WSJ Emerging & Growth Markets, March 27th 2021

Welcome to the latest edition of WSJ Pro Emerging & Growth Markets, our weekly review of key news affecting frontier and small emerging markets. This newsletter is a companion to Strategic Intelligence, an information resource focused on emerging markets that brings together the global news coverage of The Wall Street Journal with the analysis of market intelligence firm FrontierView. 

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Africa

Uganda delays oil pipeline project following Tanzanian leader’s death. Uganda will delay the long-awaited launch of its $3.5-billion oil export pipeline through Tanzania until next month following the death of Tanzania’s President John Magufuli, Nicholas Bariyo reports. The launch of the 900-mile project, along with the commencement of work on oil fields operated by Total, was originally scheduled to take place on March 22 but will now remain on hold until April as Uganda joins Tanzania to mourn Mr. Magufuli, the Uganda Petroleum Authority said.

The pipeline will move from Uganda’s western border with the Democratic Republic of Congo, through Tanzania, and end at the Indian Ocean port city of Tanga. Construction is expected to take around three years.

Uganda discovered oil around its western border more than a decade ago, but the commercialization of vast crude reserves, estimated to contain as much as 6 billion barrels of crude, has dragged on due to a number of disruptions. Total holds a majority stake in the oil project, which is expected to deliver some 230,000 barrels-per-day of crude by around 2023.

Analysis: The brutal business model behind the Nigerian school kidnappings. The kidnap for ransom business is booming across northern Nigeria, and schoolchildren are its hottest commodity, Joe Parkinson and Gbenga Akingbule report. Since December, heavily armed criminal gangs have abducted and ransomed more than 800 schoolchildren. Hundreds of school campuses have been closed across four states for fear of more attacks, leaving close to 15 million Nigerian children out of school—more than any other country in the world.

The mass abduction that drew international attention was Boko Haram’s infamous kidnapping of 276 schoolgirls from the town of Chibok in 2014, igniting the global #BringBackOurGirls campaign. More than 100 of those captives were freed in two exchanges in 2016 and 2017 for a prisoner swap and a ransom of €3 million, or about $3.6 million, according to government officials and people involved in the negotiations.

“Kidnap for ransom has become so normalized and institutionalized that it now bears the mark of legal enterprise,” said Bulama Bukarti, a security analyst and columnist with Daily Trust, northern Nigeria’s leading daily. It is even more lucrative, “especially when it comes to children,” he said.

President Muhammadu Buhari, a former general who won back-to-back elections on a promise to restore security, said recently the region is facing a profound crisis and has urged regional governors to stop paying ransoms. Fulan Nasrullah, a terrorism analyst who has advised government officials on the kidnappings, says that’s going to be difficult. “If they don’t pay the money they are prepared to kill the children,” he said.

Asia

Asian exporters scramble to resolve Suez-related supply chain constraints. Asian and European businesses, which rely heavily on the Suez Canal to move their products between the regions, are weighing contingency plans as efforts to move a ship blocking the canal drag out, Philip Wen, Jing Yang and Stella Yifan Xie report. Exporters are already wrestling with higher costs and delays in supply lines stretched during the pandemic.

A satellite image shows idling ships at the entrance of the Suez Canal in Egypt on Tuesday. PHOTO: PLANET LABS INC/REUTERS

Jack Yang, the founder of Yiwu Jin-Jack Import & Export firm, which sells goods such as umbrellas and jewelry from its base in eastern China’s Yiwu city, said several of his clients are now considering sending goods by rail to Spain and Germany instead of dealing with a potential prolonged blockage of the canal. Others may be forced to consider airfreight.

Some exporters are simply stuck, unsure whether to wait things out and hope the canal clears soon or look at alternative routes such as one around the southern tip of Africa, a detour that is more expensive and takes about two weeks longer. “If we make an alternative decision now and if things improve in the next few days, you could end up in another costly and time-consuming scenario,” said a Shanghai-based executive at an international logistics firm specializing in chemicals, which has dozens of containers stuck on the Ever Given. 

