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Thoughts and Takeaways From The EMsights Annual Research Retreat
The EMsights Capital Group held their annual research retreat in December. For two days the investment team gathered off-site to recap the events of 2023 and look forward to 2024. This year’s agenda also featured several outside speakers ranging in expertise from the Russia/Ukraine war to the current health of the US economy.
Over the course of the two days, the team identified several cross-regional trends they expect to remain prominent in 2024:
On-Going Conflicts May Give Way To A Rise In Smaller Disputes
The wars in Russia – Ukraine and Israel – Gaza remain front and center on the global stage as aid packages and political relations are on the line. While these conflicts rage on, the EMsights team is also keeping a close eye on smaller and seemingly more contained quarrels that may come to a head during these turbulent times. With most people’s attention elsewhere, it is possible that countries might see now as an opportune time to slide under the radar and settle their smaller disagreements. For instance, territorial disputes between Venezuela and Guyana, normalization between Serbia and Kosovo, and coups across Africa may escalate.
Rise Of The Far-Right
A conservative wave has been sweeping elections across parts of the developed and emerging world, particularly in Latin America and Europe. From Argentina to El Salvador, Italy to Hungary and most recently, the Netherlands, far-right ideology has gained popularity. Polls are forecasting similar outcomes at the EU Parliamentary election in June 2024 and the US Presidential election in November, though it is still too early to call.
The verdict of these elections will have material effects on the global economy as they will guide how the on-going wars will be handled and how aid is allocated. From an economic standpoint, the shift to the far right can be favorable for emerging market investors as more business-friendly reforms are introduced, which we are already seeing play out in Argentina. This can help repair ailing economies and drive the return of foreign capital.
The Downfall Of The Common Framework
In recent years, China has become a leading creditor to emerging markets, however its role in the restructuring process is proving to be more harmful than helpful. Zambia and Ghana have both faced delays in their quest for relief at the hands of China. The Common Framework’s mission to provide aid for low-income countries by facilitating discussions between traditional and non-traditional creditors, such as China, is falling short of its goal. The EMsights team expects these failed restructuring attempts will create a stronger desire for countries to remain current on their payments and avoid restructuring, when possible, especially when China has a seat at the creditor table.
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