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Blackwater USA – Daily Brief

Afghanistan

  • Time reported that SecState Pompeo refused to sign the U.S.-Taliban agreement expected out of Doha, but that may have been misinformation seeded by a resentful Ghani government bitter about having been left out of the process: a State Department spokesperson said Pompeo is actually ready to sign the agreement once Pres. Trump approves it.
  • News like this about an imminent deal seems to always come with bad news about another Taliban attack, and today was no exception: a Taliban car bomb targeting a foreign convoy killed 10 outside the NDS in Kabul.

Iran

  • Pres. Rouhani delivered on his threat to announce “extraordinary” new shenanigans if Iran didn’t get any help from the remaining nuclear deal signatories. Today he said Iran would lift all limits on nuclear research, and resume development of new centrifuges to hasten enrichment. (Iran already operates 5,060 centrifuges—the limit under the nuclear deal—but is now threatening to make more.)

Kashmir

  • A 16-year-old protester in Kashmir died, after Indian security officers shot him in the face with buckshot. He’s the first casualty linked to the protests, and his death is getting lots of media play—it could trigger a new wave of protests.

Mexico

  • I missed this a few days ago, but Pres. AMLO gave his first State of the Union address on Sep. 1st. An AS/COA article pasted below lists some highlights. It sounds like more of the same stuff AMLO’s been saying over the last year, with undertones of a subtle plea for more time to let his policies play out.

U.S.

  • Hurricane Dorian caused at least 20 deaths in the Bahamas, and is now heading northeast off the coast of South Carolina. It was just upgraded back to a Category 3 storm, after briefly weakening to Category 2.
  • Walmart said it would stop selling ammunition for assault-style rifles after two deadly shootings at its stores; however, it doesn’t plan to stop selling guns altogether. That said, a retail ban on gun sales wouldn’t have stopped the shooter in Saturday’s West Texas attack from buying guns, even though he’d been federally banned from doing so—he likely bought his AR-15 in a private sale that didn’t require a background check.
  • In announcing the Walmart ammo sales ban, CEO Doug McMillon also challenged Congress to resume the gun control debate: “We encourage our nation’s leaders to move forward and strengthen background checks and to remove weapons from those who have been determined to pose an imminent danger. Congress and the administration should act. Given our decades of experience selling firearms, we are also offering to serve as a resource in the national debate on responsible gun sales.”

DRC

  • Mining Review Africa printed a report on DRC Mining Week attendees’ attitudes on the new mining code, one year after the law’s passage: essentially, the private sector is still frustrated by uncertainty, and unwilling to fund new projects in DRC until they get more clarity on their demands for changes to the law. Article pasted below.
  • Meanwhile on the other side of the world, Reuters says Glencore revealed that it’s lost its appetite for risk by shuttering its Mutanda mine in DRC, and investing in a Cu-Ni project in nice, safe Minnesota instead.

Venezuela

  • The Venezuelan military is upset at Mastercard for cutting off its bank cards in Venezuela in order to comply with U.S. sanctions. Mastercard (and Visa and Amex) technically didn’t have to stop doing business with associates of the Maduro government until March 2020…Mastercard appears to have chosen to do so early.

South Sudan

  • South Sudan’s main rebel faction, under former VP Riek Machar, criticized Pres. Kiir for planning to build a $700 million highway, rather than spending the money on peace initiatives (read: buying off former rebels like Machar) instead.
  • Nothing much has changed since May, when the government and rebels agreed to a six-month delay to their plans to integrate into one big, happy government—they’re certainly not on target to meet the new November deadline.

Mexico: Takeaways from AMLO’s First State of the Union

AMLO. (Image: Government of Mexico) AMLO. (Image: lopezobrador.org.mx)

Carin Zissis

September 04, 2019

Ten months into office, Andrés Manuel López Obrador gave his primer informe, or his first official state of the union address, from the National Palace on September 1, before Interior Secretary Olga Sánchez Cordero delivered the report to the opening session of Congress. Still, while it might have been his first keynote given to the government, the backdrop behind López Obrador, or AMLO, announced it was his third address to the people of Mexico, given prior informes when he hit his hundredth day in office in March and on the anniversary of his July 1 electoral win.

Here’s a look at takeaways from his September 1 speech, AMLO’s popularity, and his foreign policy stance.

Key points from the primer informe

The economy: Mexican presidencies generally witness an economic slowdown early in their six-year terms, or sexenios, and the trend continues under López Obrador. The economy contracted 0.3 percent in the first quarter of 2019 compared to the fourth quarter of 2018. Mexico avoided a recession when growth stagnated at 0 percent in the second quarter of this year. The Central Bank—which cut interest rates in August for the first time in five years and cautioned that the AMLO government’s policy steps hinder investment—forecasts 2019 GDP growth to hit between 0.2 and 0.7 percent, below the president’s pledge of 2 percent for the year.

