These Three Frontier Markets Countries Have Already Launched Their Own Cryptocurrencies

Economies are increasingly adopting cryptocurrencies

Bitcoin’s humble beginning in 2009 and its subsequent growth to a $76 billion market cap (as of October 9) bears testimony to the conviction of blockchain technology as a means of payment. Blockchain technology and its product, cryptocurrencies, are gaining acceptance amongst a handful of sovereigns that are now considering the idea of developing their own digital currency. Cryptocurrencies together now command over $150 billion in market capitalization.

There are approximately 50 countries globally (ACWI) (VTI), which currently do not have or do not use their own sovereign currency. This is resulting in some governments beginning to consider the creation of a digital currency of their own. The prospect of decreased transaction costs and ease of ownership make the option increasingly appealing, particularly for use in international transactions.

Presently, there are three frontier markets (FM) (FRN) that are already using digital currencies (ARKW), and a fourth is preparing to do so. Emerging markets (EEM) (VWO) such as China (FXI) and Russia (RSX) are also considering various applications in this regard. Meanwhile, the emirate of Dubai recently launched its own blockchain-based cryptocurrency known as emCash.

Here are the 3 frontier markets that are already using digital currencies, and the fourth which is preparing to join the list:

1. Ecuador

In 2014, Ecuador became the first country in the world with its own digital currency. The small Latin American (ILF) nation is the first to have a state-run electronic payment system known as Sistema de Dinero Electronico. The system allows Ecuadorian residents to pay for public services via their mobile wallets. The scheme intends to help begin to reduce government spending of more than $3 million a year to exchange old notes for new dollars. The 5-year goal for the digital currency is to reach over 4 million users registering around $80 million.

2. Tunisia

Since 2015, Tunisia has been using the universal contracting platform, Monetas, to boost its eDinar (aka Digicash and BitDinar) digital currency using the blockchain. The Monetas platform is an advanced crypto-transaction technology that uses a Blockchain secured digital notary to enable all kinds of financial and legal transactions, public or private, globally. With the La Poste Tunisienne android application powered by Monetas, Tunisians use their smartphones to make instant mobile money transfers, pay for goods and services online and in person, send remittance, pay salaries and bills, and manage official government identification documents.

3. Senegal

In December 2016, this West African country launched its own national digital currency, eCFA, valued at par with the CFA franc. The eCFA was developed by the Banque Regionale de Marches (BRM) and eCurrency Mint and is compatible with other digital cash systems in Africa. The blockchain-based currency has been designed to be compatible with other digital currencies in Africa (EZA). The drive for its very own digital currency perpetuated from the fact that Senegal’s CFA franc is shared by 14 countries in West and Central Africa, and its value is guaranteed by the French government.


This European country (VGK) (EZU) is among the most tech-friendly countries in the world. The economy already has an e-Residency programme in place where the government stores its data on the blockchain. Now, the Baltic country is on track to creating its own digital currency, Estcoins, which will be available for use by members of its e-Residency programme. The project is being advised by Ethereum founder, Vitalik Buterin.

Ecuador’s Anti-OPEC Decision Raises Fear of Contagion Amongst Other Members Countries

Ecuador straining relations with the OPEC

Ecuador has publicly stated that it will not adhere to OPEC’s (Organization of the Petroleum Exporting Countries) production curbs. The steep slide in oil (OIL) (USO) prices since mid-2014 led OPEC members, in November 2016, to sign a pact to curb oil production by 1.2 million barrels a day starting January 1, 2017. In December, non-OPEC members such as Saudi Arabia (KSA) and Russia (RSX) had also agreed to reduce output by 558,000 barrels a day to help address price slide triggered by the supply glut. Accordingly, OPEC oil production had dropped by 32.5 million barrels a day from January 1st, lending some respite to the steep fall in oil prices since mid-2014.

The price of crude oil has now recovered nearly 50% since its lowest point seen in January 2016.

