INTERNATIONAL ECONOMY – TRENDS
[Financial Times] US inflation fell to 2.4% in September Inflation fell but beat expectations, cementing expectations that the Federal Reserve will cut interest rates at its next meeting in November. Thursday’s inflation figure marked the sixth consecutive month in which the annual headline rate has fallen. However, once volatile items such as food and energy were removed, «core» inflation rose faster than expected, up 3.3 percent in the year through September. Thursday’s jobless claims data also beat expectations. The number of Americans filing for unemployment insurance rose to 258,000, nearly 30,000 more than the expected figure and the largest weekly increase since August 2023. Against an election backdrop, the inflation figure may not help the Harris campaign. Trump seized on the inflation and unemployment data to warn of «the worst depression» if Harris was elected.
[Reuters] China launches delayed stimulus to meet 2024 growth target China plans to issue special sovereign bonds worth around 2 trillion yuan ($284.43 billion) this year as part of a new fiscal stimulus. Shanghai and Shenzhen are planning to lift key restrictions on home purchases. They are looking to push economic growth toward the target of about 5% this year. In recent months, a wide range of economic data has fallen short of forecasts, raising concerns among economists that the growth target is at risk and that a long-term structural slowdown may be at play. In this regard, the People’s Bank of China cut the amount of cash that banks must hold as reserves by 50 basis points. This frees up 1 trillion yuan ($142.5 billion) in liquidity in the banking system and was accompanied by a cut in the benchmark seven-day reverse repurchase agreement interest rate by 20 basis points to 1.50%. In turn, yuan raised through special bonds will be used to increase subsidies for a consumer goods replacement program and for commercial equipment upgrades. They will also be used to provide a monthly allowance per child. It also seeks to help local governments address their debt problems. The impending fiscal measures would mark a shift toward stimulating consumption. Weeks later, during a symposium commemorating the 40th anniversary of the first national-level Economic and Technological Development Zone, Vice Premier He Lifeng relayed Xi Jinping’s instructions and called on development zones to recognize new challenges, act as pioneers in reforms, drive regional development, and lead China’s economic transformation and global integration. Upcoming high-level meetings, such as the National People’s Congress Standing Committee and Politburo session, are expected to outline broader strategies to boost growth and address the complex challenges facing China’s economy.
[Bloomberg] China pledges to meet its economic targets, but refrains from implementing a large stimulus. China’s National Development and Reform Commission (NDRC) announced plans to accelerate investment and support the economy, bringing forward 100 billion yuan ($14 billion) of spending from 2025 to 2024. It also seeks to expand financing through special local bonds and accelerate the issuance of 290 billion yuan in bonds by the end of October. In addition, the recent Chinese Politburo meeting on September 26 addressed current economic difficulties, such as the slowdown in consumption, rising unemployment and pressure on the real estate sector. Emphasis was placed on expansionary fiscal measures, especially tax cuts and stimulus to public spending, while monetary policies were a secondary focus. Incentives to strengthen the private sector and social welfare were also promoted, including efforts to secure employment and moderate food and housing prices. This approach seeks to avoid financial risks and maintain overall stability. Despite these measures, analysts point out that they may not be sufficient to achieve a strong recovery in economic growth. Key investments include improvements in infrastructure, utilities and urban systems. The NDRC also highlighted the need to improve urban infrastructure, such as water, drainage, gas and heating systems, estimating that China will need to invest around 4 trillion yuan over the next five years to upgrade 600,000 kilometers of these systems. Although the government is introducing fiscal stimulus measures, market analysts remain skeptical about their potential to significantly boost growth. Some experts anticipated a larger stimulus package, with estimates ranging from 2 to 3 trillion yuan, which would include support for local governments, infrastructure and social spending. Chinese markets reacted enthusiastically to the news of the monetary stimulus, but have turned cautious as investors await more details on the fiscal stimulus. The CSI 300 index of shares on the Shanghai and Shenzhen stock exchanges, and Hong Kong’s Hang Seng index, have fallen in October, although they continue to post gains so far this year. China’s economy expanded 4.6% year-on-year in the third quarter, according to announcements on Friday, October 25, down from the previous three months, underscoring weakening growth as Beijing steps up efforts to boost the economy. Authorities have not yet quantified the additional fiscal spending, but analysts believe this could be announced at a meeting of the standing committee of the National People’s Congress, China’s parliament, in the coming weeks, following the U.S. elections.