In his remarks, AMLO rejected the “technocratic obsession of measuring everything according to simple economic growth,” instead emphasizing equitable distribution of wealth and “the happiness of the people.” As in past speeches, the president condemned the more than three decades of neoliberal policies that preceded his presidency. But he also said that ratification of the U.S.-Mexico-Canada Agreement by Washington’s Congress—where the pact remains stalled—will strengthen the Mexican economy, as well as that of North America overall.

The finance ministry presents the administration’s 2020 budget proposal to the lower house on September 8.

Corruption: After blaming the period of neoliberalism for unleashing an era of impunity, he highlighted his fight against fuel theft, known as huachicoleo, citing a decrease of 94 percent in this type of robbery that cost the federal government an estimated $3 billion in 2018. Animal Político, using data from state oil firm Pemex, charted a 20 percent year-on-year decline in incidents in both April and May, followed by a 0.3 percent decline in June.

The president pointed to his austerity measures as an indicator of transparency, giving examples such as prohibiting public servants from traveling on private flights and cutting pensions for ex-presidents, which AMLO has suggested amounted to as much as $10,000 a month. He also called on Congress to eliminate immunity, or fuero, for public servants.

Security: Mexicans say improving security is a bigger priority than either the economy or battling corruption, per polling firm Consulta Mitofsky. AMLO acknowledged that there is no good news yet when it comes to violence, given that there were more than 17,600 murders from January through June, marking the most murderous first half of the year on record for Mexico and a 4.4 percent increase over the same period in 2018. Femicides also keep climbing, with 448 in the first half of the year, up 9 percent over the same period last year and already higher than an entire year as recently as 2015.

AMLO described his creation of a National Guard, already a 58,600-strong force thus far dispatched to 150 areas nationwide and under civilian command, as a paradigm shift away from military enforcement. Some observers, however, say the guard represents ongoing militarization.

About those approval ratings

Early in his 90-minute speech, AMLO called on Congress to approve a constitutional reform allowing for a referendum roughly midway through his term in which voters could decide whether he should continue in the post. Although he originally pitched for the vote to take place on the same day as midterm elections—with the next ones slated for the summer of 2021—the opposition rejected that idea, and so AMLO proposed an earlier date of March 21, 2021.

Looking at his support levels, AMLO likely feels comfortable that the referendum would go his way. A series of polls released ahead of the primer informe shows his approval rating reaching as high as 71 percent. On the other hand, it’s less certain that his political party, MORENA, will sustain backing. Between February and August this year, the portion of Mexicans who self-identify as a morenistas dropped from 34 percent to 24 percent, per pollsters Buendía y Laredo. No other party exceeded 10 percent, while half of Mexicans self-identified as independents, up from 42 percent six months earlier.

The other question is how long the goodwill can last. Over the past three decades, other Mexican presidents had similar or higher approval ratings at this point in their sexenios. But thus far, Mexicans seem willing to give AMLO the benefit of the doubt: a July Parametría poll showed that 77 percent of respondents said the president needs more time in office before evaluation.

Where AMLO stands on foreign policy

While applauding the end of what he called the “opulence” of his predecessors, AMLO praised moves to cut back on officials’ “meaningless” foreign trips. He spoke of the closure of international trade and investment agency ProMéxico and 51 related offices worldwide, calling its existence “ridiculous” before adding there’s no such thing as a ProGermany, ProCanada, or ProFrance.

As previously covered, AMLO hasn’t left Mexico since September 2017 and he’s not breaking that two-year streak yet: Foreign Minister Marcelo Ebrard will represent him at the UN General Debate this month in New York. Ebrard, a former Mexico City mayor like the president, has been the face of Mexico abroad, attending the G20, traveling to El Paso last month after a mass shooting targeted Mexicans, and negotiating an exit to a June tariff threat by the White House. He heads to Washington again to meet with U.S. Secretary of State Mike Pompeo for a September 10 meeting on migration. Since implementing a program dubbed “Remain in Mexico” in January 2019, the United States has sent more than 35,000 mostly Central American asylum seekers back to Mexico to wait out their proceedings.

DRC Mining Code: Addressing the elephant in the room (Mining Review Africa)

It’s a little over a year since the new Mining Code was signed into law in the Democratic Republic of Congo (DRC), but how much has it impacted mining companies operating in the country and can it be a win-win for both industry and government? GERARD PETER spoke to industry experts on the sidelines of DRC Mining Week 2019 about their views of the impact of the code.

