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With the power supply source for Zanaga so far unresolved (AFAIAA), it's interesting to see contrasting approaches - Western vs Chinese - to the power constraints in Zambia impacting the viability - indeed raison d'etre - of the Lobito Corridor copper exports project, see

https://energyforgrowth.org/article/the-energy-crisis-in-zambia-is-undermining-the-lobito-corridors-potential-and-dfcs-investments/

.."The lack of sufficient electricity in Zambia, however, is slowing down the mining industry — and the Lobito Corridor with it. Without reliable energy, the rail infrastructure connection to Angola’s port will fail to expand a thriving minerals industry, as mining operations and processing facilities will continue to be constrained by power shortages. So the energy shortages are both a threat to the project and highlight a gap in the US approach.

Compare the US effort to China’s. China is investing in substantial power generation capacity, including a recently approved 300MW coal-fired power plant, to address Zambia’s energy crisis while also expanding its mining presence. Meanwhile, the [US]DFC and its [European/African] partners are allocating only very modest resources to Zambia’s energy needs: a $40 million liquidity facility for renewable energy trading, a $4.2 million contribution to an AfDB initiative to develop bankable green infrastructure projects, a feasibility study for a solar plant, and a $1.5 million grant for solar-powered irrigation equipment.

So, the US and its partners focus on renewables and innovation, and China’s expansion of baseload power are both attempts to address the same energy security challenge but with different timeframes, scopes, and priorities. US strategy may yield greater long-term sustainability, while China’s scope is set on delivering immediate, reliable power...."

The Chinese were supposed to be implementing C-B's Sounda dam project (including finance) by Q1 2025.....

GLA

Continued...

Finally, unless private sector credit expands significantly, the fiscal surplus alongside still-elevated inflation will cause a shortage of pesos in the system over time. If the BCRA increases the monetary basis more slowly than inflation, liquidity will tighten along with activity. This is deflationary and, at some point, the BCRA would have to inject more pesos into the system.

Buying dollars with newly issued pesos would kill two birds with one stone. Analysts estimate USD 7-15bn of dollar purchases would be needed to keep the monetary basis unchanged this year, depending on inflation and private credit creation. That’s significantly above the USD 4bn target of reserve accumulation set by the IMF. Milei said any FX intervention by the BCRA would only take place at the lower end of the band, meaning tighter peso liquidity before any dollar purchases which would provide further protection from inflation.

Where does Argentina go from here?

With agricultural harvest inflows peaking between April and June, the main risk for FX stability ahead of October’s mid-term elections would be an exogenous shock driving oil and agricultural prices down. In this scenario, the upper limit of the band may be tested, forcing the BCRA to sell reserves. While we can’t discount this scenario, there’s a low likelihood that it would derail the adjustment, as the fiscal anchor imposes a natural limit to dollar demand. The IMF buffer also provides significant protection from a more meaningful deterioration, and Scott Bessent indicated recently that the United States would be willing to offer its own credit line if push came to shove.

Stability in the run-up to the midterms would bode well for Milei and his La Libertad Avanza party. Milei already has the highest approval rate of any leader since Néstor Kirchner (2003-2007). With the economy tracking at 5% GDP growth in 2025, and inflation declining quickly, voters have legitimate reasons to believe the economic adjustment is working. With only half of Congress seats and one-third of Senate seats up for grabs in October, Milei’s party is unlikely to get much more than a third of the seats in either house. Nevertheless, his impressive popularity could force many provincial governors (including moderate Peronists) to support his measures in Congress.

Having steadied the ship, Milei needs to double-down on structural reforms in the next leg of his administration. Countries can live with stronger currencies in real terms, if met by productivity growth. For example, after a major economic liberalisation in 1991, Argentinian rental prices declined as landlords felt more comfortable about getting paid and were less worried about losing their properties – a classic example of reform driving prices lower and productivity higher......

Continued.....

Ashmore's latest :

Why Milei’s IMF deal could make Argentina great again

15 May 2025

After President Milei’s rapid fiscal rebalancing, a fresh USD15bn disbursement from the IMF put Argentina in a position to slash its capital controls. Under the new FX regime, the peso - the world’s best performing currency last year - is holding firm. As inflation decelerates and growth recovers, Milei’s popularity continues to surge.If he can consolidate power in the 2025 mid-terms, his promised tax, pension, and labour reforms can lay the foundation for the next leg of investment returns in Argentina.

