Tag: Brazil

Egypt Takes $5.2 Billion IMF Loan to Support Economy

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The International Monetary Fund in Washington DC has approved Cairo’s request for a $5.2 billion one-year loan. The loan that will have to be repaid within a year adds to a separate $2.77 billion package of “emergency support” granted to Egypt on May 11, to assist the country in its struggle to stop its COVID-19 epidemic.

The IMF considers Egypt to be somewhat of a pre-coronavirus success story as it complied with IMF demands for increased privatization, cutting public spending, and deregulation of industry. In May, an IMF statement said, “as the crisis abates, measures to lower the debt level would need to resume along with continued implementation of structural reforms to increase the role of the private sector.”

Egypt-IMF relationship

But the COVID-19 pandemic’s impact on tourism, global trade and oil prices has significantly impacted Egypt’s economy. Egypt relies heavily on revenues from its hotels and resorts on the Red Sea as well as tourism to its historic landmarks. Reductions in global trade have meant Egyptian state coffers see shipping fees from its vital Suez Canal reduced significantly while oil and gas revenues from Egypt’s growing energy sector similarly fell dramatically.

The fact that Egypt had recently completed a three-year economic reform plan as part of a $12 billion IMF loan that concluded in 2019 appears to have done little for the country’s economic resilience, but further austerity and privatization would eventually produce better results, according to the Fund.

Foreign priorities

Egyptian President Abdel Fattah el-Sisi had received praise from his Western backers and international bankers for implementing unpopular austerity measures that caused a dramatic rise in prices for essential goods for poor and middle class Egyptians, including a large increase in the price of electricity and drinking water. But the moves have helped “attract foreign investment,” justifying praise from the Egyptian government’s financiers.

Egypt’s transition to the neoliberal economy that foreign powers mandate has done little to produce an effective COVID-19 response. Like other countries that follow this economic mantra, such as Brazil, the US, the UK and India, COVID-19 cases have exploded with little government assistance to the country’s poorest and most vulnerable communities.

Local suffering

Egypt’s government has distributed monthly assistance of $31 for informal workers, who make up a significant section of those working in its hospitality industry. The limited support for Egyptian citizens has seen 73% of Egyptian households report a decline in their incomes over the past months.

Like Brazil, the US, and the UK, Egypt is now rushing to reopen its economy, even though it recorded 1,625 new cases on June 26, with 62,755 total confirmed cases and 2,620 deaths. The necessity to bring in revenue appears to have outweighed any desire to control the local epidemic as hygiene standards and social distancing are seen as sufficient to again receive foreign tourists.

Egyptian citizens will have to again brace for austerity measures that cut government support for the poor and increase the cost of living, while the government hopes that this time, the IMF’s demands will produce the “resilient” economy that its financiers have repeatedly promised.

COVID-19 Pandemic Reaches Highest Daily Increase in Cases

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On Sunday, June 21, WHO Director-General Dr. Tedros Adhanom Ghebreyesus called COVID-19 “the challenge and opportunity of our time” as the pandemic reaches a new phase. The world appears to be caught in the first wave of the pandemic, with cases still increasing daily. Countries reported 183,000 new cases on June 21, marking the largest daily increase since the emergence of the virus in 2019.

Growing cases

Brazil appears to be the worst-hit country currently. Its government’s much-criticized COVID-19 response led to a disastrous 55,000 new cases to add to its caseload of one million patients. Brazil has reported 49,976 COVID-19-related deaths. Brazilians took to the streets to protest President Jair Bolsanaro, as he appeared to bolster support of the military as tensions mount in the capital, Brasilia.

On the African continent, recorded cases reached 306,567 according to the Africa Centres for Disease Control and Prevention. The African CDC also reported 146,212 recoveries amid a total death toll of 8,115 as the continent’s disparate regions face different phases of the epidemic. North African countries have achieved relative success through strict containment measures, keeping the total regional caseload at around 81,500.

In Southern Africa several nations are still facing the initial wave of infections with 101,700 recorded cases while West Africa has seen 62,400, East Africa reported 31,400, and Central Africa recorded 29,500. Africa’s young population appears to be keeping death tolls relatively low but, like in many places across the world, much remains unclear about the scale of unreported cases.

Socioeconomic impact

While Africa’s youthful population might be more resilient against the virus, the socioeconomic consequences of the global crisis are prompting a renewed call for solidarity in the pandemic’s aftermath. The president of Costa Rica, Carlos Alvarado Quesada, joined forces with Ghebreyesus to launch a “Solidarity Call to Action.”

