Mission Grey Daily Brief - September 08, 2024

Summary of the Global Situation for Businesses and Investors

Algeria's presidential election, Libya's oil exports standstill, political tensions in France, and the possibility of Belarus' involvement in the Russia-Ukraine war are the key issues impacting the global situation today. In Algeria, the incumbent president is expected to win a second term despite concerns over deteriorating human rights and low voter turnout. Libya's oil exports are at a near standstill due to political tensions over the control of the nation's central bank, which manages oil revenues. Protests in France against the appointment of Michel Barnier as Prime Minister reflect political divisions in the country, as a left-wing coalition won the most seats in the lower house of parliament in the July elections. Meanwhile, Belarus' proximity to Ukraine and its relationship with Russia raise concerns about its potential involvement in the war.

Algeria's Presidential Election

Algeria held a presidential election on Saturday, with preliminary data showing a voter turnout of around 48%. The incumbent president, Abdelmadjid Tebboune, is expected to win a second five-year term despite concerns over deteriorating human rights and a history of embarrassing statements. Human rights groups and opposition figures have criticized the government for dissolving political parties, civil society organizations, and independent media outlets, as well as a spike in arbitrary arrests. The election took place against a backdrop of economic challenges, with the government failing to contain soaring inflation and meet export growth targets. Algeria's largest opposition party, the Rally for Culture and Democracy (RCD), has been a particular target of government crackdowns, with 60 of its activists arrested in August. The country has also never had a peaceful transition of power, and the military's influence remains strong. The election results are expected today.

Libya's Oil Exports Standstill

Libya's oil exports are at a near standstill due to political tensions over the control of the nation's central bank, which manages oil revenues. Forces aligned with eastern leader Khalifa Haftar halted production at major oil fields on August 26, slashing output by half. This disruption has sent ripples through global energy markets, causing a brief rise in world oil prices above $80 per barrel. While a recent agreement between rival governments has raised hopes for a resolution, industry analysts warn that the situation remains unsettled. Libya's oil production is critical to its economy, accounting for 98% of government income and 65% of its GDP. The National Oil Corporation has declared force majeure, seeking release from its contractual obligations. The situation has also impacted OPEC members' views on China's oil demand, which may be weaker than anticipated due to a transition to electric vehicles.

Political Tensions in France

Tens of thousands of demonstrators took to the streets of Paris and other French cities to protest the appointment of Michel Barnier as Prime Minister by President Emmanuel Macron. The protests reflect political divisions in the country, as a left-wing coalition won the most seats in the lower house of parliament in the July elections. Macron's decision to appoint a veteran conservative has been denounced as a "power grab" that undermines democracy. Surveys suggest that a majority of French voters believe Macron has "disregarded" and "stolen" the election results. The protests come just days before Denmark's vote in the European Union election, and in the context of an increasingly polarized political climate across Europe, as seen in the recent assassination attempt on Slovakia's Prime Minister.

Belarus and the Russia-Ukraine War

As the Russia-Ukraine war continues, attention turns to the situation along Ukraine's border with Belarus. Belarus has played a key supporting role in the war, with Russian troops and equipment positioned in Belarus before the invasion. Tensions have escalated in recent months, with Belarus positioning thousands of troops near the Ukrainian border. While backchannel negotiations led to their repositioning, there remains a concern that Belarus may come under pressure from Russia to become directly involved in the war. Ukraine has been fortifying its border with Belarus and does not seek a confrontation but cannot rule out the possibility. A potential Belarusian military intervention could involve a joint attack on Kyiv, forcing Ukraine to redeploy troops from frontline positions.

