Our pick of headlines this week impacting commercial real estate in the emerging markets.
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Headlines:
Global
Consumers love next-day deliveries but oppose the spread of logistics properties that make it possible. Property developers are receiving more resistance from communities to build the required infrastructure. Local governments are restricting or even banning new logistics hubs. The jobs are seen as substandard and the attention has been more on the noise, traffic, and pollution the logistics hubs create in towns.
China has come to dominate the global manufacturing trade and the dramatic trade imbalances are causing some in Washington DC to take serious action and finally address the threat. The recent pause in the expansion of the manufactured goods surplus comes after a huge jump between 2018 and 2022. The United States continues to slide relative to manufacturing trade balances with China.
In the first two months of 2024, Suez Canal trade dropped by 50 percent from a year earlier while trade through the Panama Canal fell by 32 percent, disrupting supply chains and distorting key macroeconomic indicators. Traffic through the Cape of Good Hope, around Africa, has surged an estimated 74%.
Latin America
In terms of U.S.-Mexico trade, the value of goods sold has been rising steadily, and reached almost $476bn for the year; the equivalent figure for Chinese goods fell sharply, from $536bn in 2022 to $427bn in 2023. China’s strategy of using Mexico, and other nations, to divert goods is causing a rift between neighbors. Data doesn’t show an increased influx of goods from China, but those watching closely know that the influx has occurred it’s just been hidden by diverting the goods through nations such as Mexico and Vietnam. The USMCA framework is set to be renegotiated in 2026. Barring an agreement, the trade agreement terminates after 10 years. Trump, the frontrunner, is likely to be in charge of the negotiations and has signaled he will impose a 60% on all Chinese goods into America which would dramatically increase the speed of decoupling and further straining relations between Mexico and the United States.
The Development Finance Corporation (“DFC”) has announced the opening of its first Latin American office in Sao Paulo, Brazil. The opening was alongside a loan commitment of nearly $470 million to Stone, a company in Brazil aimed at funding financing gaps of small businesses.
Both Mexico and Brazil are led by hard-left ideologues, and both are dithering while the global semiconductor supply chain is being remade. Once set, a shift is unlikely to occur again for years leaving some pundits to question why Mexico and Brazil aren’t doing more to take a bite at the apple. Costa Rica seems to be the only Latin American nation benefiting from the semiconductor supply change shakeup. The United States invented and invested heavily in creating semiconductors, yet 75% of chips are made in Asia in Japan, South Korea, China, and Taiwan. Latin America’s relatively low wages would be a help to America’s ambitions to return the manufacturing capacity of semiconductors under the purview of the inventor and still chief designer of chips.
Africa
Lars Krogsgaard has taken the reigns again of Danish DFI, IFU. Last year, the Danish government announced a major plan to boost IFU’s ability to invest in emerging markets and developing countries. The plan is to double the DFI’s investments in emerging economies by 2030. Africa will be a major focus for the DFI as it explores places to place capital.
The Lobito Corridor port was previously managed by a Chinese logistics firm that failed to renew its agreement with the government of Angola. The new operator is Africa Global Logistics (“AGL”) which received its first cargo shipment recently into Lobito. AGL has a 20-year concession to manage the port. AGL operates in 49 countries and manages over twenty port concessions, including concessions in Cameroon and the Ivory Coast. AGL is owned by MSC Group, a Swiss company, and was previously known as Ballore Africa Logistics before MSC acquired it in 2022.
An IMF report states that between 2015 (263,000) and 2021 (93,000), the total number of Chinese workers in Africa fell by 64 percent. A reduced number of projects being funded and managed by the CCP in Africa is one reason for the decline, according to the IMF. Algeria and Angola saw a 90% reduction in Chinese workers during the period. The top five African nations with Chinese workers presently are the DRC, Algeria, Egypt, Nigeria, and Angola which collectively account for 42% of total Chinese workers in Africa.
Southeast Asia
Vingroup was previously the largest retail property owner in Vietnam. In March, the investor sold a significant portion of its interest in Vincom Retail, leaving it owning 18.37%, down from 41.5% before the sale. Vincom Retail operates 83 malls, in 44 cities and towns, with plans to open six more in 2024 alone. The buyers are undisclosed and the rationale for the sale is to focus more capital on sectors with higher growth potential, including EV manufacturing.
An agreement is being worked on, valued at over $500 million, by a group of Chinese alternative managers to purchase the data centers held by GDS Holdings Ltd outside of China. GDS is a Singapore-based company and a leading data center operator in China and has over 100 data centers globally. GDS has ambitious plans to continue expanding in Southeast Asia.
Much of the discussion has been fueled by comments by the ambitious Manila mayor, Isko Moreno, who has many times reaffirmed his goal of turning Manila into the next Singapore. Corruption, inefficient bureaucracy, poor infrastructure, and restrictive clauses for foreign investment in the Consitution stand in the way of these ambitions.