[Bloomberg] What really happens on the ground when the U.S. imposes tariffs on China The story from Pittsview, Alabama, and Emporia, Virginia, shows the consequences for industries that are supposedly being protected. In 2020, U.S. trailer manufacturers filed a petition in Washington requesting punitive tariffs on chassis manufactured by Chinese state-owned container giant China International Marine Containers Group Co. (CIMC). In 2021, the government was finalizing tariffs of more than 220% on Chinese trailers, on top of the 25% tariffs put in place during the Trump administration. Imports were halted, leaving a gap in the market just when the economy suddenly needed many more trailers. Domestic manufacturers applauded but trucking companies and port operators complained that the new tariffs and the end of chassis imports were making the now severe supply chain problems even worse. Chinese-owned CIMC set up shop in Emporia in 2015. When it became clear that changes were coming, CIMC changed the name of its U.S. subsidiary to CIE Manufacturing. It invested more than $20 million in setting up a supply chain out of China to comply with the rules. While restructuring its business, CIE executives discovered that one of the rivals that prompted the tariffs (Alabama-based Pitts Enterprises) was importing thousands of chassis from a privately held Vietnamese company that makes cars, buses and trucks. CIE suspected that the chassis included parts and raw materials from China, which meant they should be subject to the same tariffs that Pitts had pushed for on CIMC’s former Chinese-made chassis. In 2023, Customs ruled that Pitts’ Vietnamese trailers contained enough Chinese components to be subject to the new tariffs. But on the other hand, CIE’s Thailand plant was believed to be a front to mask the shipment of Chinese-made trailers to the U.S. then CIE also faced another damaging investigation and millions of dollars in potential tariffs.
[Bloomberg] The world’s central banks no longer follow the Federal Reserve’s lead Today’s economic reality differs from the era of globalization and the unipolar moment of U.S. geopolitical power of the 1990s and early 2000s. The structure of the world economy changed and the United States and its allies control a smaller share. Today the United States faces the problem of post-pandemic inflation. Europe suffers the same affliction, aggravated by the war in Ukraine. In China, the problem is too low prices. For these reasons, central banks are moving at different paces. The European Central Bank and the Bank of England began lowering rates before the Federal Reserve, as did many emerging market central banks. In China, by contrast, the authorities are struggling to stop a slow collapse of the property market and prop up the stock market. As for the Bank of Japan, it is not cutting but raising. In the coming months, the Fed’s calibration of the pace and magnitude of rate cuts will be important. But it is possible that Beijing’s stimulus bombardment will matter more.
[SCMP] China’s surging steel exports raise concerns it could increase trade tensions China’s steel exports hit an eight-year high as the industry grapples with overcapacity due to a real estate crisis and weak domestic demand. Overseas steel shipments reached 10.15 million tons in September, up 25.9% year-on-year to the highest level since June 2016. But the price of exported steel fell 11.62% year-on-year last month. In the first eight months of the year, China exported 66.818 million tons of steel, a year-on-year increase of 31.8%, but the value of its steel exports fell 10.7%. China produces more than half of the world’s steel and uses it mainly in areas such as construction, infrastructure, machinery and automobiles. China is facing trade investigations from several countries over its steel overcapacity, and this year has already been subject to 28 such investigations in 12 economies, including the European Union, the United States, Brazil, Vietnam and Malaysia.
[Financial Times] How Malaysia is attracting foreign investors Malaysia, known as an exporter of raw materials and a manufacturing hub, is reportedly benefiting from companies’ determination to mitigate the risks generated by ongoing trade tensions. The country is benefiting from the migration of supply chains from Taiwan and southern China because it invested in building an electronics supply chain base; the semiconductor industry as a whole has shifted its value chain to more advanced technology. A study conducted by Standard Chartered in Q1 2024 and based on a survey of 400 banks, investment managers and asset owners based in Europe and the Americas revealed that 25% of respondents have plans to invest or grow their business in Malaysia in the next 12 months. Only mainland China and India scored higher. In 2023, foreign investment was $69.5 billion, which was a record for the country and a year-on-year increase of 23%. According to the IMF, GDP growth forecasts of 4.3% in 2024 are bolstered by a track record of fiscal prudence and a credible monetary policy framework. Malaysia also has one of the most ambitious decarbonization plans in Asia.
