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Australian allies raise toast with wine to counter China’s ‘bullying’

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A global alliance of parliamentarians has urged people to buy a bottle of Australian wine during the festive season in a campaign designed to stand up against “bullying” by China.

The Inter-Parliamentary Alliance on China, which has a membership of 200 MPs from 19 countries, asked citizens in a video to swap their favourite national tipple for Australian wine in a demonstration of solidarity with Canberra.

The campaign follows Beijing’s imposition of punitive tariffs on Australian exports to China and the publication of an incendiary social media post this week by a senior Chinese diplomat, which depicted an Australian solder holding a bloodstained knife to the throat of an Afghan child.

The Twitter post by Zhao Lijian, which referenced alleged war crimes committed by Australian special forces in Afghanistan, provoked an outcry in Australia, where Prime Minister Scott Morrison labelled it as “repugnant” and demanded an apology.

Beijing fired back on Tuesday, accusing Canberra of seeking to deflect public attention from “horrible atrocities” and attempting to “stoke domestic nationalism”.

The diplomatic stand-off is the latest barrage in a dispute that erupted after Canberra demanded an independent inquiry into the origins of the coronavirus pandemic in April. Beijing has retaliated by slapping sanctions on beef, wine, coal and several other Australian exports, which analysts labelled a deliberate policy of “economic coercion” against Canberra.

China is Australia’s largest trade partner, with two-way trade amounting to A$252bn ($185bn) last year. Industries in politically sensitive sectors, including winemakers, face severe disruption under the punitive tariffs and technical trade barriers that restrict exports.

On Wednesday, Mr Morrison made a direct appeal to the Chinese public on WeChat, saying the provocative tweet would not diminish Australia’s respect for the Chinese community at home or abroad. But he said Australia would remain “true to our values and protect our sovereignty”.

Analysts said the campaign by IPAC — a cross-party group of legislators seeking to reform how democratic nations approach China — is a symbolic gesture rather than a measure that will substantially boost Australian wine sales.

But it reflects growing concern that China is increasingly resorting to economic muscle to target individual countries for criticising Beijing over human rights and other policies.

“This isn’t just an attack on Australia. It’s an attack on free countries everywhere,” said Kimberley Kitching, an Australian senator, in the IPAC video.

Ms Kitching said China had cancelled a range of Australian imports in an attempt to “bully” Australia into “abandoning its values” and to stop it from speaking out in defence of human rights and the rules-based order.

Miriam Lexmann, a member of the European parliament from Slovakia, invited people to “stand against [China’s president] Xi Jinping’s authoritarian bullying”.

Several of Australia’s closest allies have also voiced support for Canberra, including New Zealand, France and the UK. The National Security Council, which advises US presidents on security issues, said it would serve Australian wine at a White House Function this week.

“Pity vino lovers in China, who due to Beijing’s coercive tariffs on Aussie vintners will miss out. #AussieAussieAussieOiOiOi!,” the NSC wrote on Twitter.





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Emerging Markets

Bond sell-off roils markets, ex-Petrobras chief hits back, Ghana’s first Covax vaccines

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The yield on the benchmark 10-year Treasury exceeded 1.5 per cent for the first time in a year and the outgoing head of Petrobras warns Brazil’s President Jair Bolsonaro against state controlled fuel prices. Plus, the FT’s Africa editor, David Pilling, discusses the Covax vaccine rollout in low-income countries. 

Wall Street stocks sell off as government bond rout accelerates

https://www.ft.com/content/ea46ee81-89a2-4f23-aeff-2a099c02432c

Ousted Petrobras chief hits back at Bolsonaro 

https://www.ft.com/content/1cd6c9fb-3201-4815-9f4f-61a4f0881856?

Africa will pay more for Russian Covid vaccine than ‘western’ jabs

https://www.ft.com/content/ffe40c7d-c418-4a93-a202-5ee996434de7


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Petrobras/Bolsonaro: bossa boots | Financial Times

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“Brazil is not for beginners.” Composer Tom Jobim’s remark about his homeland stands as a warning to gung-ho foreign investors. Shares in Petrobras have fallen almost a fifth since President Jair Bolsonaro said he would replace the widely respected chief executive of the oil giant.

Firebrand Bolsonaro campaigned on a free-market platform. Now he is reverting to the interventionism of leftist predecessors. It is the latest reminder that a country with huge potential has big political and social problems.

