Our pick of headlines this week impacting commercial real estate in the emerging markets.
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Headlines:
Global
FDI into China dipped to $33 billion, the lowest since 1993. The good news is that China's FDI figure was positive, some analysts were predicting a negative FDI for the year with outflows outpacing inflows. South Korea, Taiwan, and Japan have all significantly slashed FDI into China. Germany seems to be the only advanced economy doubling down on China having made a record number of investments in the communist country last year. Some experts are accusing the CCP of data manipulation to give an illusion of stability suggesting things could be far worse than the numbers released indicate.
President Nayib Bukele's CPAC speech rallied against "dark forces" threatening democracy. His rise as an unconventional leader mirrors a shift in Latin American politics. Bukele emphasized conservative principles, urged media integrity, and cautioned against economic pitfalls. Despite controversies, his popularity reflects a desire for change. Bukele's speech signals a global call for accountability and leadership grounded in governing in a responsive way to the people and workers, not only to the elite and political classes.
Latin America
Mexico's EV manufacturing potential is immense and the impact of the USMCA on EV trade is on the verge of making Mexico an EV manufacturing behemoth. Major players like Tesla, Volkswagen, Kia, Stellantis Group, BMW, and now BYD are pouring billions into expanding their manufacturing bases in Mexico. Domestic EV sales surged 24% in 2023 to 1.36 million, but the real catalyst is tax-free access to the US market for EVs built with North American components. Mexico is not wrong to welcome BDY, but by so doing it may diminish its leverage at the next renegotiation of the USMCA which is slated to occur in 2026. Failure to reach an agreement would trigger an automatic termination of the USMCA after ten years.
Nearshoring gains are under strain from a variety of sources, including a tenfold increase in illegal border crossings. Even cities traditionally supportive of immigrant communities who proudly proclaimed themselves "sanctuary cities" are feeling the strain, prompting questions about border control policies. Escalating crime along transportation routes and increased scrutiny on shipments into the U.S. further exacerbate the situation, potentially impacting future trade negotiations under USMCA slated to occur in 2026. US-Mexico border management, and the illegal immigration impact, are creating nearshoring challenges and headaches for Democrats who which to remain in power beyond 2024.
El Salador’s charismatic, smart, and beyond all else tough-as-nails young President is taking the fight to the terrorist cartels in his country and winning. In a short period he’s decimated the morale of the cartel terrorists and turned his nation from one of the most dangerous in a short period. Milei’s Security Minister, Patricia Bullrich praised Bukele for lowering “crime as you have done and still endure criticism when you have saved millions and millions of lives…We really want to work and see what you have done. We put a lot of effort into it and we need to get to that place too. And we are going to get there. We are making an important change in Argentina,” Bullrich told Bukele.
Africa
Globally, China now has 274 diplomatic posts, according to the Global Diplomacy Index released by the Lowy Institute. Washington DC is close behind with 271. China has a larger presence in Africa, East Asia, the Pacific Islands, and Central Asia. Washington DC leads in Europe, the Americas, and South Asia. A major criticism of America’s foreign “diplomatic” outposts is they are extremely overstaffed, too large and complex, and too costly to manage and run. The American diplomats tend to remain in the compounds and focus on pushing developmental aid and spending taxpayer money for pet projects, rather than achieving meaningful results. Conversely, the Chinese outposts are far more efficient and useful and focused on engaging with the government on deals, and investments and assisting Chinese private enterprises to enter foreign markets.
Egypt said on Friday it had signed a deal with the United Arab Emirates to develop a prime stretch of its Mediterranean coast that would bring $35 billion of investments to the indebted country over the next two months. The deal with ADQ, the smallest of Abu Dhabi's three main sovereign investment funds, is for the development of the Ras El Hekma peninsula and could eventually attract as much as $150 billion in investments, Egyptian Prime Minister Mostafa Madbouly told.
The United Arab Emirates and Kenya concluded negotiations on a trade deal that would boost trade and investment ties between the two countries as the Gulf country expands its role across Africa. The Emirati news agency WAM reported that UAE Minister of Foreign Trade Thani bin Ahmed Al-Zeyoudi and Kenyan Cabinet Secretary for Investments, Trade and Industry Rebecca Miano signed a joint statement at the conclusion of the talks on the Comprehensive Economic Partnership Agreement in Dubai on Thursday. The agreement will secure vital supply chains for both sides and facilitate investments in several fields including logistics, health care, travel and tourism, infrastructure and Information and communication technology, according to WAM.
Southeast Asia
VinFast shares approached meme-stock status in 2023 making it briefly the third most valuable car company in the world. Now that the shares have returned to earth, the company faces other challenges. The ambitious and expensive expansion plans are growing sales but costs far exceed revenues leading to a difficult-to-swallow $2.4 billion loss for the Vietnamese company in 2023. The struggles reflect broader issues in the EV market globally marked by heightened competition from rivals like Rivian and established players like Tesla and China's BYD. Beyond the EV hype which captivated many, concerns remain about limited charging infrastructure, high costs, ethical mining practices, and the environmental impact of relying on fossil fuels for electricity generation.
Southeast Asia's real estate market has an impressive mix of high-quality real estate investment firms, at least compared to other emerging markets. It should come as no surprise that most are based in Singapore, and focused primarily on advanced logistics investments. The top three property investors in the region are unpacked and those include CapitaLand Investments, GLP, and ESR Cayman Limited. Honorable mentions also discussed are Temasek (i.e., Mapletree), Blackstone, Nuveen Real Estate, Brookfield Asset Management, PGIM Real Estate, and UBS Asset Management. Taken together these are considered the best real estate investment firms in Southeast Asia.
many in Vietnam attribute the nation’s recent economic success is to its ability to distance itself from both American and Chinese interests, to play the middle ground. To find a way to gain an advantage by playing the two adversaries off against one another in a way that doesn’t offend either side. There may be some truth to these claims, but the more obvious reason for Vietnam’s success is it is geographically close to China, and has a large population full of industrious people willing to work for low wages. China is running out of workers, and the advanced economies have been looking to diversify from China for years even before decoupling began. The true test for Vietnam is upcoming and it is whether can it continue to thrive in a world decoupling from China and one where America is moving rapidly towards regionalizing its manufacturing base and supply chains and automating functions previously carried out by mostly Asian workers.