Only by working together, the statement says, can we ensure a fair and equitable response to the economic aftermath of the crisis. The WHO’s June 1 call to action urges governments to avoid international competition over vaccines and economic support in order to mitigate the long-term effects of the pandemic that has claimed almost half a million lives in less than a year.

Urging an “open and collaborative” approach

Governments and researchers should “promote innovation, remove barriers, and facilitate open sharing of knowledge, intellectual property and data,” according to a WHO statement, as international frictions have emerged over the distribution of an eventual COVID-19 vaccine.

The WHO hopes to encourage a spirit of “open and collaborative approaches” to ensure an “equitable distribution and access to products needed for COVID-19.”

Some commercial companies working on vaccines are pressuring governments to outbid each other to receive “first access” to an eventual vaccine.

The US and EU are already buying up hundreds of millions of doses of yet unproven drugs, causing many to many fear the crisis will further exacerbate global inequalities.

Desperate need for unity

Calls for the development of a “People’s Vaccine” through global cooperation appear to have resulted in little, despite the concept’s broad support by many current and former world leaders.

The new “Solidarity Call to Action” appears to attempt to refocus the global pharmaceutical industry and its government funders to prioritize global stability and a common humanity over political decisions that lead to competition over vaccine access.

The Call to Action has received formal support from a variety of WHO member states across the world, but the future will tell if any true collaboration will materialize.

“The world is in desperate need of national unity and global solidarity. The politicization of the pandemic has exacerbated it,” Dr Tedros said on Monday, June 22, “…the greatest threat we face now is not the virus itself, it’s the lack of global solidarity and global leadership.”

Russian Sources Signal Possible End to Oil Production Cuts

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With oil prices nearing their highest since early March, Kirill Dmitriev, one of Russia’s top oil negotiators  signaled his will to draw down production cuts on Friday June 19. Dmitriev is one of the key players leading negotiations with the Organization of Petroleum Exporting Countries (OPEC). Agreements between OPEC and the Russian-led alliance of non-OPEC countries, called OPEC+, have been one of the primary factors in the efforts to stabilize the oil market.

With demand for oil increasing as economies reopen, Russia appears to see no point in further extending production cuts. The existing agreement calls for a global production cut of 7.7 million barrels per day, from August to December. From January 2021, production cuts would drop to 5.8 million barrels per day, lasting until April 2022 when the agreement expires.

Price uptick

In April, oil prices hit their lowest price since the turn of the millennium as high global supply met an unprecedented dip in demand when flights were grounded, citizens faced lockdowns, and non-essential economic activity dissipated. In April prices hit $16 per barrel, with WTI briefly dipping into historic negative territory amid a scramble to offload futures before their expiry.

The extreme fluctuations in the already volatile oil market prompted most of the world’s oil producing countries to come together to establish painful, but necessary, production cuts in order to ease over supply that led to oil storage running out, with tankers and oil bunkers used as temporary storage to accommodate for a lack of buyers.

OPEC+

Ever since, any news around negotiations over production cuts between OPEC and the OPEC+ groups has led to swings in global oil prices. Now that demand is increasing and most OPEC members report compliance with the agreed upon cuts, meetings have revolved more around suring up lagging countries like Iraq and Kazachstan.

The current oil price hovers around $40, sufficient for Russia to balance its budgets. For many higher-cost oil producers however, the current price means losses, involuntary production cuts and even bankruptcies. The US shale gas industry, Canadian tar-sand extraction and Brazilian off-shore oil all struggle to survive at current prices, while countries like Saudi Arabia would be able to live with “lower for longer.”

OPEC

But while many OPEC members in the Gulf could make a profit on current prices, their national budgets have been based on much higher prices, leaving major gaps. A country like Iraq, that has some of the cheapest oil to extract, still needs oil prices to be at $56 per barrel in order to fund the $135 billion in estimated state revenue. The country has struggled to comply with OPEC’s agreed cuts as most of its oil production is done by foreign supermajors, leading to difficult negotiations.

Many countries of the Gulf Cooperation Council (GCC) similarly presented ambitious budgets for 2020, expecting much higher revenues than those that materialized due to the COVID-19 crisis. For these countries production cuts remain one of the few tools to drive prices up further, but it appears that major players like Russia and Saudi Arabia would prefer oil prices to not increase too rapidly, in order to prevent a resurgence in its higher-cost competitors like shale gas.