Need to plug the economy’s fiscal deficit

Ecuador’s decision is backed by the country’s need to plug its fiscal deficit. According to Ecuador’s oil minister, Carlos Perez, “we are not meeting the quota imposed on us because of the obvious needs the country has……… there’s a need for funds for the fiscal treasury, hence we’ve taken the decision to gradually increase output.” The Latin American (ILF) (GML) economy’s compliance on its agreed quota of 26,000 barrels a day cut in oil production was seen falling to 69% in June. Accordingly, the country has been falling short by about 10,000 barrels a day.

According to Perez, Ecuador remains committed to the pact and its support towards the Organization. However, as per a non-written agreement with OPEC on flexibility in terms of production needs, the economy could now be curbing production by approximately 16,000 barrels of oil per day.

June 2017 has already seen OPEC production up by 1.2% vis-à-vis May. Output for OPEC averaged 32.61 million barrels a day last month, with Ecuador contributing 1.75% of it. Besides, countries such as Libya and Nigeria, which are exempted from the output-cut agreement on account of social instability, have been pumping in more oil.

Ecuador’s decision raises the fear of a contagion

Markets fear the risk of a contagion to other OPEC economies. Ecuador’s move could encourage other OPEC nations such as Algeria, Angola, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Qatar (QAT), UAE (UAE), and Venezuela to rethink their commitment to the production curb. Other OPEC members following suit could impact the recovery in oil prices achieved since last year. Kazakhstan’s intended ‘soft exit’ from the deal be taken as a hint.

No More Border Wall: Ecuador to Mend Relations With Peru

Suspension of the Ecuador-Peru border wall

On July 14th, Ecuador’s Foreign Minister Maria Fernanda Espinosa announced that the country had decided to halt the construction of the border wall with Peru (EPU). The wall was built as a flood precaution by Ecuador. It has been the center of controversy for some time now, straining diplomatic relations between the two countries. The issue had gained prominence following US President Donald Trump’s pledge to build a wall between the US (SPY) (IWM) and Mexico (EEW).

Peru, which believes that the wall infringed on a 1998 deal which prohibits construction within 10 meters of the border, recently recalled its ambassador from the country to express its rage over the decision. Subsequently, the foreign ministry of Ecuador announced the suspension of the construction of the mile-long, 13-foot high wall between the two Latin American (ILF) (GML) countries.

Ecuador mending relations with Peru

The suspension should bode well for Andean (AND) countries. The wall would have led to about 5,000 job losses on each side of the wall, primarily in the local fish trade. Currently, fishermen cart their fresh catches over the canal which outlines the border across bamboo footbridges. With the wall in place, workers would have had to take a lengthy detour to unload their catches in Peru probably putting an end to the trade.

Moreover, Peru counts among the top 3 export destinations of Ecuador. Close to $1 billion worth of goods are exported from Ecuador to Peru, accounting for 5.1% of its exports (see chart above). The wall would have certainly impacted cross-border trade volumes.

Now, while on one hand, Ecuador has taken a step to mend its diplomatic relations with Peru, on the other hand, it stands a chance to strain its relations with the OPEC (Organization of the Petroleum Exporting Countries). The next part of this explains how.

Lenin’s Ecuador: What Lies Ahead In Latin America?

Moreno’s success in Ecuador’s presidential elections casts doubt over the future of democracy and the country’s economy, with implications for the region as a whole and particularly its current ally, Venezuela.

The elections: Round 2

On Sunday April 2, 2017, Ecuador held its second round of elections with the purpose of finally deciding who the next Ecuadorian president would be. After an inconclusive first round of elections, held on February 19, 2017, candidates Lenin Moreno, representing the current government party, Alianza PAIS, and Guillermo Lasso from the CREO party, faced each other on a runoff election round. Given the provisions under Ecuador’s Organic Electoral Law, which establishes that a presidential candidate must earn either 50% plus one votes, or at least 40% of votes and at least a 10% advantage over the next closest candidate, no candidate was deemed a winner during the February 19 elections, in which other candidates aside from Moreno and Lasso also participated; during the first round of elections, Moreno earned 39.35% of votes while Lasso earned 28.11% of votes.