Recommendations for Businesses and Investors

Algeria: Businesses and investors should closely monitor the situation in Algeria, particularly regarding the protection of human rights and the potential for economic reforms. While political stability may be appealing, the country's history of arbitrary arrests and lack of respect for civil society organizations could pose risks.
Libya: The uncertainty surrounding Libya's oil exports underlines the risks of investing in countries with political instability and a heavy reliance on a single industry. Businesses and investors should be cautious about entering or expanding operations in Libya until the situation stabilizes.
France: Political tensions in France highlight the risks of investing in a country with a polarized political climate. Businesses and investors should monitor the situation and be prepared for potential policy changes if the left-wing coalition gains more influence.
Belarus: The potential involvement of Belarus in the Russia-Ukraine war underscores the dangers of doing business in or with countries that support or enable authoritarian regimes. Businesses and investors should avoid any involvement with Belarus to prevent reputational and ethical risks, as well as potential economic disruptions.

Themes around the World:

Energy Sector Transition

Canada's shift towards renewable energy and reduction of fossil fuel dependency impacts international investment and trade. Policies promoting clean energy technologies create opportunities but also pose risks for traditional oil and gas sectors. This transition affects supply chains related to energy exports and infrastructure development, influencing long-term business strategies.

Geopolitical Tensions and Security Risks

Ongoing regional conflicts and security concerns in Israel create volatility that affects foreign investment and supply chain stability. Heightened tensions with neighboring countries increase risk premiums, impacting insurance costs and operational continuity for international businesses.

Vision 2030 Economic Diversification

Saudi Arabia's Vision 2030 initiative aims to reduce oil dependency by developing sectors like tourism, entertainment, and technology. This transformation attracts foreign investment, reshapes supply chains, and opens new market opportunities, impacting global business strategies and partnerships.

Foreign Investment Surge and Strategic Sectors

Thailand experienced an 11% increase in foreign investor approvals and a 72% rise in investment value in 2025, with key inflows from Japan, Singapore, China, and the US. The Eastern Economic Corridor (EEC) remains a focal point, attracting 29% of foreign investors and 33% of investment value, underscoring its strategic importance for industrial growth.

Export Growth Despite US Tariffs

Mexico's exports grew 5% in 2025 despite US-imposed tariffs, driven by US companies accelerating purchases to avoid higher costs. The US-Mexico-Canada Agreement (USMCA) provides Mexico a tariff advantage over other countries, particularly China and Canada. However, upcoming USMCA renegotiations pose risks to this advantage, potentially affecting Mexico's export competitiveness and economic stability.

Currency Fluctuations and Monetary Policy

The Canadian dollar's volatility against major currencies affects trade competitiveness and investment returns. Bank of Canada’s monetary policies influence inflation and borrowing costs, impacting business financing and pricing strategies.

Taiwan's AI-Driven Economic Boom and Inequality

Taiwan's economy is surging with 7-8% GDP growth driven by AI and semiconductor exports. However, wealth gains are unevenly distributed, with tech sector prosperity contrasting stagnant wages and subdued consumer confidence in traditional sectors. This economic divergence poses challenges for social cohesion and sustainable domestic demand.

Emergence of Vietnam’s Dual-City International Financial Centre

Ho Chi Minh City and Da Nang are developing a dual-city International Financial Centre (IFC), attracting global crypto players like Binance and Tether. Flexible regulations, fintech sandboxes, and a large crypto user base position Vietnam as a regional hub for digital assets, fostering innovation while navigating evolving regulatory frameworks.

Global Market Sensitivity to Japanese Policy

Japan’s monetary and fiscal policy shifts have outsized influence on global financial markets. Rising Japanese bond yields and yen fluctuations affect US Treasury yields, equity valuations, and emerging market capital flows. Investors closely monitor Bank of Japan decisions, as policy missteps could trigger global liquidity shocks and heightened market volatility.

Digital Economy Expansion

Rapid growth in Indonesia's digital economy, including e-commerce and fintech sectors, is transforming business operations. This expansion offers new market opportunities but also requires adaptation to evolving regulatory frameworks and cybersecurity challenges.