Bolsonaro reacted to fuel protests by pushing for a retired army general to supplant chief executive Roberto Castello Branco, who had refused to lower prices. This is politically advantageous but economically short-sighted.

Fourth-quarter ebitda beat expectations at R$60bn (US$11bn), announced late on Wednesday, a 47 per cent increase on the previous quarter. This partly reflected the reversal of a R$13bn charge for healthcare costs. Investors now have to factor the cost of possible fuel subsidies into forecasts. The last time Petrobras was leaned on, it set the company back about R$60bn (US$24bn at the time). That equates to 40 per cent of forecast ebitda for 2021.

At just over 8 times forward earnings, shares trade at a sharp discount to global peers. Forcing Petrobras to cut fuel prices will make sales of underperforming assets harder to pull off and debt reduction less certain. Bidders may fear the obligation to cap prices will apply to them too.

A booming local stock market, rock bottom interest rates and low levels of foreign debt are giving Bolsonaro scope to spend his way out of the Covid-19 crisis. But the economy remains precarious. Public debt stands at 90 per cent of gross domestic product. The real — at R$5.40 per US dollar — remains near record lows. Brazil’s credit is rated junk by big agencies.

Rising developed market yields will make financings costlier for developing nations such as Brazil. So will high-handed treatment of minority investors. It sends a dire signal when a government with an economic stake of just over a third uses its voting majority to deliver a boardroom coup.

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South Africa’s economy is ‘dangerously overstretched’, officials warn

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South Africa is pushing ahead with plans to shore up its precarious public finances as officials warn the economy is “dangerously overstretched” despite the recent boom in commodity prices.

Finance minister Tito Mboweni hailed “significant improvement” as he delivered the annual budget on Wednesday and said that state debts that will hit 80 per cent of GDP this year will peak below 90 per cent by 2025, lower than initially feared.

But Mboweni warned that President Cyril Ramaphosa’s government was not “swimming in cash” despite a major recent tax windfall. The Treasury now expects to collect almost 100bn rand ($6.8bn) more tax than expected this year after a surge in earnings for miners. This compares with a projected overall tax shortfall of more than 200bn rand. Still, the finance minister made clear that spending cutbacks would be necessary.

“Continuing on the path of fiscal consolidation during the economic fallout was a difficult decision. However, on this, we are resolute,” Mboweni said. “We remain adamant that fiscal prudence is the best way forward. We cannot allow our economy to have feet of clay.”

The pandemic has hit South Africa hardest on the continent, with 1.5m cases recorded despite a tough lockdown. An intense second wave is receding and the first vaccinations of health workers started this month. More than 10bn rand will be allocated to vaccines over the next two years, Mboweni said.

‘We remain adamant that fiscal prudence is the best way forward’ – South African finance minister Tito Mboweni © Sumaya Hisham/Reuters

Even before the pandemic’s economic hit, a decade of stagnant growth, corruption and bailouts for indebted state companies such as the Eskom electricity monopoly rotted away what was once a prudent fiscus compared with its emerging market peers. 

Government spending has grown four per cent a year since 2008, versus 1.5 per cent annual growth in real GDP. The country’s credit rating was cut to junk status last year. Despite this year’s cash boost, the state expects to borrow well over 500bn rand per year over the next few years. The cost to service state debts is set to rise from 232bn rand this year to 338bn rand by 2023, or about 20 cents of every rand in tax.

The fiscal belt-tightening will have implications for South Africa’s spending on health and social services. On Wednesday Mboweni announced below-inflation increases in the social grants that form a safety net for millions of South Africans. “We are actually seeing, for the first time that I can recall, cuts in the social welfare budget,” said Geordin Hill-Lewis, Mboweni’s shadow in the opposition Democratic Alliance.

The finance minister is also facing a battle with union allies of the ruling African National Congress over a plan to cap growth in public sector wages. South Africa lost 1.4m jobs over the past year, according to statistics released this week. The jobless rate — including those discouraged from looking for work — was nearly 43 per cent in the closing months of 2020.

The South African treasury expects the economy to rebound 3.3 per cent this year, after a 7.2 per cent drop last year, and to expand 2.2 per cent and 1.6 per cent next year and in 2023 — growth rates that are widely seen as too low in the long run to sustain healthy public finances.

“The key challenges for South Africa do however persist, clever funding decisions aside,” Razia Khan, chief Middle East and Africa economist for Standard Chartered, said. “Weak structural growth and the Eskom debt overhang must still be addressed.” 



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