Our pick of headlines this week impacting commercial real estate in the emerging markets.
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Headlines:
Global
2020 Interview at the Air Force Association Air Ware Symposium between Elon Musk and Lt. Gen. John F. Thompson. Good mindset for a 2024 that is only going to get bumpier.
A combination of factors has created the environment for decoupling from China to a more decentralized and regional manufacturing system (i.e., nearshoring and reshoring). Shipping rates increasing tenfold in 2022 played a big part, but so has Chinese labor rates increasing 30 times from $46 per month in 1992 to $1,500 in 2024. The shifting landscape creates immense opportunities for real estate investors and developers who have their ears to the ground and can see the transition presently underway.
Latin America
Open-pit mining in Mexico is a major contributor to the Mexican economy. Industry experts attribute 2 million direct and indirect jobs to the industry and the collection of $8.8 billion in taxes annually into government coffers. The outgoing President of Mexico is attempting to ban the practice in his country and is expected to meet fierce opposition from incumbents. These AMLO mining reforms are part of a long list of actions to contain investors and businesses, particularly those operating in the northern provinces which AMLO considers his adversary.
Latin American retail giant Parque Arauco has chosen four proptech startups, from four countries, from over one hundred applicants to join its Parque Arauco Venture Client program. These innovation leaders and retail-focused startups will receive funding, office space, and the opportunity to pilot their solutions in Parque Arauco malls across Chile, Peru, and Colombia. Real-world testing through a pilot program is critical for startups to refine their offering. What an opportunity!
President Javier Milei's Argentina just achieved its first budget surplus in 12 years, boasting a 256.9% increase in tax revenue and a 50.3% drop in public spending in January 2024. This milestone, exceeding the 2.77 billion peso surplus recorded in the last surplus in 2012, marks a potential turning point for the nation's finances. Skeptics and critics warn of the long-term sustainability of the drastic measures being employed which Milei himself refers to as "shock treatment". Argentina's financial trajectory under this unconventional leader has investors taking notice, making it a country worth watching in the ever-evolving South American landscape.
Africa
The Gulf Cooperation Countries delivered 156 greenfield FDI projects, valued at $113 billion, in 2022 and 2023. The significant uptick is striking and due primarily to Saudi Arabia's and the UAE's desires for greater food security, to tap into Africa's growing consumer market, and to remain relevant by securing access to the energy transition metals that Africa has in spades. To put these figures in context, in 2023 US Africa investment was only $10 billion of greenfield FDI in Africa, its highest figure since 2018. China Africa Investment in 2022 was a record $38.5 billion, and the Western European nations weren't far behind China was $38 billion in greenfield commitments.
South Africa's beloved flame-grilled chicken chain launches in Atlanta after US success. The first location will open in Dunwoody's High Street development with a second location planned for Peachtree Corners. The chain was founded in Johannesburg in 1987 and now has 1,250 restaurants in 35 countries including the UK, Portugal, and America where it has 47 stores. Atlanta has been a popular city for South Africans looking for greener pastures in the United States and even has a direct flight connection to South Africa.
On February 8, at the Lobito Corridor Investor Forum in Lusaka, Zambia, the DFC announced the approval of a $250 million loan to fund the continued expansion and improvement of rail infrastructure along the Lobito Corridor. Congressional approval is required because it exceeds thresholds and further scrutiny has been triggered, otherwise investments are normally dispersed once authorized by the DFC board.
Southeast Asia
Vietnam has a booming "low-end" electronics manufacturing sector and now has its sights on a new challenge of carving out a niche in the fiercely competitive and capital-intensive global semiconductor industry. Vietnam currently lacks domestic fabrication capabilities and faces a tenfold deficit in semiconductor engineers. Its current strategy hinges on attracting foreign investment like the $1 billion Bac Gian fab, but questions linger about long-term sustainability compared to nations like the US (investing $52.7 billion through the CHIPS Act), China (over $100 billion), and Europe (pledging €43 billion). The coming years are critical for Vietnam, once the global semiconductor supply chains are resettled there won't be much room for upstarts to wedge their way in.
Thailand's real estate market faces challenges due to a slowing economy, reduced tourism, and declining foreign investment. To revive the market, the government plans to offer support to qualifying homebuyers, including reduced fees and tax breaks on purchases up to $42,000. Additionally, the loan-to-value ratio (LTV) for eligible buyers will be increased from 70%/90% to 100%, enabling them to purchase homes without a down payment. This initiative aims to boost domestic demand and stimulate the residential real estate sector and the overall economy.
Bernie Madoff and Enron executives are rejoicing that their scandals and frauds may soon be eclipsed by one in Vietnam involving nearly 10% of Vietnam's GDP. The international media attention on the fraud trial of Chairwoman Lan has been scant, but as the trial advances and more facts emerge, watch for that to change. On one hand, the case shows Vietnam acknowledges its corruption problem and is doing something about it. On the other, it shows to the world a darker side of Vietnam. Seeing this side could make foreign investors reconsider investments, and at the very least to proceed with more caution than was previously thought required.
