EMERGING MARKETS


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Emerging Economies are Tapped Out
Twelve emerging countries, including Brazil and Russia, drew down their foreign currency reserves in March by a combined $143.5 billion, the fastest rate since 2008, according to Arkera, a London-based research firm.
Turkey has depleted its reserves to $56 billion, a level last seen in 2006. The country’s banks hold $79 billion in debt coming due early next year.
The Turkish lira has declined 15 percent against the dollar this year.
Egypt poured out $5.4 billion of its foreign currency stash last month, the nation’s biggest monthly payout on record, leaving it with about $36.4 billion in foreign currency.
The collapse of global tourism has slashed Egypt’s income from foreign visitors, leaving analysts wondering if the country will be able to make scheduled payments on its dollar-denominated debt.
Interest rates of Egypt’s bonds soared from 4 percent in February to 31 percent. The rate settled back to 7 percent after Egypt asked the International Monetary Fund for help.
The global economic crisis led foreign investors to redirect their money to safer assets, leaving the nations to delve into their foreign currency reserves – primarily dollars – to make debt payments and buy food, medicines, and other necessities from abroad.
TRENDPOST: Developing countries are in a lose-lose dilemma. They need to store up dollars to pay their debts, but if they service their dollar-denominated debt, they will not have the dollars they need to fund imports of essential goods.
Indeed, it is the global financial pressures that are forcing nations to lower interest rates and pump unprecedented digital money backed by nothing and printed on nothing, which is keeping the dollar strong and a safe-haven currency… despite that the U.S. engaged in the same Ponzi printing schemes.
Nigeria’s Economy Crashes
In Nigeria, Africa’s biggest economy, oil accounts for 60 percent of government revenues and 90 percent of exports and foreign exchange.
Or it did.
With oil prices at the bottom of the barrel, demand gone, and storage tanks and ships full, Nigeria’s economy has slammed to a stop.
Nigeria’s break-even price for oil is the world’s highest at $133 a barrel, due to institutionalized corruption and high processing costs. Brent crude, the world’s price benchmark, has been trading below $30 a barrel for weeks.
But Nigeria keeps the oil pumps running. Many of them are so old that, once stopped, it might not be possible to restart them. In that case, the government would have to permanently shut in a significant amount of the oil it depends on for jobs, revenue, and, to a large extent, social stability.
When the oil industry collapses, “you will have serious security implications… unrest,” said Kola Karim, chair of Shoreline, the nation’s third-largest oil company.
Nigeria is less prepared to weather this oil-market disruption than those of the past, noted the International Energy Agency, because the nation’s GDP has shrunk by a third in the last five years.
Now the coronavirus that led to the global economic shutdown and oil price collapse is making its way into Nigeria.
The number of cases of the virus there is unknown, but the president’s chief of staff has died of the disease, sparking fear among the ruling elite and motivating the president to shut down the country.
With 90 percent of the nation’s 206 million people working in the shadow economy, the lockdown means the hand-to-hand cash or barter payments that kept most of the country’s people alive have been lost.
Nigeria’s government has cut its 2020 budget by $5 billion and asked the IMF for $7 billion in aid.
TREND FORECAST: Nigeria is just one example of a poor oil-rich country getting poorer. Again, as we have noted, whether an oil-rich country that is poor or oil-rich countries that are rich, minus a war or a Black Swan event that sharply drives oil prices above $80 per barrel, we forecast rapidly rising social unrest as people who have lost everything and have nothing left to lose will lose it.

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