Aurelia Butler

How well did you keep up with the news this week? Take our quiz.International oil prices fell further on Friday following the historic decision by the Biden administration to release about 180mn barrels of oil from its strategic reserves over the next six months.President Joe Biden said yesterday that the move was designed to lower “painful” petrol prices that were harming the finances of many households in America.“My plan is going to help ease that pain today and safeguard against tomorrow,” Biden said. He suggested the price at the pump could decrease by the “better part” of anything between “10 cents to 35 cents a gallon”.Biden has faced criticism and waning approval ratings over surging fuel prices, which have risen 50 per cent in the past year to hit record levels.The new release of 1mn barrels a day was by far the biggest ever announced and will last six months, draining almost a third of the US Strategic Petroleum Reserve. The drawdown would take the reserve to its lowest level since 1984.But oil investors were sceptical that the release would have a long-term effect on crude prices. “History shows that SPR releases are not particularly effective at controlling [oil] prices,” said Dan Pickering, founder of Pickering Energy Partners, an investment group. “You’re not fixing a structural problem of supply and demand.”Oil prices are on track for their biggest weekly fall in two years, according to Reuters. The US West Texas Intermediate crude futures contract was down $1.02 at $99.26 a barrel this morning after slumping 7 per cent yesterday. Brent crude futures, the international benchmark, slid 79 cents to $103.92 a barrel, after dropping 5.6 per cent on Thursday.More on Ukraine: Ukraine attacks Russia: Local authorities in the Russian city of Belgorod claimed two Ukrainian military helicopters carried out a cross-border air raid on a fuel depot earlier today in what would be the first strike by Ukraine on Russian soil since the war began.Military briefing: Ukrainian forces have made several territorial gains around the capital and elsewhere in the country in recent days by exploiting the Russian army’s vulnerabilities. Meanwhile, the blame game in Russia is getting worse.Markets: Global dealmaking fell to its lowest level since the start of the coronavirus pandemic in the first three months of the year as surging inflation, tougher regulation and the war in Ukraine led to a slowdown in mergers and acquisitions. The benchmark S&P 500 ended the quarter down nearly 5 per cent.Roman Abramovich: The Antiguan government has established that two yachts moored in the Caribbean island belong to the sanctions-hit oligarch, confirming a Financial Times investigation.Mariupol: Russia’s assault on the besieged Ukrainian port has continued despite the Kremlin’s promises of a ceasefire, according to Kyiv. Meanwhile, more than 2mn refugees have fled to Poland. Here are their stories, in their own words.Opinion: The FT View is that Moscow is struggling to find counter-sanctions that do not harm its own economy. At some point, the west will have to talk to the enemy. That will mean doing a deal with Putin, writes Edward Luce.Twitter Spaces: FT journalists Edward Luce, Gideon Rachman, Henry Foy and Polina Ivanova yesterday discussed the possible outcomes of the war on Twitter.Thanks for reading FirstFT Americas and here’s the rest of today’s news — Gordon.Five more stories in the news1. Toshiba surges after biggest shareholder backs Bain buyout plan Shares in Toshiba rose more than 6 per cent today after Bain Capital secured the backing of the company’s largest shareholder and opened talks with other investors on a potential deal to take the 140-year-old Japanese conglomerate private.2. Amazon workers in Staten Island pull ahead in union vote A grassroots campaign to create the first-ever union at an Amazon facility in the US has taken a significant lead in voting. Workers at a warehouse known as JFK8 in the New York borough of Staten Island had voted in person over a five-day period that ended on Wednesday. The Amazon Labor Union was ahead by a margin of 1,518 votes to 1,154 at the end of counting yesterday.3. Centrist pulls out of Brazil’s polarised presidential race Sérgio Moro, a former judge who led a sweeping anti-graft crackdown in Brazil, has pulled out of the country’s presidential race. His exit means October’s general election is likely to be a two-horse race between incumbent far-right president Jair Bolsonaro and leftwing former leader Luiz Inácio Lula da Silva.4. Shanghai extends Covid lockdown measures China’s financial centre is to extend strict lockdown measures in many parts of the city that were expected to resume normal life today. The city is ramping up efforts to contain an outbreak of largely asymptomatic cases of Covid-19.5. Abu Dhabi state funds were used to buy NSO Mubadala Capital, a state-owned investment company, has been an investor since 2019 in the Israeli cyberweapon maker, whose Pegasus spyware has been traced to the phones of journalists, activists and the estranged wife of Dubai’s ruler.The days aheadUkraine crisis Leaders of the EU and China meet for a “difficult” virtual summit with Russia and Ukraine at the top of the European agenda. The International Energy Agency will hold an