The second round of presidential elections held this past Sunday April 2, 2017 resulted in thevictory of the current governing party, represented by candidate Lenin Moreno with  51.17%. Moreno, who was the former vice-president of Ecuador from 2007-2013 under current President Rafael Correa, ran for these presidential elections alongside current, and now future, vice-president Jorge Glas. Both candidates were hand-picked by current President Correa, who has been in power for a decade and has changed the Ecuadorian constitution several times in order to allow himself to retain power. Moreno’s victory in this sense represents a victory for Correa and a continuation of his hold on power.

Many factors have led to speculations about the transparency of the elections and vote count process that led to the victory of Lenin Moreno and Alianza PAIS. Candidate Lasso, along with his supporters, has already denounced the election process as fraudulent after a mysterious shut-down of the electoral website, which resulted in a sudden increase in votes for government-backed candidate Lenin Moreno. Lasso has in turn denounced electoral fraud before the Organization of American States’ (OAS) electoral commission. Likewise, protests have broken out in support of Lasso in two major cities, Quito and Guayaquil. Nonetheless, the OAS, as well as several other Latin American nations and the US, have recognized the election results. Despite the recognition of Moreno’s victory, his political term will be one marked by increased political polarization and a struggling economy.

The future

Lenin Moreno’s victory in Ecuador has many implications both for the future of the country as well as the Latin American region as a whole. Moreno’s predecessor, Rafael Correa, has faced harsh criticism on several fronts due to his government policies as well as the duration of his mandate. As previously mentioned, Correa has changed the constitution several times in order to accommodate his policies, which have often been backed by other socialist leaders in the region, such as Venezuelan President Nicolas Maduro. The current situation in neighboring Venezuela has already shown the detrimental effects of authoritarianism and an a lack of institutionalism. Should Moreno follow in the footsteps of his predecessor, democratic institutions in Ecuador could be at risk, and the region may see the rise of yet another oil-money-backed authoritarian ruler.

Even if Moreno upholds democratic institutions and democratic processes, something that has already been questioned given the election process and results of this past April 2nd, 2017, his political affiliations will continue to have negative implications for his country and the region. Moreno’s campaign promises bow to expand on Correa’s social programs, which under the current economic conditions of the country, including its reliance on oil exports and the constraints of a dollarized economy, are unsustainable. While Lasso’s campaign promised a reduction in taxes and a reduction in government spending, Moreno’s policies will increase government expenditure, leading to increased debt and instability for Ecuador.

Moreover, many question whether Ecuador remains the political ally that Venezuela so desperately needs this point in time. The Venezuelan government is quickly losing its grip in power and resorting to extreme measures that have exacerbating an already-existing democratic, economic, and social crisis. The end of the Correa rule would have meant that the Venezuelan government was losing yet another ally in the region, undermining its hold on power. Unless Moreno steers away from his party’s affiliations and long-standing support for the Maduro regime, his victory will have detrimental consequences for the region at a crucial period in time.


Astrid Hasfura Dada is an Analyst at Global Risk Insights. As originally appears:

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Latin Winners & Losers: Argentine Debt Talks, Change in Venezuela & Hope in Ecuador

In a month that’s seen Argentina win an historic victory in US courts and Venezuela lift gas prices for the first time in almost two decades, Gavin Serkin interviews Exotix Partners’ head of research, Stuart Culverhouse, on his outlook for the continent.



Argentina was back in the courts again last week, but this time the government received a favorable verdict, convincing a New York judge to drop orders barring the nation from issuing new bonds and paying its existing debt.

The decision substantially weakens the bargaining power of those hedge funds like Paul Singer’s Elliot Management still holding out for a settlement on debt that Argentina defaulted on back in 2001.

For everyone else, it means that Argentina could finally be about to normalize relations with international investors, and its bonds have been rallying on the back of that.

Clearly, these are very complex investment areas that we’re talking about, and it’s not going to suit every investor, but if you are in that market, what should you be doing in Argentina right now?



Argentina is on the path of normalisation after 15 years in the wilderness, essentially following the default in 2001.

It’s taken this long to resolve some of that defaulted debt, mainly through the courts, and President Macri, who took office in December, has taken huge strides to try and resolve this, and also implement other economic policies to rebalance the economy.