Middle East

Saudi Arabia offers cease-fire deal in Yemen. Saudi Arabia unveiled a proposal for a cease-fire aimed at disentangling itself from Yemen’s civil war, as rebel forces press an offensive and the Biden administration seeks to extricate the U.S. from the six-year-old conflict, Stephen Kalin reports. The proposal announced on Monday includes a nationwide cease-fire, reopening of both the airport in the capital San’a and the country’s largest port at Hodeidah, as well as the start of political consultations under United Nations supervision, which have so far failed to resolve the conflict between the Saudi-backed forces and the Houthi rebels.

“We want the guns to fall completely silent. That is the initiative and that is the only thing that can really help us get to the next step,” Saudi Foreign Minister Prince Faisal bin Farhan told reporters. The Houthis, who are aligned with Saudi archenemy Iran, dismissed the proposal as containing nothing new.

Armed Houthi rebels riding in a funeral procession on March 9 for fighters allegedly killed in recent fighting with the Saudi-backed Yemeni government forces.

PHOTO: HANI AL-ANSI/DPA/ZUMA PRESS

Following the announcement, the State Department said Secretary Antony Blinken had spoken with Prince Faisal by phone to reiterate U.S. commitment to Saudi Arabia’s defense and support for efforts to end the conflict in Yemen.

Saudi Aramco to retain $75 billion dividend despite earnings slump. State-oil giant Saudi Aramco said it would keep its $75 billion dividend pledge despite a 44% drop in its 2020 profit, Summer Said writes.

The Saudi petrochemical company’s payouts, which mostly go to the Saudi government, were significantly higher than its 2020 free cash flow of $49 billion.

• Oil giant Aramco’s shares remain a curiosity

The company’s gearing surged from minus 4.9% in the first quarter of last year to 21.8% in the third quarter as it spent $69 billion for a majority stake in Sabic, the company said.

Iranian politicians divided on return to nuclear talks with U.S.Iran’s political leaders are divided over how to respond to U.S. President Biden’s overture to start negotiations aimed at reviving an international agreement that puts limits on Tehran’s nuclear ambitions in exchange for sanctions relief, Sune Engel Rasmussen and Aresu Eqbali report. The split, reflecting disagreements over how long Iran can withstand the economic damage inflicted by sanctions and political jockeying ahead of presidential elections in June over who will be able to claim credit if they are lifted, has made it hard to predict when and under what conditions Iran would be willing to meet with the U.S., diplomats say.

President Hassan Rouhani has said publicly that Tehran should be willing to return to the strictures of the nuclear accord either all at once or in steps, as long as the U.S. first lifts at least some of the damaging economic penalties it has imposed.

Iranian Supreme Leader Ayatollah Ali Khamenei hasn’t taken sides in the domestic debate over starting talks with the U.S.

PHOTO: SUPREME LEADER OFFICE HANDOUT/SHUTTERSTOCK

More conservative opposition politicians, who control the nation’s Parliament, argue that Washington must lift all sanctions imposed by the Trump administration before Iran resumes compliance with 2015 multination deal. Iranian Supreme Leader Ali Khamenei, who has the final say on matters of national security, said Iran would return to all its commitments in the accord once the U.S. lifted all sanctions.

Europe

Erdogan plunges Turkey into fresh turmoil. Turkey’s economy is facing fresh turmoil after the surprise ouster of the central bank governor by President Recep Tayyip Erdogan, Jared Malsin and Caitlin Ostroff report. The move added another chapter to years of unpredictable economic policy, spooking foreign investors and possibly sowing the seeds of a financial crisis.

Last Friday, Mr. Erdogan replaced Naci Agbal with Sahap Kavcioglu, a former member of parliament for Erdogan’s Justice and Development Party, who publicly sided with the president’s calls for lower interest rates, despite inflation hitting 15.6% annually in February. Mr. Agbal had raised interest rates in an effort to fight inflation. Investors poured billions of dollars back into the country since he was appointed in November.

• Turkey risks currency crisis after ousting of central bank chief

The dismissal of Mr. Agbal triggered on Monday one of the worst single-day selloffs of Turkish lira-denominated assets, as investors scaled back their exposure to the currency.

Mr. Kavcioglu has sought to reassure markets by saying he would curb inflation but hasn’t said whether interest rates will change.