When former DRC President Joseph Kabila announced the new Mining Code in 2018, it sent shockwaves through the industry as new taxes or ‘super profits’ and an increase in royalties had mining companies crying foul.

Major companies, including Barrick Gold, Glencore and Ivanhoe Mines were defiant and started the Mining Promotion Initiative (MPI) to oppose the new code. Despite this opposition, the code was legislated in June 2018.

When the country elected Felix Tshisekedi as its new president earlier this year, it created further uncertainty along with a sliver of hope that the code could be reviewed.

However, the new leader soon made his intentions crystal clear: the new Mining Code is here to stay and mining companies have to adopt to the new operating conditions.

That said, Tshisekedi has left the door open for engagement with mining companies saying that government wants to produce ‘win win’ contracts, although his rhetoric around how he would go about doing this is still hazy.

Without doubt, the new Mining Code was the trending topic at this year’s DRC Mining Week, with the big questions being: What has been its impact on the industry and is a ‘win-win’ for both industry and government possible?

PwC assurance and advisory partner for Francophone Africa Jean Jacques Mukula explains: “We have no choice – the code is the law. As such, it needs to be beneficial to both industry and government.”

Mukula acknowledges that when the code was first tabled, there were many contentious issues but now the topics of discussion are different a year after implementation.

“Now, the discussions revolve around the provisions of some terms of the code and during our discussions at DRC Mining Week, it was agreed that there needs to be ongoing engagement amongst government, civil society and mining companies. I believe if this cooperation exists, then the code will be beneficial to all.”

Meanwhile, Luke Mumba, head of community and responsible mining development at Eurasian Resource Group (ERG) Africa adds that because the DRC plays such an important role in the company’s international operations, it is important that it is engaged with all stakeholders in the country.

Already, the company’s operations have been affected by the implementation of the new code. At the end of February, ERG temporarily shut one of its Boss Mining assets, placing it on care and maintenance while it completes a feasibility study on the construction of two processing facilities, resulting in significant job losses.

“While there are challenges, we understand the need for the changes that have taken place,” adds Mumba.

“However, at the same time one needs to understand that investing in mining is a slow process that demands time and plenty of resources and we plan our operations on the assumption that there is stability in the country and that it is not an ever-changing environment.”

While the mining code has created a fair amount of discontent within the industry Alphamin Resources CEO Boris Kamstra on the other hand believes that operating a mine in any jurisdiction has its own challenges.

“For example, I know of a case of a company who is trying to get a gold mining permit in Arizona, USA and it has taken a number of years to begin operations. Similarly, the new Mining Code reduces the ease of doing business in the DRC.”

At the opening ceremony of DRC Mining Week 2019, Simon Tuma Waku, vice-president of the Chamber of Mines, DRC said that it was imperative that government and industry works within the new regulatory systems as partners to further mining operations in the country.

“We need to work together to create infrastructure such as road and rail as well as address energy deficiencies. Without this collaboration, the industry won’t grow.”

Waku added that the new mining regulations has created a new tier of sub-contractors which has created an emerging middle-class which is further helping to boost socio-economic conditions in the country.

In essence, the new Mining Code is supposed to benefit all stakeholders and create socio-economic and environmental upliftment. However, there are already worrying signs that the new legislation is already having a negative impact on the DRC’s mining sector.

Speaking during a Mining Review Africa webinar, Investing in the DRC – what you need to know, held during the lead up to DRC Mining Week, Louis Watum, MD: Operations of Ivanhoe Mines DRC stated, “The revised Mining Code has created uncertainty of the regulatory framework and quite frankly, has made it very difficult to fund projects in the DRC. The direct consequence of this is limiting the growth of the mining industry in the DRC and hampering the medium to long-term growth of the DRC as a country.”

As the global demand for electric vehicle and battery storage increases, there can be no doubt that with a wealth of mineral resources, the DRC can benefit tremendously from this demand.

And, while it is still early days, it is clear that more dialogue needs among relevant stakeholders need to take place to address the elephant in the room, i.e. the new Mining Code so that it can indeed be a win-win for both industry and government.

Key points of the new Mining Code

  • Exploitation licences reduced from 30 to 25 years and renewable only once.
  • State’s non-dilutable equity stake increases from 5% to 10%, increasing by a further 5% with each renewal.
  • 10% of shares in a mining company to be held by Congolese citizens.
  • An increase in the royalty for iron and ferrous metals from 0.5 per cent to 1 per cent.
  • An increase in the royalty for both non-ferrous and base metals from 2% to 3.5%.
  • An increase in the royalty for precious metals from 2.5% to 3.5%.
  • The introduction of a 10 per cent royalty for strategic minerals.
  • Creation of a special 50% tax on excess profits, defined as profits made when a commodity exceeds by 25% the price used in the bankable feasibility study.