• Matheus Zani

🌎 The 4th Time's A Charm |Hong Kong going red|India watching (monitoring) Netflix

Updated: Nov 24, 2020

November 13th, 2020

Happy Friday!

In a busy week, fires flared between President-Elect Joe Biden and Brazilian President Jair Bolsonaro over the continued deforestation of the Amazon rainforest. Biden previously warned that the continued destruction of the Amazon would incur economic consequences - with Bolsonaro responding this week that he would respond with “gunpowder” not just “saliva” if that were to happen. Not sure what’s worse to be honest, though given the current situation both countries are in, let’s just hope they do neither.

Did You Know...

According to rain-tree.com more than 20% of the Amazon has been lost, and it is currently vanishing at around 20,000miles per year?

To the nearest billion, how many trees are left in the Amazon?

(Answer below)

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The 4th Time's A Charm

Clearly, 2020 has not been easy for many countries, and Peru is no different. Like many, the country is experiencing a devastating pandemic, yet it has the highest death rates per million citizens among its peers in Latam. Similar to its peers, the Peruvian government faces the deepest economic crisis on record, with GDP expected to contract by 13% in 2020 (Fig 1) and economic activity (Fig 2) being heavily impacted by isolation measures implemented in March to contain the propagation of the virus.

Figure 1. Peruvian PIB Figure 2. Economic Activity

To add to all this instability, Peruvians woke up on Tuesday with a new president, the fourth president in five years!

The day before, the Congress had voted to impeach the popular (Fig 3) President Martín Vizcarra over corruption allegations, just five months before new elections. By Tuesday morning, Congress had sworn in Manuel Merino as a new president of Peru.

As expected, the surprise impeachment of the country’s most popular leader in decades triggered street protests against what some see as a power grab by the opposition. Indeed, Peruvians are not surprised by Vizcarra's removal, but furious at a political system, which seems to be willing to risk instability in pursuit of petty political disputes, instead of focusing on the country’s pressing problems.

Thus, the apparent ease with which Congress manages to corner presidents has become a kind of trivial practice for Peru, which like other Latin American countries suffers from corruption coupled with extraordinary consequences.

Figure 3. Martin Vizcarra’s popularity. Source: Gestion.pe

Unsurprisingly, like six predecessors in office, the new president of the country is also involved in scandals. Merino de Lama is being investigated for influence peddling, as he is allegedly facilitating contracts between his family and the government.

Mr. Merino promised to focus on the pandemic and honor the scheduled Apr. 11 election date. But a question remains, will Merino be able to hold the presidency until there?

FX | Peru’s sol posted small gains over the week, after falling to an 18-year low Tuesday. Investors are braced for more political turbulence as the country struggles back from one of the world’s deepest economic recession.

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Hong Kong is about to lose its political opposition

The complex legal framework that was put in place when Hong Kong reverted to Chinese rule in 1997 [from Britain] makes it a unique case, and one which means that the delineations between the Hong Kong Special Administrative Region (SAR) and China are rarely straightforward.

A good example of this complex framework occurred on Wednesday when the Hong Kong administration delayed elections and purged pro-democracy lawmakers. In this action, a new law was imposed by Beijing allowing the disqualification of “unpatriotic” opposition members, which prompted the entire pro-democracy caucus to announce their resignation. Thus, the judicial, executive and legislative branches of Hong Kong’ government do not work or officials are by far under China influence.

Under this new law, anyone who is found to be politically incorrect or unpatriotic or simply not likeable to look at, can be ousted by the government. The international community saw the actual act by Beijing as a path was paved to wipe out any pro-democratic fight in the country.

The US national security advisor, Robert O’Brien, accused China of having “flagrantly violated” its international commitments, and threatened further sanctions on “those responsible for extinguishing Hong Kong’s freedom”. Britain and the European Union also condemned China’s move. The U.K.'s minister for Asia, Nigel Adams, told Parliament that London was considering sanctions against individuals in China.

Shortly the old saying might be: "One Country, Two Systems One System”

FX | The pair USD/CNY is still under an appreciation bias. As persistent and large capital inflows continue, the RMB would be pushed to a one way appreciation path.


India watching (monitoring) Netflix

India is a young country, where nearly 65% of its population is younger than 35. So, let’s do some maths here. Considering that India's population is estimated at 1,380,004,385 people and 65% is under 35… we have around 897,002,850 potential young people thirsty for connectivity.

Even though the country faces a lack of infrastructure and other hurdles that make mass connectivity in the immediate future impossible. India has been experiencing a technology revolution which has fueled unprecedented access to information. Millions of people who had little means to join the national discourse can now gain new insights into the world around them. Along with telephony, Internet penetration is soaring in rural and urban India. Urban India boasts 137 million Internet users and rural India, 68 million. Moreover, the number of rural Internet users is growing by 58% annually.

Against this backdrop, It is easy to understand why India is currently the world’s fastest growing OTT (over-the-top streaming) (Fig 1) market, and is all set to emerge as the world’s sixth-largest by 2024.

Figure 1. Video on demand in India

Source: PWC - Video on demand: Entertainment reimagined

According to PWC report, the massive investments made by OTT services like Netflix, Amazon, Disney+, Hotstar and others in originals as well as acquired content will help subscription video-on-demand make up 93% of the total OTT revenue (as compared to 87% globally) by 2024 (Fig 2).

Figure 2. India’s OTTs

Not for nothing that digital streaming platforms have had a dream run in India. However, this report did not count with the new Indian government regulation, which may interfere with or regulate content… raising censorship fears and leading those companies to lose millions of dollars in investments.

The Indian government this week announced that all digital content platforms would now be under the information & broadcasting (I&B) ministry’s jurisdiction. This Ministry, which regulates and censors print newspapers, television, films and theatre, will also have jurisdiction, under the new order, over digital news and entertainment platforms in India. Currently, traditional media in India is largely pro-government and subject to fierce pressure, while digital content platforms have any government control and censorship...so has been concerning the Hindu nationalist agenda of the prime minister, Narendra Modi.

Would this new government regulation disrupt that technology revolution? If it brings censorship in tow, it can.

FX | The Indian Rupee trades on the back of strong global cues after the US presidential election outcome and sustained foreign capital inflow into the domestic market. However, the currency’s prospect is a bit dark, after the country has entered a technical recession in the first half of 2020 for the first time in its history. GDP contracted 8.6% in the quarter ended September and previously, the economy had slumped about 24% in April to June.

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Quiz of the week


There are estimated to be 390 billion trees in the Amazon, split into 16,000 species.

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