R&D #5:Going Nuclear
Hello international investment enthusiasts and welcome to edition #5 of R&D.This month we’re looking at one of the great on-again-off-again, will-they-won’t-they relationships: Planet Earth and Nuclear Energy. Like Ross and Rachel, those two just can’t seem to make it work. Rather less like Ross and Rachel, the impending climate apocalypse and an invasion-induced global energy crisis means Planet Earth really couldn’t give an F if they were on a break or not, it needs energy now.
The question is, who’s funding this fairytale?
But first, to Argentina.
Why ‘the Wig’s’ Dollarization dreams are just combing over a balding economy
Next month, Argentina heads to the polls for the first round of its Presidential election. The current shock front runner is Javier Gerardo Milei, AKA ‘the Wig’, a former rockstar, sex instructor and goalkeeper campaigning on a platform of, among other things, replacing the volatile Argentine peso with the US dollar.
It’s Milei’s hope ––along with a sizable chunk of the Argentine electorate–– that this strategy, known as dollarization, will put a stop to the country’s spiraling inflation, currently at over 120% and estimated to hit 180% in the not-too-distant future.
This, says Deaglo’s Paul Stafford, is not going to happen. For starters, dollarization requires a country to have huge, huge reserves of dollars and while $20 - $25 billion sounds like a lot to the man on the street, it’s probably not even half of what the country would need, meaning a huge loan would be required. Well, Argentina has already had one of those, to the grand sum of $60 billion in fact, and it keeps nearly faulting on it and borrowing money from the original lender, the IMF, to pay it off. Considering poverty levels are at around 40% already, loading the country with even more debt feels like a risky strategy.
Who’d have thought a man who named all five of his dogs after economists could be so wrong?
Read the full piece here.
Charted Territory: G7 being bumped out of BRICS FDI
We spotted these charts showing FDI into the BRICS and BRICS+ blocs while browsing FDI Intelligence last week. Deaglo’s Head of FX Risk Management Matheus Zani explains what it all means.
With the BRICS bloc looking to expand its reach, the member states will undoubtedly be able to increase their FDI capabilities and economic influence, especially given the inclusion of the UAE and Saudi Arabia, both of which boast substantial sovereign wealth funds and active multinational investors. The big driver here is China, which has increased its investments in the BRICS+ countries significantly in preparation for the expansion and as part of its overarching ambition to establish a rival to the G7 group.
To a degree, it looks to be working, with the G7’s share of the FDI diminished slightly. But despite this, the G7, powered by the United States, still maintains a significantly more substantial historical FDI presence throughout the BRICS+ bloc.
Around the World in Headlines
Vamos to Spain first, where the fallout from Luis Rubiales’ World Cup Final kiss on Jennifer Hermoso continues to overshadow the fact that the team actually won the literal World Cup. Meanwhile, China decided to ban the use of iPhones by government officials, taking a $200bn bite out of Apple’s market value in the process. In Russia, North Korea’s Kim Jong Un and Vladimir Putin crossed swords in a huge display of big dictator energy to the West, while Kevin McCarthy, the speaker of the United States House of Representatives, announced an impeachment inquiry into President Joe Biden because why not? In more bad news for Joe, his son, Hunter, was also indicted on gun charges. Talking of complicated father/son relationships, Rupert Murdoch finally announced he will be stepping down as Chairman of Fox Corporation and News Corp, and handing the reins to his son, Lachlan.
All in all, a big month for alpha males.
We’ll end with a quick climate check: Yep, still doomed.
Featured: Going Nuclear
Nuclear energy is having a renaissance. Following a prolonged period of weaning themselves off the power source, many former nuclear hubs are having second thoughts. Europe’s first nuclear reactor in 16 years began commercial operation in April, while the UK, France, China and the US have all begun ramping up their efforts. Across the ‘developing’ world, plans for new or expanded nuclear energy programmes are being drawn up in their droves.
But there’s a problem. Only a handful of countries have licensed reactor designs and building a plant requires a huge expenditure of time and capital up front, more than most can afford. For most countries, going nuclear requires a technology and financing provider is required.
The top two providers? Russia and China, both of which absolutely have no ulterior motives whatsoever. Find out how nuclear energy FDI is helping to shape a new world in our latest deep dive here.
‘Raise and Deploy: The International Investing Podcast’ Episode 5 is now live! 🎙️
In our latest episode, we spoke to Alex Saller of Spectra about search funds and the details and nuances of this novel investment vehicle, from how they raise money and operate, all the way through to how they exit.