Israel's Military-Tech Exports to Latin America

Israel exports advanced military and surveillance technologies to Latin America, including predictive monitoring and riot-control vehicles. These exports extend Israel's geopolitical influence and open new markets but raise ethical concerns about repression and human rights, potentially affecting Israel's international trade relations and reputation.

Geopolitical Security Concerns

Heightened geopolitical tensions, including cybersecurity threats and defense policies, affect US trade relations and foreign direct investment. Businesses must navigate increased risks and adapt security measures accordingly.

Infrastructure Investment Plans

Significant US government spending on infrastructure modernization aims to enhance logistics and transportation networks. Improved infrastructure supports more efficient trade flows and can attract foreign investment.

Risk of Investment Grade Downgrade

S&P Global warns Mexico is close to losing its investment-grade credit rating due to rising public debt, fiscal deficits, and potential increased financial support for state-owned enterprises like Pemex and CFE. A downgrade could increase borrowing costs, reduce investor confidence, and negatively impact foreign investment and economic growth prospects.

Robust GDP Growth and Sectoral Expansion

Egypt's economy grew 5.3% in Q1 2025/26, the highest in three years, driven by non-oil manufacturing (+14.5%), tourism (+13.8%), and telecommunications. Private investment surged 25.9%, reflecting structural reforms and diversification away from oil. This growth signals expanding market opportunities and improved business climate for investors and supply chains.

Rupiah Redenomination Risks and Opportunities

Indonesia's plan to redenominate the Rupiah aims to simplify accounting and enhance digital payment efficiency. While theoretically neutral, implementation risks include short-term price volatility due to rounding and expectation effects, especially in informal cash-heavy sectors. Effective governance, clear rules, and communication are critical to mitigate inflationary pressures and maintain purchasing power.

Housing Market Cooling and Affordability Issues

The Israeli housing market is experiencing a prolonged price decline due to high interest rates, oversupply, and geopolitical tensions. Reduced sales and price drops affect real estate investment, consumer wealth, and construction sector activity, with regional disparities in price movements.

Economic Polarization and Dutch Disease

Taiwan's booming tech sector has led to wealth concentration and economic divergence, with traditional industries lagging. This polarization mirrors Dutch Disease, weakening domestic sectors and consumer spending, which poses risks for sustainable economic growth and affects domestic market stability for investors.

Record Foreign Direct Investment Growth

Despite economic headwinds, Mexico has achieved a record US$40.9 billion in FDI in the first nine months of 2025, a 14.5% increase over 2024. This surge, driven by new investments in manufacturing, financial services, and infrastructure, reflects growing global investor confidence, bolstered by nearshoring trends and Mexico's strategic position within North American trade frameworks.

Supply Chain Diversification Efforts

Global companies increasingly diversify supply chains by relocating manufacturing to Vietnam to mitigate risks from China-centric dependencies. Vietnam's competitive labor costs and improving infrastructure make it a preferred destination, impacting investment flows and reshaping regional manufacturing hubs.

Labor Market Dynamics and Skill Development

India's large labor force offers a competitive advantage, but challenges remain in skill development and labor regulations. Efforts to enhance vocational training and labor law reforms aim to improve workforce productivity, which is crucial for sectors like manufacturing and IT services that drive export growth and attract foreign investment.

Geopolitical Tensions Affecting Commodities

Rising geopolitical risks, including Middle East conflicts and US-China trade tensions, have introduced significant volatility in commodity markets. Energy prices, especially crude oil, carry geopolitical risk premiums, impacting global supply chains and inflation. Safe-haven assets like gold have surged amid uncertainty, reshaping investment flows and affecting commodity-dependent economies and industries worldwide.

Currency Volatility and Inflation

Iran experiences significant currency depreciation and inflationary pressures, undermining purchasing power and complicating financial planning for businesses. Currency instability increases costs for imports and affects profitability, posing challenges for foreign investors and local enterprises alike.