[Bloomberg] The Northern Triangle has a chance to escape its past Central American migrant apprehensions at the US border are dropping dramatically. The number of migrants from Guatemala, Honduras and El Salvador attempting to cross the southwest border of the United States has fallen by nearly 30% in the first eight months of the year compared to the same period in 2023. In addition to tighter controls and «pull factors» (such as employment prospects), Central American nations are experiencing growth rates that outpace their neighbors: the three Northern Triangle nations are poised to grow 3.4% annually on average between 2024 and 2026, according to World Bank figures. Through a combination of prudent macroeconomic policies, pro-business reforms, bets on sectors such as tourism and manufacturing, and a remittance boom that fuels consumption, growth is nearly double the overall growth expected for Latin America and the Caribbean this year and above the 2.6% forecast for 2025.
INTERNATIONAL SYSTEM
[BBC] China hits back at EU with brandy tax Arguing to protect its domestic producers with an «anti-dumping» measure, China imposed duties on imports of European brandy. France called the move a retaliation for the large tariffs the EU recently announced on Chinese electric vehicles, and French brandy producers said the tariffs would be «catastrophic» for the industry. France accounts for 99% of brandy exported to China. The European Commission said it would challenge the Chinese tax at the WTO, calling it an «abuse» of trade defense measures. Shares of companies selling alcoholic beverages took a hit following the Chinese announcement.
[The Guardian] Coast Guard message to Taiwan during military drills China conducted military exercises in Taiwan, surrounding its main island and outer territories with aircraft and ships to practice a blockade and attack. It also launched a torrent of propaganda. Prominent among the «inevitable reunification» montages was an illustration showing a satellite image of Taiwan’s main island and a line of arrows surrounding it in the shape of a heart. The accompanying text read, «Hello, my love» and «The patrol has a way of loving you.» Taiwan’s coast guard denounced the image as a form of cognitive warfare and harassment by China. On social media, the image generated mostly mockery and anger. People found the image «creepy.»
[Bloomberg] In China, Harris Seen as Mostly Preferred to Volatile Trump Conversations in Beijing would indicate a preference for Kamala Harris’ continuity over Donald Trump’s unpredictability. Even as issues such as Taiwan, the South China Sea and Joe Bien’s export controls persist, U.S.-China ties have stabilized over the past year. A big part of that has been regular, low-key talks between Chinese Foreign Minister Wang Yi and U.S. National Security Advisor Jake Sullivan. The talks helped manage the conflict and paved the way for another meeting between Biden and Xi Jinping expected later this year. A Harris presidency would allow Xi’s government to build on that foundation and provide a somewhat stable external environment while officials focus on reviving the economy. Trump, for his part, would threaten that strategy by imposing tariffs on China of up to 60%.
ARTIFICIAL INTELLIGENCE
[Project Syndicate] AI is a rare bright spot for global governance. Multilateralism has faced serious challenges recently, such as the inability of the UN Security Council to stop the invasion of Ukraine and the failure of climate summits to achieve sufficient concrete action. In addition, the Sustainable Development Goals (SDGs) have been off course, with some progress reversing. Despite this fragmented geopolitical landscape, global cooperation remains possible, as demonstrated by the UN General Assembly’s first «Future Summit» in September, which focused on one of the greatest transnational challenges of our time: artificial intelligence (AI). Surprisingly, the UN was able to coordinate a global response to this emerging technology. The global political reaction to AI has been one of the fastest and strongest in recent memory. In 2023, UN Secretary-General António Guterres convened representatives from governments, the private sector and civil society to develop a global governance framework for AI. This effort included the 39-member High-Level Advisory Group on AI from around the world. Among its key recommendations was the creation of an International Scientific Panel on AI, modeled on the Intergovernmental Panel on Climate Change (IPCC), with the goal of providing a common knowledge base on AI risks and developments. Beyond establishing a scientific basis, the group advocated ensuring that the benefits of AI reach all countries, preventing the poorest and most vulnerable nations from being left behind. Equitable access to talent, standards, data and funding is key to AI becoming a transformative tool for global development. In September 2023, UN member states adopted the «Global Digital Compact,» a comprehensive governance framework that reflects many of these recommendations. This agreement marks a significant breakthrough, as it overcame differences between powers such as the United States, China, Europe and the Global South, as well as between governments and the private sector. While some question the UN’s role in AI governance, the organization is the only entity with global legitimacy to bring governments and key players into the conversation. The Global Digital Compact shows that, even in a divided world, it is still possible for multilateralism to make progress on crucial issues such as artificial intelligence.