The inheritance from Cristina Fernández de Kirchner was pretty weak, so with that in mind they’ve tried to reach a solution with the holdouts and the plaintiffs.

It’s happened probably a bit more quickly than expected. We thought that we might get a deal in the first half of this year, but we seem to be ahead of that.

There is an argument that the deal isn’t as good as we might have expected it to be for some of the plaintiffs, who might have wanted to hold out for longer, and certainly the judge has consistently been against Argentina, really, in the way that it’s handled this.

But the light at the end of the tunnel on Friday – Judge Griesa essentially saying that he would lift the injunction subject to a couple of conditions, which are probably doable over the next few weeks – really changes the balance of the negotiation now and I think a lot of people will be expecting a deal to happen pretty soon.

Argentina will re-rate as more of a normal emerging-market compared to what it’s been before.




Venezuela has been revising its economic policy in the hope of easing the economic turmoil there – raising petrol prices, for example, for the first time in nearly two decades, and devaluing the bolivar. But it doesn’t seem to have made a huge impact so far on investor sentiment.


Yes, some might it’s a bit too little, too late. President Maduro has been talking about this, actually, for over a year now.

Obviously, with oil prices falling, it’s unmasked a lot of the inherent vulnerabilities that we saw under the Chavista model and therefore he probably had to do something, but that’s been put off. I think what changed in the political decision was the National Assembly elections in November/December, which really changed the balance of power, and the opposition now have a majority there and can probably influence things.

The fact that he’s announced some measures is useful. But the depth of the problems is so deep that it may not be enough. There is a real concern in the market that Venezuela is going to be a default candidate. We don’t think it will default this year, but prices of bonds are in the 30 to 40 level and that shows you something about the risks now in the market.

It’s still going to be a very big challenge and they really need to secure financing from other people – in particular China – to get themselves through the next couple of years with oil prices at these levels.



Another country that’s been truly out of favour just lately has been Ecuador. It’s another oil producer whose bond yields have been rocketing into the high teens. But you’re also optimistic there. What’s the picture for you?


Ecuador really paid the price for this strategic default in 2008, when oil prices fell sharply. The knee-jerk reaction was to default on your bonds, or certain bonds, anyway.

Memories are short in the City, but they’re long enough to remember that, and I think they pay a premium now because of that market perception.

Yields have risen. I think they’re now about 14-15%, which is quite high, but I actually think that offers value because, yes, the president defaulted several years ago, but he’s trying to honor the debts now that they’ve incurred.

They’ve adjusted their policy. They don’t have a flexible exchange rate. It’s dollarised, so that puts more emphasis on fiscal policy, and they are adjusting fiscal policy.

We’ve got a president who is sort of leftist-leaning but who has actually implemented a wage freeze, and I think that’s, again, a positive response to the shock.

They’ve a long way to go, clearly, but at those sort of yields I think that’s beginning to look attractive.
The full interview with Stuart Culverhouse on the Emerging Opportunities show on Share Radio is available for download here.

Dam, Ecuador.

Ecuador just inaugurated the first of its eight planned hydroelectric power-generating dams. Taken altogether, the eight dams will generate nearly 2800 megawatts of electricity.  The country’s focus on renewable energy is part of a long-term strategic vision to become an oil exporter, and this project is expected to save the country about US$3 billion in imports. However, with oil prices hovering around $50, there’s no word on whether its strategic vision remains economically viable.


Revisting the Elegant Narrative of the Two Lefts

In 2006, Jorge Castaneda published a Foreign Affairs article claiming there were “two lefts” in Latin America.

One is modern, open-minded, reformist, and internationalist, and it springs, paradoxically, from the hard-core left of the past. The other, born of the great tradition of Latin American populism, is nationalist, strident, and close-minded.

I never agreed with Castaneda’a “two lefts” analysis (nor did I agree the region experienced a “pink tide”), but it was the sort of elegant narrative that became conventional wisdom in many circles. Analysts contrasted a moderate left defined by Brazil and Chile with a populist left defined by Venezuela and the rest of ALBA. The assumption was that the moderate left would succeed while the populist left would eventually collapse under its own failures (but we should all panic about it anyway).