It has been nearly a month since Argentina announced a USD 20bn deal with the IMF and lifted virtually all capital controls. To ensure macro stability, the previous crawling peg was replaced by a “dirty float” regime where the currency is allowed to oscillate within a 1,000 to 1,400 band, which will widen over time.

So far, the results are very encouraging. The old Blue Chip parallel market is now redundant, as retail can now arbitrage any gap away. Since Javier Milei came to power, the Argentinian peso has been oscillating closer to the lower band of the new target anyway, depreciating less than 20% after the first devaluation in December 2023 brought the official rate closer to the Blue Chip. Holding Argentinian short-term peso bonds in that period has returned 46% in carry adjusted terms, making the peso the best-performing currency in the world, alongside the Turkish lira.

The side-effect of devaluing the currency much less than running inflation has made the peso relatively expensive in real effective exchange rate (REER) terms. While currency overvaluation concerns remain, the new regime looks sustainable for several reasons.

First, with the immediate USD 15bn IMF disbursement, Argentina’s liquid FX reserves (c. USD 27bn) are now broadly equal to the monetary base (M0), the amount of money in circulation. Total reserves (c. USD 40bn) are also close to the size of M2, which aggregates the liquid cash available in the economy.

Second, the commitment to fiscal discipline indicated by ongoing government surplus targets will likely continue to anchor real wages. This should keep import demand contained, limiting any deficits in external accounts. Middle incomes have rebounded from the lows but are far from levels that would allow most Argentinians to travel to Santiago to buy iPhones. Most of the money that is being spent abroad by Argentine tourists is dollars accumulated abroad in previous years, which does not impact the Central Bank of Argentina’s (BCRA) FX reserves.

Third, the US dollar is selling off. It would have been tragicomic if Argentina had dollarised only to see the US debasing the Greenback; a scenario unthinkable a few months ago, but very much possible today.

Continued......

Next for the ESG file(s), if/when discussed...

Note the difficult logistical and working issues in Koilou department (which is close to Pointe Noire and relatively developed).

From depeches

KOUILOU

Several forest communities deprived of their fundamental rights

Bivela, Mbéna, Ngoungui and Bada, four forest communities bordering the Nkola logging unit (UFE) of Afriwood Industries, in the department of Kouilou, lack health centres, drinking water and teachers.

These are the findings of a study carried out in these localities by the non-governmental organisation (NGO)

Rencontre pour la paix et les droits de l'homme.

...."no functional health centre is to be seen. ‘Neither staff nor medical equipment, with impact on access to adequate healthcare . The result is a series of deaths from neglect and considerable difficulties for women to give birth.

In general speaking, there are no secondary schools in these areas’, says the NGO in its report.

However, the makeshift schools that are located there are crumbling under the threat of a lack of teaching staff and teaching materials.

Similarly, the road network is very defective and unmaintained, leading to transport difficulties that severely limit communities' access to other localities for medical care and delivery to market of local goods.

Still in these districts, access to drinking water and electricity is a cause for concern, with very limited coverage, further cutting off communities and indigenous tribes from the rest of the world, the study reveals.

On the other hand, the man-elephant conflict has not seen any major progress. It is growing worse, to the extent that animals are now making repeated incursions into residential areas...."

The involvement and participation of communities in decision-making processes is not effective. The same applies to

management of benefit-sharing mechanisms, in this case, the specified development funds are 'not always operational.'

In the light of these facts, the report states that Afriwood industriel is not complying with its social obligations set out in the company's agreement...."

It should be noted that this note was prepared with the financial support of the British Foreign Commonwealth & Deve

lopment Office as part of the Forest Governance programme..."

Afriwood's website : https://www.globalwood.org/company/mgodetail.asp?id=26858

and 2 x NGO 'scorecards'

https://opentimberportal.org/operators/afriwood-industries/overview.......11 out of 36 timber suppliers in C-B;

https://www.spott.org/timber-pulp/afriwood-industries/.......1.7/100 compliance with checklist.

'Your tax dollars at work'...or not, as the case may be.

GLA

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