NUCLEAR ENERGY
[Financial Times] Google orders small modular nuclear reactors for its data centers Google has ordered between six and seven small modular nuclear reactors (SMRs) from Kairos Power, becoming the first technology company to order nuclear plants to provide low-carbon electricity for its data centers. The total capacity of the SMRs will be 500 MW and the first commercial reactor is expected to be operational by 2030, with more reactors in operation by 2035. Michael Terrell, Google’s director of energy and climate, stressed that this decision is a milestone in its journey towards clean energy and that nuclear power could play a key role in meeting the company’s energy demand in a clean and consistent manner. It has not yet been decided whether the reactors will be connected to the grid or directly to the data centers. The value of the deal was not disclosed, nor whether Google will finance the construction or simply pay for the electricity once the reactors are operational. This deal follows other commitments by technology companies to nuclear power, such as Microsoft, which announced a 20-year contract to buy electricity from a nuclear plant in the US.
CRITICAL MINERALS
[Bloomberg] China’s fast-growing copper champion is reshaping the world’s metal supply Chen Jinghe, a young geology graduate, received a life-changing assignment in 1982: a government official asked him to head to Zijin Mountain to find gold. This challenge led to the discovery of China’s largest gold deposit, which in turn laid the foundation for Zijin Mining Group Co, a state-owned company now worth $67 billion. Since its inception, Zijin has conducted intensive exploration and acquisition, mining gold, copper and lithium on multiple continents. Although officially a state-owned company, its behavior more closely resembles that of a private firm, with a lean structure and a risk-tolerant approach to its investments. According to Chen, their growth has been divided into three stages: in the first ten years, they focused on gold and copper development in Zijinshan; in the next decade, they expanded their operations throughout China; and in the last ten years, they have sought to expand globally.
Unlike established Western mining companies, such as Anglo American Plc, which have curtailed their investments after the last great commodity boom, Zijin has forged ahead during the sector’s difficult years, enabling it to triple its copper production in the last five years. In 2023, Zijin became the world’s sixth largest copper producer. This expansion coincides with China’s rise as a global growth engine and major consumer of raw materials. In addition, the company has pioneered innovations that enable it to excel in a competitive global landscape. Chen has characterized Zijin as a company that operates «in the middle transition zone» between state-owned enterprises and private competitors. To differentiate itself, it seeks resources in mineral-rich areas, even in underdeveloped regions that many international mining companies consider problematic. However, not everything has been easy; in 2010, the company faced a serious setback when an acid spill from its copper smelter in Zijinshan contaminated a river, killing a large number of fish and causing panic in the community. This incident resulted in charges against several Zijin and local government officials. Despite these challenges, Chen maintains that Zijin has learned from its mistakes and that, in many respects, its standards now exceed those of its Western counterparts. Recently, Zijin has been at the center of U.S. accusations about the use of forced labor in the Xinjiang region, which led to the imposition of sanctions. Chen expressed surprise at these accusations and defended that his workers’ wages were almost double the local average. In the early days of the company, Chen and his team were looking to find more valuable resources than the remnants of gold that had been discovered in the area since the Song Dynasty a thousand years ago. He led his team to explore the forest, where they found a significant gold deposit under the mountaintop, as well as copper reserves. Although mining did not begin until the 1990s, this discovery made Zijin a role model in Chinese mining. Chen emphasizes that «technology and innovation are our key competitive advantage». Zijin has in-house research, design and construction capabilities, enabling it to complete projects quickly. Although most deals have been small-scale, such as the 2018 acquisition of Nevsun Resources for $1.4 billion, Zijin’s strategy of making early-stage acquisitions has been successful. Zijin’s copper production is expected to increase to 1.6 million tons by 2028, a significant increase from 1 million tons the previous year. One of the key risks was a 2015 bid for Canadian Robert Friedland’s Kamoa project. At the time, the industry was facing debt and Kamoa was seen as a promising, but remote, project in the Democratic Republic of Congo. The anticipated surge in demand due to the energy transition has driven the price of copper to record levels. Friedland points out that Zijin does not face the same constraints as Western mining companies, which are very risk-averse. This makes it difficult to imagine a future in which Zijin does not continue with outstanding growth in the sector.
