with industrial output up 8% year-on-year, consumption up 12%, and foreign direct investment commitments for January up 50% compared to the previous year,” he said. Investors might have a hard time accessing the market, though, as “almost all of the more liquid, transparent listed businesses are at the foreign ownership limit,” he added.

That limit is one of the key factors preventing Vietnam’s upgrade to emerging-market status by index provider MSCI. But, according to Kevin Snowball, CEO of PXP Vietnam Asset Management, the country already satisfies many of the MSCI’s quantitative criteria and the Prime Minister Nguyen Xuan Phuc has indicated he wants to push for an upgrade. “With the right signals on policy commitment, there is every possibility of Vietnam being placed on MSCI’s watch-list in June,” Mr. Snowball said.

KEY STORIES FROM THE WSJ

Shell Faces Prosecution Over Nigeria Deal

Mozambique Sues Credit Suisse Over Debt Deals

Violent Extremism in West Africa Spreads as U.S. Trims Military Footprint

Vietnam Is the Early Winner From the Trump-Kim Summit

India Bombs Pakistan in Response to Kashmir Terrorist Attack

U.S. to Send Stolen Assets Back to Kyrgyzstan

Saudi Arabia Names Princess as New U.S. Ambassador

Latvia Ordered to Reinstate Central Banker

Maduro’s Opposition Urges Military Force in Venezuela

Russia Firms Up Support for Venezuela’s Crisis-Hit Government

Defaults Hurt, But Emerging Debt Still Wins in the Long Run

AROUND THE WEB

Sinohydro to Build 300MW Hydro Plant in Guinea

Ethiopia To Turn Least Developed Regions Into Economic Engines

Sudan’s Bashir Bans Protests and Regulates Foreign Currency Trade

Niger Puts Private Capital at Heart of Economic Plan

Myanmar Government Pins Hopes for Rakhine State on Tourism

Cambodia Joins Beneficiaries of U.S.-China Trade Spat

Brexit Threatens Cambodia’s Progress

Ukraine President Tries to Salvage Corruption Law as Election Looms

Policy Clash Makes Argentina Own Worst Enemy on Inflation

Argentina’s Macri Throws $2.6b Lifeline to Struggling Firms