Diverging forecasts

Saudi Arabia and Russia are expected to have a much larger market-share in the near future. After a decade of losing market-share to US producers, Saudi Arabia is expected to have the largest market-share since the 1980s. With production down significantly and demand slowly returning, prices are likely to go up in the long run.

Investment bank JP Morgan Chase in early March predicted oil to hit $190 per barrel due to a “supercycle” where a downward swing in prices is followed by equally dramatic upswing. The bank’s predictions were squashed by the COVID-19 related drop in demand, but its experts remain confident that a “bullish supercycle is on the horizon,” according to CNN.

“The reality is the chances of oil going toward $100 at this point are higher than three months ago,” JP morgan’s Christyan Malek. However, uncertainty remains as economic results are highly dependent on public health successes in containing the spread of the coronavirus. BP has slashed its forecast, expecting COVID-19 to have an “enduring impact on the global economy.”

Activism and Economic Activity Amid a Growing COVID-19 Crisis

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There are currently seven million confirmed cases of COVID-19 worldwide, 400,000 have died, and new cases are still on the rise. The World Health Organization (WHO) is warning that the global COVID-19 crisis is “worsening,” yet life appears to return to normal at a lighting pace.

Many citizens who have faced long coronavirus lockdowns and travel restrictions are either waiting for their country to reopen or already seeing some elements of normalcy. Even though COVID-19 remains a global threat, economic and societal pressures are pushing people back onto the street.

Return to ‘normal’

In Europe, life seems to be returning to normal, with the EU planning to reopen its internal Schengen borders in time for summer vacations. Famous museums like the Prado museum in Madrid, the Van Gogh museum in Amsterdam, and the Versailles museum in Paris have once again opened their doors to visitors.

The Bundesliga has returned and even family entertainment venues like theme parks are reopening. Tourists are again free to visit Rome’s Colosseum and the Leaning Tower of Pisa, after which they are free to have some food or cold drinks in local bars and restaurants. Germany bars have been packed with patrons and Amsterdam’s famous Vondelpark saw an impromptu “mini-festival.”

Cyprus is so eager to again receive tourists that it is offering to pay for anyone’s COVID-19 treatment if they test positive upon arrival.

The US has seen no sign of effective containment as the country is preparing to confirm it’s two-millionth COVID-19 case, yet California bars are set to reopen on Friday, June 12.

Protesting racism

Hundreds of thousands of people in America’s largest cities have protested institutional racism in the United States over the past week, with protests now spreading to smaller towns. The brutal death of George Floyd in police custody has reignited the debate over the country’s ingrained and persistent racism.

The blatant case of police brutality has even sparked outrage worldwide, with large demonstrations across the globe. In Europe, thousands packed the streets of Amsterdam, Berlin, Barcelona, Brussels, Copenhagen, London, Madrid, Paris, Rome, and Warsaw while smaller cities also saw significant demonstrations.

In Asia, protesters in cities like Tokyo, Jakarta, Seoul, Sydney, and Brisbane came out in a display of solidarity with US protests while highlighting local injustices, such as West Papua’s struggle for independence and the Philippine anti-drug war that has become a slaughter of impoverished locals.

Even in Brazil, where the local COVID-19 epidemic is rapidly accelerating, most large cities saw protests in support of the Black Lives Matter movement, and in opposition to the Brazilian government’s COVID-19 response.

WHO warnings

When listening to the analysis of the WHO, both large-scale protests and the reopening of tourist attractions seems unimaginable.

WHO’s Director-General Tedros Adhanom Ghebreyesus in his opening remarks during a June 8 media briefing said “the situation in Europe is improving, globally it is worsening.”

On Sunday, June 7, “more than 136,000 cases were reported, the most in a single day so far,” he underlined.

Ten countries in the Americas and Central Asia currently account for three-quarters of all new cases, with fears of increasing numbers in Africa and Eastern Europe. But the WHO has expressed concern over the emergence of large protests. While Ghebreyesus stated that the WHO “fully supports equality and the global movement against racism,” he urged for “active surveillance to ensure the virus does not rebound.”

The world appears to have reached a “new normal” where some countries are resuming many parts of daily life while others continue to struggle with large local outbreaks. The patchwork of different approaches, preventive measures, and exit strategies mean that many countries base their policies on the local situation, even as the global problem grows.

While all sectors of the economy will cheer a return to normal, once international travel reemerges we could be reminded, once again, of the consequences of our interconnected global society.

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