MOZAMBIQUE: TRANSPARENCY IS ESSENTIAL

The US consulting company Kroll has just submitted its audit report on the so-called "hidden debts" to the Attorney General's Office (AGO), which is linked to three state-owned companies - Ematum (Mozambican Tuna Company), Proindicus and Mozambique Asset Management.

During the years 2013-2014 these companies contracted a debt in the amount of $ 2.2 billion, with government guarantees, but without the approval of Parliament or inscribed in the public accounts. This lack of transparency was during Armando Guebuza's presidential mandate (he became the owner of several state-owned companies), although the knowledge of this situation was already under Filipe Nyusi’s mandate.

The disclosure of the report will be released by AGO, and although no date has been se yett, the IMF extols this disclosure, hoping that this will happen during the current month.

It is essential to re-establish a climate of confidence in government agencies after such an episode, as this has generated strong indications of budgetary legislation violation, as well as representing a criminal offense in the form of abuse of office or function. In addition, as the Mozambican state assumed the inability to pay benefits to creditors, and the scandal burst (April 2016), the IMF and other international financial entities froze the various State budget support.

There are great expectations about this report, although it has already been pointed out by the AGO that the judicial confidentiality would be safeguarded.

Several questions (where is the Money?) have arisen since the beginning of this scandal, however, the fact that this report was drawn up by an independent foreign company is already an indication that transparency might not be an unattainable mirage. Transparency, macroeconomic reforms as well as the struggle for an effective peace are the foundation of a more reliable State.

Miguel Verde - Senior Consultant, Professor of International Relations

ANGOLA: ANGOLAN ECONOMY MODEST GROWTH

The IMF forecasts a 1.3% growth in the Angolan economy this year, especially at the expense of increasing public spending. After the suffocating stagnation that struck the country last year it looks like growth might again be a reality, not only in 2017 but also for next year (1.5%).

Although this  auspicious growth in the face of current scenario, it isn’t naive, since the presidential elections will take place next August; Hence a more expansionary budget perspective.

The Angolan economy, indeed, has kept a growth below average since the beginning of the decade. Among other things, the IMF warns about the accumulation of arrears by the State, and allow me to add: the country's excessive dependence on oil. The low-price trend of recent years has led to an imbalance in public accounts due to declining fiscal revenues, coupled with the global economic slowdown.

The IMF also highlights the importance of fiscal consolidation, as the decrease in revenues has led to high inflation - forecasting 27% this year and 17.8% in 2018.

Finally, with regard to public debt, the IMF stresses that the more restrictive financing conditions and the greater acknowledgement to debt financing have worsened the cost of servicing the debt.

P.S.- There were rumors the President José Eduardo dos Santos health condition worsened. This circumstance has left his MPLA comrades apprehensive. We must bear in mind the presidential campaign of General João Lourenço (MPLA candidate) is controlled by the Republic Presidency. José Eduardo dos Santos is only the second President since Angola’s Independence (1975) and has been in power for 37 years.

João Dias - Senior Consultant

BRAZIL - RETAIL TO GROW IN 2017

The first months of 2017 brought good news to the retail trade, after 2 consecutive years of retraction. Large companies that depend on consumer spending have increased revenue and profit in the first three months of the year. The course of the following months seems to be promising not only for big companies with shares in the stock market, but also for small, medium-sized retailers.

There is a very positive reaction in several sectors such as clothing, construction material sector, or even in the optical industries.

According to some analysts March was the big turning point in revenue growth; the new growth prospects point to a recovery in domestic consumption that may result into a real boost.

Notwithstanding these good prospects, there’s some research showing that six out of ten consumers want to cut spending in May and only 15% of Brazilian have a bigger income than monthly expenditure, thus the level of indebtedness tends to increase.

The euphoria or exaggerated optimism that has been Brazilian hallmark for many years, today only gives way to moderate optimism.

Miguel Verde - Senior Consultant, Professor of International Relations

PORTUGAL- CGD vs. POPULATION: WHO’S TO BLAME?

The last few months have brought CGD (Caixa Geral de Depósitos) to the front pages of the newspapers. The diverse factors responsible for the mediatisation of the state bank have not been the noblest, and many times we have the idea that the bank's destiny seems doomed to a hectic reform, or even to a privatization.

The latest controversy involves the closure of several bank branches, leading to protests in some countryside regions – Almeida Council the most visible. Under this constant turmoil of the state bank, the trend will be to look for the culprits. Is CGD, through its managers, the culprit? Does population understand the need of the bank reorganisation?

As a matter of fact, both CGD and the citizens are right. Both are victims of the bank's administrative past, as well as the policies followed by the past governments with regard to the countryside where the investment is nil.

