🌍 Lula goes up against the central bank

🗺️ AROUND THE WORLD

1. 🇳🇵 Nepal: The latest climbing season on Everest is set to become one of the deadliest-ever, with 11 climbers losing their lives in just the past few weeks. Critics say Nepal is over-issuing permits, which have raised $5M in revenue so far this year.

2. 🇫🇮 Finland: A record 6,000 Russians emigrated to Finland in 2022, according to Finland’s statistics agency. Around 5,500 Russians migrated to Finland in 1991, the year the Soviet Union collapsed.

3. 🇮🇩 Indonesia: A former president has slammed the military’s plans to establish commands in all 38 of Indonesia’s provinces, asking “are we going to war?” The reform was announced by Defence Minister Prabowo Subianto, who has accepted his party’s nomination to run for president next year.

4. 🇵🇦 Panama: The $43M money laundering trial of former president Ricardo Martinelli began in Panama City on Tuesday. Martinelli still plans to participate in his party’s primary election in July.

5. 🇩🇿 Algeria: A prominent pro-democracy opposition figure, Karim Tabbou, was arrested in his home on Tuesday. Tabbou previously served a one-year sentence in 2020 for criticising the army’s role in Algerian politics on social media.

🇧🇷 BRAZIL | ECONOMICS

Brazil’s president in public feud with central bank

Briefly: Brazil’s central bank (BCB) continues to keep interest rates high despite a new economic survey forecasting cooler inflation in the country. In response, Brazil’s President Luiz Inácio Lula da Silva has criticised the BCB chief for months.

The BCB has pursued an aggressive monetary policy in recent years, hiking rates earlier and harder than other central banks around the world. This has helped tame inflation, but it’s put parts of the Brazilian economy under strain:

• 📈 Bankruptcies have spiked 34.1% this year

• 💸 Household debt hit record highs last year, and

• 🐢 GDP growth is forecast at around half the world average

So since taking office this year, President Lula has said the BCB chief:

• “has no commitment to Brazil”

• is holding back Brazil’s economic growth, and

• is loyal to the previous right-leaning president that appointed him.

For his part, the BCB chief says everyone wants lower rates, but spiralling prices would be much worse, particularly in a country with a history of hyperinflation.

Intrigue’s take: Central bank independence is a key feature of modern democracies, allowing technocrats the freedom to make unpopular but necessary economic decisions.

Brazil’s strong institutions offer good reasons to be bullish on its future. But the country only formalised its central bank’s autonomy in 2021, and markets are getting nervous Lula might try to pack its board with loyalists.

Just ask Turkey where that road can lead.

Also worth noting:

• Markets in Brazil, Chile, Colombia and Mexico are expecting rates to start falling before the end of this year.

• The central bank’s chief and all its board members will complete their terms during Lula’s presidency. Lula will then appoint their replacements.

• Brazil’s central bank hiked rates several times last year, before Lula’s election victory.

Today’s briefing is sponsored by Arcadia

🇰🇪 KENYA | DEFENCE & SECURITY

China wants its money back

Briefly: Hackers based in China targeted the Kenyan government in a years-long attempt to access data about the country’s debt, according to a Reuters report. China has denied involvement.

For the last couple of decades, Kenya has borrowed from China and others to fund major infrastructure projects like highways and railroads. But those projects haven’t boosted revenue enough to cover loan repayments.

Intrigue’s take: Several African governments struggling to meet repayments might be forced to cut back on essential investments to keep servicing their debt.

For its part, Kenya has taken extraordinary measures to pay back its debts, even temporarily suspending salaries for ministers, legislators, and civil servants.

And China seems to be taking extraordinary measures to enforce those debts. The reported hacking of Kenya’s government suggests real anxiety in Beijing that much of the $80B in outstanding debt across the continent may not be repaid.

Also worth noting:

• Governments across Africa now spend around 17% of their revenues to service debt, with China the single largest bilateral lender.

• Last month, Kenya’s top economic advisor tweeted, “Salaries or default? Take your pick”.

• The IMF announced this week it’s agreed a $1B loan to Kenya. The IMF and China agreed to restructure Ghana’s debt earlier this month.

👀 EXTRA INTRIGUE

Here’s what we’re reading about venture capital and start-ups.

• Can A.I. spot the next Facebook or Uber? ($)

• We read Tech Safari to get the latest on all things happening in African tech and venture capital

• How Silicon Valley's troubles are reshaping venture capital ($)

• Start-ups are taking over the defence industry

📊 CHART OF THE DAY

According to one estimate, a billion AC units will be installed before the end of the decade, with most growth coming from China and India. The hotter the earth gets, the more AC we’ll need, but air conditioners aren’t too good for the planet.

🗳️ POLL TIME!

Yesterday’s poll: Do you agree with France's decision to ban air routes that can be covered by a train journey of less than 2.5 hours?

🟩🟩🟩🟩🟩🟩 🧑‍✈️ Yes, and high time too! (68%)

🟨🟨⬜️⬜️⬜️⬜️ 🛩️ No, it's a symbolic (and annoying) move! (30%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🖋️ Other (write in!) (2%) 

Your two cents:

• 🧑‍✈️ D.D: “Absolutely. With the increasing temperatures these measures are vital to “keeping 1.5°c alive””

• 🖋️ A.A: “This seems like another policy that's good in theory, but will fall apart in practice. With all the strikes that have happened lately in France, will there be enough trains still running to meet new demand?”