FINANCING FOR DEVELOPMENT
[Bloomberg] JPMorgan closes $1 billion debt swap deal for El Salvador The deal is equivalent to approximately 14% of El Salvador’s debt and allows the country to refinance a portion of its debt and help finance the conservation of its wetlands. Under the terms of the agreement, which is the first of its kind targeting riparian ecosystems, it means that the country will generate more than $352 million in savings, which will be used to protect the Lempa River and its surroundings. Bukele mentioned that the agreement «not only reaffirms this government’s commitment to economic growth, but also allows us to achieve this growth while preserving one of our most precious natural resources».
[Bloomberg] The World Bank is poised to double agricultural financing to $9 billion. The World Bank is poised to double investments in agriculture as it seeks to transform the farm sector amid climate risks and emerging labor gaps in the developing world. The bank will increase its agricultural and agribusiness financing commitments to $9 billion a year by the end of the decade, said President Ajay Banga. It also wants to mobilize companies to increase investments to $5 billion by 2030, according to a speech prepared for an event in Washington on Wednesday. Agriculture is increasingly vulnerable to climate risks while acting as a significant driver of emissions. New tools are allowing private capital to flow into the sector, while digital advances and supplier organizations can help ensure financing reaches more farmers. All of these changes have the potential to reshape the agriculture sector, making the time right for a new World Bank approach, Banga said.
CLIMATE CHANGE
[Bloomberg] How climate change contributes to dangerous hurricane paths The unusual paths of hurricanes Milton and Kir, which could become more frequent due to climate change. Milton follows a rare west-to-east path over Florida, and Kirk is headed toward Europe. High ocean temperatures are linked to the rapid intensification of hurricanes, such as Milton, whose wind increased 95 mph in a single day. However, scientists say more research is needed to confirm whether climate change is affecting hurricane tracks.Atmospheric factors, such as low-pressure systems and changes in the jet stream, are influencing these unexpected paths. Although high ocean temperatures do not necessarily change the paths, they allow hurricanes to maintain their strength, increasing the risk in regions such as Europe, which are not used to tropical cyclones. This underscores the need to prepare for extreme storms in areas that do not usually face these phenomena, as evidenced by Hilary’s impact on California in 2023.
ENERGY
[Bloomberg] India is finally becoming a clean energy superpower India’s clean energy sector is finally showing significant progress after years of missing ambitious targets. Although the country previously fell 40% short of its 175 GW target for 2022, 2024 is shaping up to be a record year, with 18.8 GW of new renewable energy installations through August, surpassing the aggregate total in 2023. By the end of the year, installations are expected to reach 34 GW, and forecasts point to 62 GW annually by 2030.
This growth is driven by large investments in solar and wind power projects, with India’s renewable energy minister confirming that nearly 430 GW are in operation or under construction, putting the country on track to reach its target of 500 GW by 2030. Key factors contributing to this acceleration include more stable policies, a reduction in financial barriers and the expansion of solar module manufacturing capacity, which is expected to meet domestic demand well into the 2040s. This shift is crucial, as India, the world’s fastest-growing major economy, has been a significant contributor to rising global emissions. However, the country’s transition to renewable energy could help reverse that trend as early as 2026. If India succeeds, it will demonstrate that rapid economic growth is possible without the environmental damage historically associated with industrialization, setting a vital example for other developing nations.