Trade Deficit Reduction and Export Diversification

Egypt's trade deficit narrowed by 16% to $26.3 billion in the first 10 months of 2025, aided by a 19% surge in non-oil exports to $40.6 billion. Key export markets include UAE, Turkey, Saudi Arabia, Italy, and the US. Export growth in building materials, chemicals, food, and engineering products reflects successful diversification, improving Egypt's global trade competitiveness.

Strategic Trade and Investment Partnership with Saudi Arabia

Egyptian businesses prioritize expanding trade and investment with Saudi Arabia, driven by Saudi Vision 2030's economic diversification. Nearly 90% of Egyptian firms plan significant growth in bilateral trade, focusing on technology and renewable energy sectors. Enhanced legal frameworks and investment agreements facilitate this partnership, presenting substantial opportunities for cross-border collaboration and regional economic integration.

Belt and Road Initiative Expansion

China continues expanding its Belt and Road Initiative, enhancing infrastructure connectivity across Asia, Africa, and Europe. This facilitates trade routes but raises geopolitical concerns about debt dependency and China's strategic influence.

Geopolitical Risks and Security

France's involvement in global geopolitical issues and counter-terrorism efforts influences risk assessments for businesses. Security concerns and regulatory responses affect operational continuity, insurance costs, and investment risk profiles in the region.

Foreign Direct Investment Trends

Pakistan's net FDI reached $178.9 million in October 2025, slightly down from September, with major inflows in power, financial, and communication sectors. China, UAE, and the Netherlands are key investors. Despite positive sectoral contributions, overall investment growth is fragile amid governance concerns and economic uncertainties, impacting long-term capital formation and industrial development.

Surge in Japanese Government Bond Yields

Japanese government bond yields have reached multi-decade highs, reflecting inflationary pressures and fiscal stimulus. This surge disrupts the longstanding low-yield environment, threatens the yen carry trade, and has global repercussions by influencing US Treasury yields and international capital flows, increasing financial market volatility worldwide.

Trade Agreements and Regional Integration

Brazil's engagement in trade agreements within Mercosur and with other global partners affects tariff structures and market access. Regional integration efforts can facilitate or hinder supply chain diversification and export strategies.

Capital Outflows and Investor Sentiment

Significant capital outflows driven by Korean investors' increased overseas equity purchases and foreign investors' domestic sell-offs are exerting downward pressure on the won and domestic markets. This trend reflects broader concerns about Korea's economic trajectory, competitiveness, and political uncertainties.

Energy and Major Infrastructure Projects

Canada is accelerating major energy and infrastructure projects, including LNG expansions, nuclear developments, and critical mineral mining. However, political, regulatory, and Indigenous opposition, especially in British Columbia, pose significant challenges. These projects are vital for Canada’s economic future and supply chain control but face delays and capital constraints, affecting international trade and investment timelines.

Concerns Over Sovereign Wealth Fund Governance

Critics highlight governance, mandate overlap, and transparency issues within Indonesia's sovereign wealth fund Danantara. Potential conflicts of interest and resource misallocation may undermine business climate and private sector competitiveness, posing risks to institutional credibility and investment attractiveness.

Supply Chain Resilience Initiatives

US companies and government agencies are investing in diversifying supply chains to reduce dependency on single sources, especially from China. This shift affects global manufacturing hubs, logistics networks, and trade flows, prompting strategic realignments in sourcing and inventory management.

Infrastructure Development and Connectivity

Ongoing infrastructure projects aimed at improving transportation and digital connectivity enhance Taiwan's business environment. Improved logistics and communication networks support supply chain efficiency and attract foreign enterprises.

Economic Contraction and Industrial Weakness

Mexico's economy contracted by 0.3% in Q3 2025, driven by a 1.5% decline in industrial output amid trade tensions and tighter financial conditions. Services grew marginally, while agriculture rebounded. The slowdown raises concerns about meeting growth targets, with policymakers facing inflation risks and external headwinds from US tariffs and geopolitical tensions impacting trade and investment.