Desertification in the countryside intensifies and no measures are taken - the loss of population, the loss of Health Centers, the loss of equipment, and now it is the loss of CGD branches. People have the right to be outraged, but CGD is not to blame for this. The Bank is not responsible for creating wealth in the countryside. The decrease in population is due to goverment’s lack of investment. Furthermore, we mustn’t forget CGD has a program approved in Brussels which, because of the recapitalization, requires a decrease on expenditure, both in reducing employees and branches.

Thus, who should we assign responsibilities to? Previous governments, namely the Socrates government and previous administrations - Armando Vara and Santos Ferreira, for example, who let CGD in an odd situation where it was necessary to inject a lot of money.

Miguel Verde - Senior Consultant, Professor of International Relations

MOZAMBIQUE: TOWARDS EFFECTIVE PEACE?

The recent times have been prodigal in optimistic statements regarding a an effective peace process, both by FRELIMO and RENAMO.

The center of the country, notably the Gorongosa region, has undergone a progressive military demobilization, with reports and testimony from the population itself that the few remaining security and defensive militar forces ambulate unarmed.

Afonso Dhlakama, RENAMO's historic leader, points out that he has maintains regular contacts with President Filipe Nyusi and announced a "truce without deadlines". Effective peace is starting to become a reality, and it shows we are facing increased confidence among belligerent factions.

The negotiating agenda aims not only the decentralization and cessation of clashes, but also integrating the depoliticization of the Defense and Security Forces and the disarmament of the opposition armed wing and their reintegration into civilian life.

In any case, if peace is to become effective, there must be goodwill on both sides and a massive support from all sectors of society.

Miguel Verde - Senior Consultant, Professor of International Relations

ANGOLA: OIL ACTIVITY IS IN CRISIS

The high cost of producing the barrel of oil and the steady decline in price on the international market is leading two of the world's largest oil companies, Chevron and Exxon to rethink their business strategy in Angola. The possibility of abandoning activity in this country is not out of the question.

Sonangol (the Angolan state oil company) led by Isabel dos Santos faces serious cash-flow difficulties and has for some time been unable to monitor with foreign investments. In addition to requiring Chevron to reduce considerably its budget (40% this year), it often fails to respond to proposed new projects, such as Exxon intension to develop a drilling project of 40 to 60 new oil wells in deep waters.

This skewed policy in which nothing is decided is attributed to Isabel dos Santos, accused by many of not being able to manage Sonangol and only being interested in personal enrichment.

Impatience has already taken over both Chevron and Exxon. Another good example of careless management is BP - itself had planned an investment of $ 800 million in Angola - after a four months deadlock the proposal succumbed.

With the reduction of investments in this sector, production will naturally tend to fall and the national budget will suffer even more harmful consequences than today.

The Angolan State can’t neglect this created scenario, as these and other companies will certainly change their strategy and invest in more attractive markets.

João Dias - Senior Consultant

BRAZIL - THE LABOR REFORM: WILL IT HARM THE WORKER’S CONDITION?

Last Friday, April 28, we had a general strike in Brazil, led by the Central Workers’ Union (CUT) and the Workers' Party (PT). This kind of strike had not been occuring since 1996, and has been another mote of discord between the various societal and political groups.

Firstly, it should be enhanced that this general strike has been used mainly by leftist parties and movements, especially the PT and the CUT, to destabilize political power and preserve its influence on workers.

Secondly, we must remember that this labor reform was passed by a majority in the Chamber of Deputies, but it still has to go through the senate and finally be ratified by President Michel Temer.

Now, the prime question one may arises is what rights will the worker lose? None! Yes, in fact, this whole frenzy about this reform is only an exaggerated hysteria, mainly fueled by the PT and CUT, because they realize their sphere of influence tends to decreasei n the coming times.

The new law will in fact modernize labor relations and follow the trend of other countries, with much more developed labor laws. Nowadays there is the compulsory union contribution (salary withdrawal). This sort of “contribution” has in fact, run its course. Contrary to what common sense may radiate to us and which is publicized by some, the less unionized countries are those in which the workers’ wage are higher.

The vacation issue is an example of how trade-unions and their acolytes seek to mislead citizens. What will happen after this reform comes into force is that the employer and the worker can enter into an agreement to divide vacations. This can be beneficial for both sides.

Wages, vacation, Christmas bonus - there isn’t any change in values, and everything the employer gives extra to the employee (performance bonus for example) can become a bonus, without this being incorporated into the pre-determined wage.

Unemployment insurance remains, except in a situation where there is agreement between the employer and the employee to leave the company, and in which the severance pay fund fine is divided.

With the planned reform, you can still fall short of expectations, but it is necessary. Despite the prospect of improvement, it would have been vital first to promote tax reform.

Miguel Verde - Senior Consultant, Professor of International Relations