Latin America

Buenos Aires bondholders sue over $7 billion debt logjam. Bondholders filed suit in New York on Tuesday against Argentina’s Buenos Aires province after talks broke down over restructuring $7.1 billion in debt, Andrew Scurria and Ryan Dube write. The bondholders sought a judgment in the U.S. District Court in New York over the province’s failure to make debt payments stretching back to April of last year.

Buenos Aires stands apart from other Argentine provinces such as Córdoba, Salta and Entre Ríos that have come to terms with creditors this year. Before the Covid-19 pandemic, Argentina signaled it would seek to restructure its sovereign and municipal debt obligations and reached an agreement in August to restructure $65 billion in sovereign bonds.

Three years into a grinding recession, the economy is in its worst shape in decades, with scant cash and gold reserves to make debt payments. Despite last year’s sovereign-debt restructuring, Argentina must still reach a separate deal with the IMF before regaining access to international capital markets.

Brazil court ruling paves way for Lula da Silva Presidential bid. Brazil’s Supreme Court ruled that the judge who convicted former President Luiz Inácio Lula da Silva of corruption was biased, strengthening the leftist leader’s likely election bid next year, Samantha Pearson and Luciana Magalhaes report. In a ruling on Tuesday, the court concluded that Sergio Moro, the lower-court judge who oversaw the country’s so-called Car Wash corruption trials, didn’t act impartially in the case amid accusations he coached prosecutors.

Former Brazilian President Luiz Inácio Lula da Silva was convicted in 2017 and sentenced to almost a decade in jail, although he served less than two years of his sentence.

PHOTO: FERNANDO BIZERRA JR/EFE/ZUMA PRESS

The decision throws out Mr. da Silva’s 2017 conviction over allegations he received a beachfront apartment as a bribe—a conviction that later landed him in jail and barred him from running in the last presidential elections. After being released from prison in 2019, Mr. da Silva has emerged as the country’s main opposition leader and strongest challenger to President Jair Bolsonaro, who is facing growing criticism over his handling of the Covid-19 pandemic.

Brazil’s death toll from the virus reached a daily record high of 3,251 Tuesday as hospitals around the country run short of beds and face deficits of oxygen and other supplies.

Mr. Moro, who is still considered by many Brazilians to be a national hero for his efforts to stamp out corruption, quit Mr. Bolsonaro’s administration last year after accusing the president of political interference in federal criminal investigations.

What We’re Reading

Eritrea withdraws from Ethiopia’s restive Tigray region. (WSJ) 

Ebola outbreaks sparked by survivors show virus’s long reach. (WSJ) 

Republic of Congo’s President Sassou Nguesso wins reelection by a landslide. (DW) 

Ghana heads back to debt markets to lock in borrowing costs. (Bloomberg) 

Egypt expanded the Suez Canal. It wasn’t enough. (WSJ)  

Suez Canal backlog grows as efforts resume to free trapped ship. (WSJ) 

Egypt renews warning to Ethiopia over Nile dam. (Asharq Al-Awsat) 

South Africa’s platinum miners shine as fuel-cell demand grows. (WSJ)

Sri Lanka secures $1.5 billion Chinese loan. (Arab News) 

U.S. backs Philippines in standoff over South China Sea reef. (AP)

Philippines deploys more patrol ships amid rift with China. (AP) 

Opinion: Bangladesh, five decades after independence, has much to be proud of. (WSJ)

Fire in Rohingya refugee camp in Bangladesh leaves hundreds missing. (WSJ)

India suspends Covid-19 vaccine exports to focus on domestic immunization. (WSJ)

Developing nations seek alternates after India restricts Covid-19 vaccine exports. (WSJ) 

India pledges to strengthen defense ties with U.S. (WSJ) 

Quick to contain Covid-19, Asia trails West in vaccinations. (WSJ) 

North Korea doubles down on nuclear weapons plan after Biden’s salvo. (WSJ) 

Israel’s political deadlock is set to continue as election is too close to call. (WSJ) 

Belarus President Alexander Lukashenko names possible successors. (BNE Intellinews) 

Kirchner: Argentina can’t pay $45 billion IMF loan. (Buenos Aires Times)

Migrant surge at U.S. border prompts White House talks with Mexico and Guatemala. (WSJ) 

Covid-19 variant rages in Brazil, posing global risk. (WSJ)

Brazil’s central bank uses payment platform to shake up banking sector. (WSJ Pro Central Banking)