[IEA] World Energy Outlook 2024 Although transitions are gaining momentum, the world is far from a trajectory aligned with its climate goals. Decisions by governments, investors and consumers too often entrench the flaws of the current energy system, rather than propel it onto a cleaner, more secure path. Some of the immediate effects of the global energy crisis had begun to subside by 2023, but the risk of further disruption is now very high. Escalating conflict in the Middle East and Russia’s war in Ukraine highlight the continuing risks the world faces in energy security. Clean energy is entering the energy system at an unprecedented pace, including more than 560 gigawatts (GW) of new renewable capacity added by 2023, but its deployment is far from uniform across technologies and countries. China stands out: it accounted for 60% of new renewable capacity added worldwide in 2023, and China’s solar PV generation alone is on track to exceed, by the early 2030s, the total electricity demand of the United States today. In turn, China has been the engine of oil market growth in recent decades, but that engine is now shifting to electricity. On the other hand, increased electricity use in data centers, linked in part to the growing use of AI, is already having strong local impacts, but the potential implications of AI for energy are broader and include better coordination of systems in the electricity sector and shorter innovation cycles.
CHIPS and SEMICONDUCTORS
[Bloomberg] U.S. Evaluates Limiting Nvidia, AMD AI Chip Exports to Some Countries The policy would rely on a new framework to ease the licensing process for AI chip shipments to data centers in places such as the United Arab Emirates and Saudi Arabia; a cap on export licenses would be set for certain countries in the interest of national security. Setting country-by-country limits would tighten restrictions originally aimed at China’s AI ambitions. The Biden administration has already restricted shipments of AI chips by companies such as Nvidia and AMD to more than 40 countries in the Middle East, Africa and Asia for fear that their products could be diverted to China. It is unclear how major AI chipmakers would react to additional U.S. restrictions.
ELECTROMOBILITY
[Bloomberg] VW, BMW and Mercedes are being left in the dust by China’s electric vehicles Ryan Xu, a longtime fan of German automakers, has become disillusioned with brands such as Porsche and Mercedes-Benz because of their disappointing electric vehicle (EV) offerings. As Chinese consumers shift their preferences toward technological refinement over traditional features, German manufacturers are struggling to compete in this evolving market.
Xu’s experience with the electric Porsche Taycan highlighted problems with its software, prompting his family to switch to a more affordable, tech-savvy model from Chinese brand Nio. Recent reports show that Volkswagen, BMW and Mercedes have experienced significant sales declines in China, with BMW facing its largest decline in more than four years and Porsche seeing a 19% drop in sales. These challenges are due to intense competition posed by local brands such as BYD and Xpeng, which offer innovative and affordable electric vehicles. German companies, which once dominated the market, now control only about 15% of it, with less than 10% share in the EV segment. The situation is complicated by the urgent need for these automakers to adapt their strategies to attract younger, tech-oriented consumers. Despite plans to localize production and improve their offerings, German manufacturers face significant structural challenges and resistance to scaling back operations in China. Their historical complacency and underestimation of local competitors have left them vulnerable as consumer expectations continue to evolve rapidly. In response to these problems, companies such as Volkswagen are attempting to strengthen their technology and establish partnerships with local firms. However, with local brands outperforming them and consumer confidence eroding, the road ahead for German manufacturers in China remains precarious.
[Bloomberg] BYD is winning the global race to make cheaper electric vehicles BYD is entering smaller European Union member states, such as Malta. After increasing its annual sales in China 15-fold, to 3 million cars in just three years, BYD now exports to approximately 95 markets, including 20 new ones this year. The company is building or has announced plans to build assembly plants outside China in 10 countries on three continents. The expansion triggered protectionist tariffs in the U.S. and EU, where policymakers fear that Chinese players like BYD will, in the words of Elon Musk, «demolish» their domestic automakers. Stella Li, BYD’s executive vice president and the face of its global expansion, says she wants consumers to see BYD as «a technological pioneer in changing the world.» She adds, «Just like when you use an iPhone, you may not think it’s from a particular country. It’s just part of your life.»
CONFLICT IN THE MIDDLE EAST
[Project Syndicate] Earthquakes in the Middle East The situation in the Middle East, especially regarding Israel and Hezbollah, is escalating significantly. Following the Hamas attack on October 7, Hezbollah rocket attacks on Israel have led to increased tensions along the Israel-Lebanon border. Israel has responded with military actions targeting Hezbollah, having previously degraded Hamas’ military capabilities in Gaza. Recent Israeli operations have involved targeted airstrikes that have decimated Hezbollah’s leadership and capabilities. However, the effectiveness of these strategies is uncertain, especially given that Hezbollah retains a formidable fighting force and a new leadership that must navigate a delicate balance between retaliation and increased Israeli military action.Iran’s involvement has increased, with direct missile strikes into Israel, further complicating the conflict and giving Israel justification to retaliate against Iranian targets. The situation remains volatile, with uncertain implications for both regional stability and the long-term security dynamics between Israel, Hezbollah and Iran.