emergency meeting of oil consuming countries to discuss a new release of strategic reserves alongside the plan by the US to pump massive supplies starting in May to cool soaring oil prices.Economic data The US is forecast to have recorded another month of robust jobs growth in March. Data, released by the Bureau of Labor Statistics later this morning, is expected to confirm employers in the world’s largest economy added 490,000 jobs last month.Fifa World Cup draw The Doha Exhibition and Convention Center plays host to the draw for the group stages of this year’s World Cup which will be held in Qatar in November and December and see France trying to defend its title. Here’s a guide for what to expect. (Guardian)Elections Hungarian president Viktor Orban will seek a fourth successive term on Sunday despite concerns over his ties to Putin. Serbia holds a general election the same day, while Costa Rica has a presidential run-off.What else we’re readingCorporate America’s ‘what if’ mindset American companies are starting to warn against using non-domestic supply chains. So, what does this mean for investors? Judging from recent conversations with C-suite executives, there are at least three practical implications, as Gillian Tett outlines.Why some of the most feared activist investors are no longer so hostile Billionaire activists like Carl Icahn, Bill Ackman, Daniel Loeb and Nelson Peltz have run some of the most hostile proxy battles Wall Street has ever seen in the past decade. Now some are changing tack and taking a more low-key approach. James Fontanella-Khan and Antoine Gara explain why. What Ukraine war means for the age of the autocrat Since 2000, the rise of the strongman leader has become a central feature of global politics. But it is possible that the catastrophe of Russia’s invasion of Ukraine will permanently discredit this style of politics, writes Gideon Rachman.Hong Kong’s property tycoons braced for further losses Hong Kong’s property tycoons have amassed billions as a result of their near-monopoly over some of the world’s most valuable real estate. But after pandemic restrictions hit the city’s economy and drove residents out of the territory property prices are expected to drop by as much as 10 per cent this year.AI industrialisation offers great promise and some peril On the peanut butter spectrum, artificial intelligence is moving from smooth to crunchy, as the powerful tool is being used for everything from search engine optimisation to accelerating drug discovery. But private companies are reaping almost all the gains, writes John Thornhill.Crypto vs gold: the search for an investment bolt hole The market in the yellow metal may be a bubble, but at least it’s a 6,000-year-old one. Meanwhile, bitcoin looks like a short-term fad, argues John Plender in this personal finance column. CollectingIt was the 1953 movie Roman Holiday, in which Audrey Hepburn causes traffic chaos on a Vespa in Rome, that introduced scooters to the world. Ahead of auctioneer H&H’s first vintage scooter sale, Iain Macauley documents the history of these two-wheeled machines long loved by Mods and moviegoers alike. More

Surging energy costs, supply chain disruption and Russia’s invasion of Ukraine have knocked Japanese business confidence lower for the first time since the outbreak of the Covid-19 pandemic two years ago, an important survey has shown.The latest quarterly survey by the Bank of Japan revealed that sentiment among big Japanese manufacturers fell for the first time since the April-June 2020 quarter, marking a turning point for Asia’s second-biggest economy, where businesses had previously been cautiously optimistic about an end to the pandemic.But the survey, which was conducted between late February and late March, also showed the large disconnect between the foreign exchange assumptions made by corporate Japan and the recent reality of a market where the yen plummeted this week to a seven-year low. The BoJ’s Tankan survey of business confidence, released on Friday, dropped to a level of plus 14 in the first quarter from plus 17 in the previous three months, compared with a median market forecast of plus 12. The Tankan survey, one of the most comprehensive economic indicators in Japan, polls big companies about whether business conditions are “favourable” or “unfavourable”. The latter tally is subtracted from the former to generate a composite reading of between minus 100 and plus 100, with figures above zero indicating positive business sentiment and those below zero negative sentiment.While sectors such as production machinery sustained the index in the quarter to March, pulp and paper and other industries worsened. Automobile production fell after the suspension of plant operations following the resurgence of the Omicron variant. Big manufacturers expected conditions to deteriorate further in the coming three months, with a predicted index of plus 9. The downward trend was echoed by large non-manufacturers, which slipped in the survey from plus 10 to plus 9. Among these companies, accommodation and food services expect a significant improvement from the lifting of quasi-state of emergency Covid-19 measures, but the sector sub-index is expected to remain in negative territory in the next three months, according to the BoJ.