A subsidiary belief to this was that the populist left was created and supported by Hugo Chavez. The rest of those ALBA countries needed Venezuela and its oil money to keep their political systems working.

Eight years later, it’s interesting to see that divide in what was considered the radical left. Venezuela is facing economic and political turmoil, recession and massive inflation, some of the worst crime statistics in the hemisphere, and one recent poll showing 58% of the Venezuelan public thinks President Maduro should resign. Meanwhile, Bolivia President Evo Morales was reelected with a solid 60% support brought about by strong economic growth and an ability to subtly and effectively neutralize his opposition.

The “two lefts” weren’t supposed to be defined by the differences between Venezuela and Bolivia, but here we are.

Michael Shifter and Murat Dagli hit some important points in this WPR article:

At least three of the ALBA members—Bolivia, Ecuador and Nicaragua—have proved to be among the most stable Latin American governments, with very popular leaders.  Despite their troubling authoritarian tendencies, marked by an erosion of the rule of law, the governance models forged by Presidents Evo Morales, Rafael Correa and Daniel Ortega, respectively, have gained wide support and are sustained by sound economies. For Washington, the challenge has become how to balance criticisms of democratic backsliding with attempts to engage popular governments presiding over economic and social progress.

Shifter and Dagli’s take on the political situations in each country is just as important as the economics. It’s not just economic growth in each of those three countries, but also a more successful manipulation of the political system than what has been mismanaged in Venezuela.

The alternative hypothesis for these countries is written by Oppenheimer in his column this weekend:

Financially irresponsible countries with luck: They include Ecuador and Bolivia, which have followed Venezuela’s steps nationalizing companies and taking other anti-business measures, but started doing these things much more recently. They are relatively lucky, because the world is awash with cash looking for short-term high yields, and they can still get some speculative investments to keep their economies going.

This is how a few analysts try to hold on to the quickly disintegrating Two Lefts theory. Instead of trying to explain why Bolivia and Ecuador are growing faster economically than Venezuela (or for that matter, Mexico and Colombia), Oppenheimer attributes it to luck and the fact their nationalizations were more recent and moves on.

Narrative of the Two Lefts

So lets look at the other side of the two lefts divide. Chile has already seen the left leave and come back in the form of Michelle Bachelet, it’s a member of the Pacific Alliance, and its economy is struggling given the current low copper prices. Brazil is facing very weak economic growth, serious protests last year and a potential (though still not likely) removal of the PT from power this year. Uruguay’s economy is doing ok, but that election is also likely to be close. Humala, who was lumped in with Evo Morales and the “populist left” in Castaneda’s 2006 article, has turned out to be one of the most macro-economic orthodox leaders on the continent and is widely praised by investors.

The group of countries and politicians defined as a moderate and pragmatic left is struggling both economically and politically to varying degrees.

Let me leave aside the crazy idea that we shouldn’t try to force each country’s individual politics and economics into an easily explainable grouping and ask the tougher question. Is there an elegant narrative for Latin America today?

To some extent there is a narrative and conventional wisdom in Latin American political analysis, with many analysts moving away from “two lefts” to contrasting the Pacific Alliance vs. Mercosur vs. ALBA. Yet, while I think the Pacific Alliance has value as a tangible group taking real integration actions, the narrative that these countries are doing better economically is only barely supported by the data and its long term political stability as an organization is not supported by public opinion polling.

So what’s the correct narrative that explains Latin America as it is, not as we might want it to be? Can we find a post-Cold War explanation for “left” and “right” ideology without stumbling over all the messy details of how these countries actually succeed or fail?

What narrative gives us a region in which Venezuela is collapsing while Bolivia is succeeding, Brazil is stumbling but Mexico isn’t doing much better, where Argentina is an economic disaster whose stock market has more than doubled this year, where the paragons of free trade ideology in Chile and Peru actually depend on a commodity export model while Ortega’s Nicaragua is the biggest beneficiary of CAFTA? Can we create any simple and elegant explanation in which all of those data points hold together?