UKRAINE
[Bloomberg] U.K. to lend Ukraine £2.3 billion to buy military equipment using frozen Russian assets It’s the first time Britain has detailed its contribution. The funding is part of a broader $50 billion package this year from the Group of Seven countries and the European Union that was announced in June. The plan was for the EU and the U.S. to contribute about $20 billion each, with Canada, Japan and the U.K. contributing the rest. The G-7 has collectively frozen about $280 billion of Russian central bank assets, with the vast majority of the funds in Europe, where they are expected to generate about $3 billion to $5 billion in profits a year. But one drawback to the $50 billion loan plan has been Hungarian opposition to changes in the EU sanctions regime, a necessary step to unlock significant U.S. funding.
CHINA and LATIN AMERICA
[SCMP] China invites Colombia to join the Belt and Road Initiative and «explore» a free trade agreement During the visit of Colombian Foreign Minister Luis Gilberto Murillo to Beijing, Beijing’s ambassador in Bogota mentioned that eight or nine months ago the invitation to participate in the Belt and Road Initiative was extended to Colombia, and no one raised objections. The possibility of a free trade agreement is also being explored. Murillo mentioned the potential for Colombia, for example with regard to the energy and socio-ecological transition plan and opportunities to attract investment from China. In South America, only Brazil and Colombia have not yet joined the initiative. With Bogota being an important diplomatic and military partner of the United States, Colombia’s decision is likely to generate concern in the United States. In addition to discussions on the Belt and Road Initiative, Murillo held preliminary talks in Beijing on Colombia’s possible accession to the BRICS.
[Elfaro] Chivo Wallet founders lead El Salvador’s free trade negotiations with China On August 31, El Salvador’s Ministry of Economy and the Invest In El Salvador agency announced the start of negotiations with China for a Free Trade Agreement (FTA). The Salvadoran delegation was led by Raymond Villalta, from Chivo S.A de C.V., accompanied by Oscar Figueroa Torres, former deputy manager of the company. Rommel Rodríguez, of the Fundación para el Desarrollo (Funde), commented that the treaty could affect Salvadoran economic sectors by competing with Chinese products, although some export products, such as coffee, could benefit. Rodriguez also noted potential advantages in the financial sector, with the possibility of Chinese banks offering credit, and highlighted challenges in the digital economy, given the divergence between US and Chinese security standards. Although President Bukele has not presented a formal economic plan, in July he outlined the creation of agromarkets and technology parks. During his first term, he failed to fulfill 78% of his Plan Cuscatlán promises, and details on the use of international funds have been classified. China has made significant investments in El Salvador, such as the construction of a library and the renovation of a port, committing a total investment of $500 million. In addition, although bitcoin was promoted by the Bukele government, 98% of remittances are still sent through traditional methods, and 88% of the population has not used bitcoin, according to surveys.
G20 Brazil
[Financial Times] Brazil wants to be a climate champion and an oil giant. Can it be both? Lula presents himself as a champion of the environment and in this term has already achieved a significant reduction in Amazon deforestation and outlined broad green economy plans. But at the heart of Lula’s aspirations for global climate leadership lies an uneasy tension with oil. As the South American country seeks to extract more and more crude from its offshore oil platforms, his government aims for Brazil to become the world’s fourth largest oil producer, up from eighth place. Lula sees oil as a central pillar of Brazil’s strategy for economic growth. There is a trend towards identifying new deposits under the seabed, including a controversial plan to drill for oil in deep water off the mouth of the Amazon. The proposals have been criticized by activists who say they clash with Lula’s claims of sustainability. As Brazil prepares to host COP 2025, the issue could overshadow its ecological diplomacy. The country leads the G20 in renewable electricity and Lula’s government has pledged to end all deforestation by 2030 and has revised upward its emissions reduction targets. But a series of extreme weather events that scientists have linked to climate change in Brazil over the past year (droughts, floods and heat waves) have added urgency to the debate. Brazil’s crude oil production is expected to peak early in the next decade and then fall. The great hope is the so-called Equatorial Margin: a 2,200-kilometer stretch of the Atlantic off the country’s northern coast. The five basins within this new frontier may contain 10 billion barrels of recoverable oil, which will require an investment of $56 billion.