The survey found that companies were under pressure from the suppression of economic activity because of the Omicron wave, unstable financial markets triggered by the war in Ukraine and subsequent sanctions against Moscow and higher costs owing to rising energy prices and the weakening yen. “The survey was intended to assess the depth of the downside risks surrounding Japan’s economy, but it was not as bad as previously expected,” said Takuji Aida, chief economist at Okasan Securities.While the yen’s depreciation may put additional pressure on profits because of rising procurement costs, Aida said that the weaker currency was acting as a tailwind for the Japanese economy by raising export prices, which would somewhat mitigate the negative impact of the war in EuropeThe survey found the average predicted exchange rate for the fiscal year starting in April stood at ¥111.93 against the US dollar, marking a large contrast with recent days. On Friday morning, the yen traded at about ¥122 to the dollar after hitting a seven-year low of ¥125.1 this week.The better-than-consensus survey result should have a slightly positive impact on equities, but “foreign factors are much more important influences today”, said John Vail, Nikko Asset Management chief global strategist. More

The writer is head of emerging markets economics at CitiThe past two years have seen some crying wolf about the risk of an imminent debt crisis among lower-income developing countries, but those fears are worth taking more seriously now.Even before events in Ukraine introduced a new threat to risk appetite among global investors, a double whammy of tighter US monetary policy and a sharp decline in global trade growth was beginning to constrain the ability of lower-income countries to get hold of dollars. The longer geopolitical tension stays elevated, the deeper that problem will become.Fears of an immediate debt crisis surfaced as soon as the pandemic did in early 2020. The view was that many developing countries simply would not have the foreign exchange to service their debt. That kind of worry back then was misplaced for three reasons. First, the US Federal Reserve’s dramatic loosening of monetary policy kept capital markets open for emerging markets borrowers by supporting risk appetite globally. Second, the US Treasury’s huge fiscal stimulus helped to generate a surge in global trade. Third, the IMF supported developing countries’ financial stability through emergency disbursements and, above all, through the issuance last year of $650bn worth of special drawing rights, a multicurrency reserve asset.Now though, the external environment facing low-income developing countries is deteriorating fast. US monetary tightening will certainly erode investors’ risk appetite towards emerging markets. The debt crises of the 1980s showed how the financial stability of developing countries is threatened when the US has an inflation problem of its own to deal with.Meanwhile, global trade growth started to decline sharply in the latter part of 2021 — terrible news for countries that depend on such growth to generate foreign exchange revenues.This is all taking place against a background in which some important metrics of developing countries’ creditworthiness have deteriorated to worrying levels. In developing countries rated single B, for example, the average ratio of external debt to exports is effectively back above 200 per cent, a level last seen in the late 1990s. Equally, the amount of these countries’ export revenues that is consumed by servicing external debt payments is also back above 25 per cent, an amount also not seen for two decades.The market had already begun to worry about single B-rated sovereigns, in the sense that the past few months had seen a marked increase in their risk premia relative to more creditworthy countries. But there is plenty of space for these concerns to deepen.The current surge in commodity prices is in principle good news for lower-income developing countries, many of whom are commodity exporters. But it is not enough, in some cases, to offset the recent collapse in risk appetite.Credit spreads for fragile commodity importing countries have obviously widened markedly since February 24, the start of the invasion of Ukraine. Yet there are also even some fragile commodity exporters which have been hit by the risk aversion.Another reason why default-risk among low-income