Rule of law ‘critically important’ to BRICS success

Russia will chair the BRICS’ seventh summit in July this yearHere is my latest column for IBA Global Insight:

When it was first coined in 2001, the term ‘BRIC’ seemed little more than a quirky acronym. Since then, the term has quickly become universal shorthand for the emerging markets’ ascent in the global economy.

Brazil, Russia, India and China – and South Africa since it joined the fold in 2010 – have all come a long way since former Goldman Sachs Chief Economist Jim O’Neill first spotted their potential 14 years ago. Despite riding out the global financial crisis remarkably well, the mighty BRICS have not been left completely unscathed. The average growth rate of each country has slipped by more than two percentage points over the past decade.

At a recent IBA conference, From BRICS to MINT… and Beyond!, O’Neill said that China was the only one of the original BRICS that hadn’t disappointed him, clocking an average growth rate so far this decade of eight per cent. Although he acknowledged weaker commodity prices were partly to blame for poorer performances in Brazil and Russia, he maintained his view that rule of law is vital for economic success. If all these countries can ‘succeed in doing all the things that are necessary for rule of law, then they’re going to get somewhere’, he says.

Published on 15-06-15. Read on here

Watershed moment

Cuba carHere is my latest column for IBA Global Insight:

After years of negotiations behind closed doors, the US and Cuba finally brokered a deal last December, which saw the release of US government contractor Alan Gross and three Cuban agents convicted of spying on anti-Castro groups in Miami.

The significance of the move cannot be underestimated. Fernando Peláez-Pier is a former IBA President and a partner at Hoet Peláez Castillo & Duque in Caracas. He says:
‘It has been an enormous step to take the decision to re-establish diplomatic relations between the US and Cuba and to lift the embargo in the short term, although it is not yet envisioned that it will lead to a reopening of embassies in each country.

‘This is the most important decision since Carter and Castro decided to establish representation of each country’s interests in Havana and Washington. It’s the beginning of a new era in the relations between both countries, marking a before and an after.’

However, the process is far from over. ‘Whoever thinks this process will be fast would be mistaken and would fail to understand the complexity of the case and what it implies for the re-establishment of relations between two countries after more than 50 years,’
says Peláez-Pier.

Published on 09-04-15. Read on here

No country for compensation

BolivaresHere is my latest column for IBA Global Insight:

Gripped by high inflation, chronic shortages and an ever-widening fiscal deficit, Venezuela a year ago was not a pretty picture. But after 12 months that have seen further unrest, currency devaluations, a dramatic slump in oil prices and a bitter stand-off between the government and international airlines, turmoil has taken on a whole new meaning in Venezuela.

‘The economic situation in Venezuela has worsened considerably since measures have not been taken to resolve the main problems affecting the country,’ says former IBA President Fernando Peláez-Pier, a partner at Hoet Peláez Castillo & Duque in Caracas.

Despite indications that Nicolás Maduro’s government was taking action to combat the crisis, ongoing shortages of basic food, medical supplies and foreign currency – not to mention the estimated $12bn a year the government is spending to subsidise domestic gasoline sales –  have pushed the economy to breaking point.

Published on 04-12-14. Read on here

Argentina’s debt tango

Beatrice MurchHere is my latest column for IBA Global Insight:

The threat of default has loomed large again for Argentina in recent months. It went right down to the wire on 30 July when it became clear that a deal wasn’t going to be reached. For the eighth time in its history the country slipped grudgingly into default, making it one of the world’s most recidivist sovereign defaulters.

First, some context: The payment problems this time stem from Argentina’s mega-default in late 2001 when the country defaulted on $95bn in government bonds. Holders of around 92 per cent of those bonds accepted restructurings worth about $0.30 on the dollar, but the remaining bondholders – a group of US-based hedge funds led by billionaire Paul Singer’s Elliott Management – refused to accept the restructuring, demanded payment in full for old bonds that weren’t exchanged and sued for full payment.

A decade-long legal battle ensued and in July President Cristina Fernández de Kirchner’s government refused to abide by the decisions of the US courts and pay the holdouts, effectively locking Argentina out of the global capital markets altogether. Thus it was with good reason that tensions were high on 30 July as the culmination of the lengthy dispute saw US District Court Judge Thomas Griesa side with the hedge funds and duly freeze a $539m interest payment from Argentina, ordering the country not to make any payments on new bonds before it paid for its previous payments, plus interest.

Published on 06-10-14. Read on here

France’s warship volte-face raises legal questions

David MonniauxHere is my latest piece published on the IBA Global Insight newsfeed:

As Western sanctions against Russia stepped up a further gear last week, a contractual dispute brewing between France and Russia threatens to have legal and economic ramifications.

It all started back in 2011 when Russia commissioned France to build two Mistral navy assault ships (bâtiment de projection et de commandement, or BPCs) for a cost of €1.2 billion. However, in recent months France’s participation in the venture has been brought under increasing scrutiny amid growing tensions over Russia’s continued involvement in the unrest in eastern Ukraine.

The French government initially resisted pressure to halt the delivery, saying it would respect the existing contract.

Despite this unwillingness to budge, the mood suddenly changed on the eve of the NATO summit in Wales on 3 September, when France announced it would suspend delivery of the two ships due to concerns over the ongoing unrest, saying in a statement:

‘The recent actions of Russia in the east of Ukraine violate basic security in Europe. The President…has found that, despite the prospect of a ceasefire, which has yet to be confirmed and implemented, the conditions for France to authorise the delivery of the first BPCs are not in place.’

Published on 19-09-14. Read on here