INDIA
[GZERO] Canadians get to give Modi a headache for a change Justin Trudeau’s government has faced criticism for failing to manage foreign interference in Canadian politics, especially from China and India. This frustration culminated in a public inquiry following leaks from Canadian intelligence. Canada, with a high percentage of foreign-born citizens, has struggled to establish protections against foreign influence and is only now implementing a foreign agent registry. Trudeau has been accused of overlooking Chinese interference while being seen as too close to separatist Sikh Canadians. In a recent move, Canada expelled six Indian diplomats, citing «credible and irrefutable evidence» linking Indian agents to the murder of a Canadian citizen, Hardeep Singh Nijjar, in British Columbia. Canadian officials claim Indian diplomats coerced Canadian citizens into spying, with evidence of links to serious criminal activity. India has dismissed the allegations as unfounded and attributed Trudeau’s actions to political motives related to his Sikh voter base. The situation escalated when an indictment revealed that an Indian national allegedly tried to hire an assassin to kill Nijjar’s lawyer in the U.S. The fallout has put pressure on Modi, especially with the involvement of U.S. authorities, but is unlikely to significantly damage strategic and trade relations between India and its Western allies. As Canada continues to pursue evidence against India, there is the potential for allies to pressure India to curb its aggressive tactics, while maintaining focus on broader geopolitical alignment with India against China.
BRICS SUMMIT 2024
[Foreign Policy] Can the BRICS finally stand up to the West? The BRICS member countries collectively account for 45% of the world’s population and 35% of the global economy. This is the bloc’s first meeting since it nearly doubled in size earlier this year, and is the largest international gathering Putin has hosted since Russia’s all-out invasion of Ukraine in February 2022. Along with Brazil, Russia, India, China and South Africa, BRICS membership now includes Egypt, Ethiopia, Iran and the United Arab Emirates. Saudi Arabia has been invited to join, but has not yet done so. Regarding Venezuela’s participation, Brazil vetoed that country’s bid to join the BRICS bloc as an associate member, maintaining Itamaraty’s pressure on the Maduro government to produce valid election results. More broadly, Brazil has sought to slow the bloc’s expansion, but supported applications by Cuba and Bolivia to join, reports El Pais. The main BRICS summit concluded on October 23 in Kazan, Russia. Several BRICS member countries have expressed interest in moving away from the Western-led SWIFT payments system by using BRICS currencies and financial entities. Such a shift would help Russia circumvent Western sanctions, while boosting technological and economic cooperation in areas such as energy and satellite data sharing. This move reflects a collective effort to develop alternative financial systems that would reduce dependence on Western-dominated structures, offering greater economic autonomy to the countries of the bloc. In Sino-Indian relations, this is the first step on a long road to revival, confidence building and possible normalization. There is still much to be done and also much that may hinder this process. As for key developments, there is agreement between the two sides to start a comprehensive dialogue, which is welcome. Xi Jinping’s formulation in referring to India as an important country is noteworthy, especially given the pecking order of countries in official Chinese discourse. India generally tends to fall into the category of peripheral diplomacy. Most important, however, is his comment that «development is currently the ‘greatest common denominator’ between China and India.« It is positive that there will soon be a meeting of the Special Representatives on the India-China border issue. India , in its report, has suggested that it expects future talks to address the issue of further relief in Eastern Ladakh, including de-escalation. But this does not appear to have been part of the conversation so far. That said, there is a curious line in the Chinese statement that says: Modi presented ideas and suggestions for improving and developing bilateral relations, and Xi Jinping agreed in principle. China has moved closer to India, a strategic ally and historic rival, in anticipation of a possible Donald Trump victory in the U.S. election. This alliance reflects shared interests in the region, especially in security and technology issues, which both countries see as key.
Por Dafne Esteso (@dafnech_esteso) y Brenda Vladisauskas (@bvladisa)