developing countries is rising has to do with the IMF itself. The last time developing countries suffered something like a systemic debt crisis, in the 1980s, the IMF’s view of its role was more or less to maintain the flow of international payments. Its behaviour, in other words, was basically creditor-friendly, putting the burden of adjustment on countries themselves to control domestic spending growth through belt-tightening in order to service external debt.These days, though, it is much more sensible to describe the IMF as a debtor-friendly institution. The Fund has been making some serious effort to encourage the G20 to go further in offering debt relief to low-income countries under the umbrella of their Common Framework that was announced in late 2020. Currently only three countries — Chad, Ethiopia and Angola — have applied for debt relief under the framework and the IMF wants more involved. Things being what they are, the Fund may get its wish.And since the Common Framework requires private creditors to participate on comparable terms with the G20, it looks like defaults to private creditors are set to increase. Maybe that’s no bad thing: If a country can’t pay its debt, then debt relief is entirely appropriate. And it is worth bearing in mind that private creditors tend to have short memories, allowing a defaulting country to return fairly fast to international capital markets. But debt defaults are often messy — one more thing to worry about in a world full of worry.  More

Russia’s rouble has wiped out nearly all of the losses incurred after President Vladimir Putin’s invasion of Ukraine as Moscow applies draconian capital controls and blocks most foreign traders from exiting their investments.The currency’s rebound shows how Moscow has managed to fend off a collapse of the country’s financial system but at the cost of further isolating Russia from global finance and adding fuel to a powerful economic pullback. In early March the rouble plunged to 150 to the US dollar — losing almost half its value in less than a fortnight — after US and European sanctions cut Russia out of global payment systems and froze a large part of the more than $600bn war chest amassed by the country’s central bank. “As a result of our unprecedented sanctions, the rouble was almost immediately reduced to rubble,” US president Joe Biden said during his visit to Poland last week.Since then, the currency has perked up considerably, and on Thursday it traded at 81.7 to the dollar, roughly the same level as February 23, the day before Putin sent Russian troops into Ukraine.Oil and gas revenues have helped to stabilise the rouble, as exports continue flowing to Europe. But stringent curbs introduced by Moscow to prop up the rouble’s value have been crucial in staving off a deeper currency crisis, according to Oleg Vyugin, chair of the Moscow Exchange’s supervisory board and former deputy governor of the central bank.“There was a moment in the beginning when the rouble fell sharply . . . when many citizens were moving their money abroad,” Vyugin said. “But then an embargo on this was introduced and it became pretty much impossible to use dollars in the country or abroad.”Russians have been prohibited from moving money to their own foreign bank accounts, extracting more than $10,000 in international currencies over the next six months, or taking more than that sum out of the country in cash. Banks and brokers have been temporarily banned from operating cash-based foreign exchanges for dollars and euros.The central bank also more than doubled interest rates to 20 per cent, providing an incentive to people to save their roubles rather than dump them for foreign currency. The measure prevented a run on the banks and kept the Russian banking system intact. Foreigners have also been forbidden from exiting local stocks, leaving their investments trapped.“This is so heavily managed by the authorities that I don’t think these are levels that can be taken as a reflection of the Russian economy, or the effectiveness of sanctions,” said Cristian Maggio, head of emerging markets portfolio strategy at TD Securities.Foreign investors, many of whom are effectively trapped holding Russian assets, are unable to transact in this market, and banks outside Russia have largely stopped quoting dollar-rouble exchange rates, according to Maggio. “Offshore this market just doesn’t exist,” he said. Still, sanctions have actually bolstered one of the traditional strong points of Russia’s economy: its trade surplus. Soaring energy prices coupled with a sharp drop in imports has created a “very strong balance of trade, and a huge excess of currency on the trade balance”, Vyugin said.Oil sales make up about 30 per cent of Russia’s fiscal revenues and current global price rises are “giving Russia the strongest terms of trade since ‘peak oil’ in 2008”, said Elina Ribakova and Robin Brooks, economists at the Institute of International Finance. “So even if Russia ships less oil now due to western sanctions, Putin still gets lots of hard currency inflows.”Ribakova forecast that Russia’s current account could probably reach $200bn to $250bn in 2022, from about $120bn in 2021, due to a collapse in imports combined with strong commodity exports. These revenues mean Russia could rebuild the central bank reserves that were frozen under sanctions in the space of just over a year, she said.Companies that earn proceeds in foreign currencies — mainly oil and gas exporters — have also been forced to exchange 80 per cent of those proceeds into roubles, effectively outsourcing the job of supporting the currency to the private sector.The Russian central bank spent a relatively modest $1.2bn on propping up the rouble on the two working days following the invasion, and has not intervened in currency markets since then, according to its own data. Analysts also say Putin’s plan to force European gas buyers to pay in roubles could provide a further boost to the currency.Still, the relative strength of the rouble could mask the profound damage that sanctions are expected to do to the Russian economy. Ribakova estimates that Russia’s economic output will shrink by 15 per cent this year, wiping out a decade and a half of growth, as domestic demand collapses — with a deeper contraction possible if there are further sanctions on oil and gas exports.More than 400 foreign companies have withdrawn from Russia, she said, many of them “self-sanctioning” by quitting the country even if sanctions do not strictly require them to do so. “The exchange rate is part of a political effort to imply the sanctions aren’t working,” said Timothy Ash, an economist at BlueBay Asset Management. “But it’s not a real market. And wherever the rouble is trading today, tomorrow, or next year, Putin has turned Russia into an international pariah.” More

Another month, and another letter from my mortgage lender arrives. The Bank of England’s decision to increase the base rate means the repayment on my tracker loan is inching up — again.Am I bothered? Hardly. Opting for a lifetime tracker when I remortgaged my London flat in 2008 was one of the best financial decisions of my life.When I first took it out, the interest rate was about 5 per cent, but soon it dropped like a stone to below 1 per cent. Instead of making lower monthly repayments, I stuck to the original level, then paid off bigger chunks as my pay increased.The end result is that now, as rates are rising, I’m close to paying it off (the rate was so low, I slowed the overpayments some years ago to beef up my pension and Isa contributions instead).I’ve benefited handsomely from interest rates staying “lower for longer”, but the prospect of rates getting “higher much sooner” raises all kinds of questions for our personal finances.Investors are already braced for rapid rises in interest rates as central banks around the world battle higher inflation.In the US, the Fed recently made its first rate rise since 2018, and is expected to make seven more increases this year (officials expect rates to be nudging 3 per cent by 2023). In the UK, markets are pricing in rates rising to 2 per cent by the end of this year, though the Office for Budget Responsibility (OBR) has warned rates could hit 3.5 per cent next year if higher inflation persists.In the race to get inflation under control, economists worry that rapid tightening risks sparking a recession and higher unemployment as businesses (and governments) absorb higher costs of borrowing. All of this uncertainty is weighing on global equity and bond markets, and raises the unwelcome prospect of “stagflation” — higher inflation combined with slower economic growth. This is challenging terrain for all investors, but especially those nearing retirement or who have already started drawing an income from their investments.

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As discussed on the Money Clinic podcast this week, younger investors are concerned this could spell the end for the traditional 60:40 portfolio split between equities and bonds, and wary of the risks of taking on more equity exposure to expand their funds. What rising rates will mean for UK property prices is (perhaps) more likely to come up in conversation at your next dinner party.Considering double-digit house price growth, you might think rising interest rates would take some heat out of the market. In a recent note, research group Capital Economics described property as the “weak link” as interest rates rise. Nevertheless, it predicted rates would have to get to around 4 per cent to trigger price falls, unless quantitative tightening causes a greater economic wobble than expected (rising unemployment would spook mortgage lenders much more than rising interest rates). But what about the impact on the consumer economy? As someone with a variable-rate mortgage and rising monthly costs, I am very much in a minority. Jason Napier, managing director of European banking research at UBS, says that fixed-rate loans now account for around 80 per cent of the UK’s £1.6tn mortgage market. The fact that so many UK consumers are locked into low rate deals means “as the Bank of England raises rates, very little changes immediately for consumers”, he says. Outstanding fixes are split pretty much 50:50 between two-year and five-year terms, so the “payment shock” of rolling off on to higher rates is very much a problem for tomorrow.Even if you have a few years to go on your fix, consider how the OBR’s 3.5 per cent scenario could inflate your monthly repayments. “The average interest rate on an outstanding mortgage in the UK is 2.1 per cent,” Napier says. “Based on a standard 25-year term, if interest rates went up 1 per cent, this would add around £100 to monthly repayments for every £100,000 you are borrowing.”Napier feels the scale of rate rises markets currently anticipate is unlikely to push many households into default. Most borrowers will have been “stress tested” on rates of 5-6 per cent, which was the average mortgage rate when Northern Rock failed. But combined with other cost of living pressures, none of this bodes well for consumer spending.

If I had a bigger loan, I’d be scouring my mortgage paperwork to see what level of overpayments I could potentially make (these are often capped at 10 per cent of your outstanding balance per year). Use a mortgage overpayment calculator to see the potential reductions you could make to your outstanding balance by the time your fix ends. When the time comes, the lower your loan to value, the better the rate you’ll be able to get. And if the Bank of Mum and Dad has any spare funds, helping adult children with regular gifts from excess income could not only reduce the size of their mortgages, but also shrink future inheritance tax liability. Changes to the base rate have a less immediate effect on the cost of short-term borrowing, but the record level of credit card spending has raised alarm bells. It’s impossible to say how much of February’s £1.5bn spending spree — the highest monthly total since records began — is due to hard-up consumers borrowing to beat the rising cost of living or more affluent ones enjoying renewed freedoms. I chatted to Chris Giles, the FT’s economics editor, who is of the view that both trends are happening at once. With standard bank overdraft rates of 40 per cent, should we be surprised that consumers see the typical 20 per cent charged on credit cards as a better deal?It turned out we had both used our credit cards to book family holidays for later in the year (the twin attractions of enhanced consumer protection and loyalty points). We are careful to pay off our monthly balances in full, thus avoiding interest charges, but not everyone can afford to do so — and zero per cent deals are getting much harder to come by.Perhaps the only silver lining will be better rates of interest on cash savings accounts. For now, new entrant Chase is offering the market-leading rate of 1.5 per cent on account balances of up to £250,000.This is welcome news for hard-pressed savers, but still nowhere near outpacing inflation which is expected to hit 8 per cent by the end of June. Taking more risk and investing the money, paying down a chunk of your mortgage, or (dare I say it) spending it on a well-earned holiday may prove to be a better use of your cash. Claer Barrett is the FT’s consumer editor: [email protected]; Twitter @Claerb; Instagram @Claerb More

Next to the motorway, heading north from Mauritius’ international airport, is a row of boxy apartment blocks festooned with washing hung out to dry. These are the cramped dormitories of thousands of foreign textile workers, the majority from Bangladesh.The hostels, which also house workers from Madagascar and Nepal, illustrate a dilemma for Mauritius. As the economy has grown more successful, wages have risen sharply, forcing manufacturers — at least those in labour-intensive industries — to either relocate abroad or import cheap labour.At its peak in 2000, manufacturing made up more than 21 per cent of the island’s GDP. That proportion has since halved to 10.7 per cent, according to the World Bank. That is partly because other industries — notably financial services — have expanded, producing what economists consider a beneficial diversification of the economy. But it also reflects what some say is the manufacturing sector’s inability to move sufficiently quickly up the value chain.“When you look at other countries like Singapore, Malaysia and Thailand, they also started with textiles but they moved upmarket into higher-value addition and a more diversified range of products including electronics,” says Vinaye Ancharaz, an economic consultant and expert in manufacturing. Somehow, he says, Mauritius never quite made that leap. These days many textile manufacturers can only survive in Mauritius by employing lower-wage workers from abroad. Others have decamped to Madagascar. Minimum wage legislation has pushed up local pay: unemployment, partly a result of a mismatch of skills, has jumped from 6.7 per cent three years ago to above 9 per cent. “Bangladeshis are doing us a big service,” says Ancharaz. “They are doing jobs that Mauritians don’t want to do, not only in textiles but also in the seafood industry and even in construction, sectors that have been abandoned by Mauritians.” Mauritius’ economic take-off was built on manufacturing. Even in the final years of British rule, when the island’s economy was almost totally dependent on sugar exports, the government sought to catalyse a manufacturing sector. Import-substitution policy used tariff barriers to protect local producers, thus encouraging the manufacture within the country of essential goods, from margarine to toilet paper.The island’s small population — about 1.3mn — limits economies of scale. To be more competitive, the government opened export processing zones, offering various tax, credit and other incentives. This enabled textile manufacturers to import cotton and fabric duty free and to export finished garments. “The good thing about textiles is it requires low-skilled labour, which we had in abundance,” says Ancharaz of those early days. Gradually, manufacturers began to source fabric locally and to make more sophisticated products, including highly priced knitwear.“We got more and more immersed into the textile industry and that inhibited diversification,” says Ancharaz. In recent years, he argues, too much foreign direct investment has gone into luxury property and not enough into productive investment. Ken Poonoosamy, chief executive of the Economic Development Board of Mauritius, says there is more to the manufacturing sector than its detractors suggest. He points to other areas, including fish processing (mainly tuna canning), jewellery and medical devices, as evidence that industry has not stood still. Natec Medical, based in the island’s high-tech Ebene business park, about 10km from the capital, Port Louis, is a leading producer of stents and balloon catheters. This is a niche area that, Poonoosamy says, benefits from Mauritius’ commitment to good infrastructure, a business-friendly environment and free tertiary education. Fred Swaniker, a Ghanaian entrepreneur who opened the campus of the African Leadership University on the island, testifies to Mauritius’ ease of doing business. “They really rolled out the red carpet,” he says. “This was a country that was serious about attracting foreign investors . . . I didn’t see that anywhere else on the continent.” Swaniker argues that the development of the island rests on its continued openness to skilled labour. “To really drive the next phase of economic development they need to let in a wave of immigrants,” he says, recalling similar policies in Singapore. “The population is ageing and, without increasing the size of the workforce, it will be harder to raise GDP.”Poonoosamy acknowledges the limitations of size but says one of the island’s biggest competitive advantages is its market access. “We are one of the countries that have made the most benefit out of Agoa,” he says of the African Growth and Opportunity Act, that enables tariff-free access for many Mauritian goods to the US. In 2019, Mauritius became the first African country to conclude a trade agreement with China and it is a member of the African Continental Free Trade Area. Such agreements, says Poonoosamy, will allow local manufacturers to move more aggressively into new areas, including pharmaceuticals, nutraceuticals (food-based substances — for example, such as vitamin supplements and often of herbal origin — used for treating and preventing diseases) and auto-parts. Ravin Dajee, managing director of Absa Bank, Mauritius, says the island needs to reduce its current account deficit, which widened to 15.6 per cent of GDP last year from 5.4 per cent in 2019. As tourists return and as manufacturers fill order books — boosted by the weak rupee, which makes Mauritian exports more competitive — the deficit should rapidly narrow. The IMF expects a figure of 6.8 per cent this year. Dajee says manufacturing can stage a longer-term recovery, but that this should not be predicated on a weak rupee. “I wouldn’t want to build an industry on that basis,” he says. “We want to build our competitive advantage on product quality and reliability.” More