From Argentina to buying cars through Amazon and much more ...
This week we focus on a new beginning for Argentina and move on to climate change financial impacts. While we shop cars in Amazon, India to dominate consumer class growth.
A new beginning for Argentina
The recent elections in Argentina have brought in a radical leader, Javier Milei, who believes in almost zero interventions from the government across different sectors and industries. His words echoed his policy principles - “Everything which can be in private sector hands will be in private sector hands”. He has pledged to implement drastic changes to the country’s economic strategy, addressing the severe crisis it faces after two decades.
Milei’s campaign focused on two key promises:
Reducing state spending: He plans to wield a metaphorical “chainsaw” by slashing government expenditures by up to 15% of gross domestic product.
Dollarization of the economy: To combat inflation, Milei aims to replace the national currency (the peso) with the US dollar.
Over the past twenty years, successive left-leaning Peronist governments have significantly expanded the public sector and introduced costly subsidies and stringent regulations across various economic sectors.
The government owes a huge amount of money to domestic lenders. The interest payments on this debt amount to 2.5tn pesos every month — the same as the fiscal deficit that the country accumulated in the previous eight months.
Javier Milei's team has indicated that approximately $40 billion would be necessary to **dollarise” Argentina's economy. However, the country faces significant challenges: its hard currency reserves are minimal, and it currently lacks access to international credit.
However, many economists in Argentina express skepticism about Milei’s flagship proposal to adopt the US dollar.
A staggering amount of US and UK military owe in climate reparations
A groundbreaking study reveals that the US and UK militaries are collectively liable for at least $111 billion in reparations to communities severely impacted by their emissions, which contribute to global warming.
The study employs the concept of the “social cost of carbon”, a framework used to estimate the monetary value of climate damage caused by each additional ton of carbon in the atmosphere.
Since the 2015 United Nations Paris Climate Agreement, these two militaries have collectively emitted over 430 million metric tonnes of carbon dioxide equivalent. Remarkably, this surpasses the total greenhouse gas emissions produced by the entire UK in the past year.
To provide minimal compensation for the harm caused by these emissions, the US military should allocate $106 billion in international climate financing, while the UK military should contribute $5 billion.
It’s important to note that these figures, although staggering, are considered conservative by the study authors.
However, the social cost of carbon does not fully account for the health impacts on communities near military activities. Examples include:
Bikini Atoll in the Marshall Islands, where nuclear testing in the 1940s and 1950s led to severe environmental damage.
Vieques, Puerto Rico, where decades of US Navy chemical pollution significantly increased the risk of cardiovascular and respiratory diseases for locals.
Iraq, where troops’ use of depleted uranium during the Gulf War and the 2003 invasion resulted in widespread health issues, including birth defects.
Militaries globally are major contributors to the climate crisis, responsible for 5.5% of all global greenhouse gas emissions according to estimates from 2022.
Notably, the US military holds the distinction of being the world’s largest institutional greenhouse gas emitter and the single largest institutional consumer of fossil fuel based on separate studies conducted in 2019.
An additional amount of $172 billion is immediately to face climate impacts
The UN Environment Programme (UNEP) has released its annual Adaptation Gap Report, which assesses the funding needs for climate adaptation in developing countries. This report highlights the substantial gap between the actual investment and what is required to address the impacts of climate change.
Two Assessment Approaches for Adaptation Investment:
There are two distinct assessments regarding the investment needed for climate adaptation.
The first assessment is the “modeled” cost of adaptation, which considers the adaptation required to reduce incremental climate risks without considering financing. According to the UNEP, this cost amounts to $215 billion per year during this decade.
The second assessment is the “country adaptation finance needs”, which refers to the financial resources required by countries from both international and domestic sources to implement their national adaptation plans. UNEP states that this figure is nearly double the modeled cost, totaling $387 billion per year during the same period.
Regional Distribution of Adaptation Investment:
Both the modeled costs and finance needs indicate that East Asia will require the most adaptation investment, accounting for approximately 40% of all investment dollars between 2020 and 2030.
Income-Level Perspective:
Source: Bloomberg Richer countries have relatively low adaptation investment requirements when viewed as a share of their absolute income levels. For lower-middle-income countries, it’s only 0.7% of their gross domestic product (GDP), and for upper-middle-income countries, it’s 0.5% of GDP.
In contrast, low-income countries, despite having smaller absolute needs, face a much higher adaptation investment burden as a percentage of GDP, reaching 3.5%.
This underscores the importance of international support for their adaptation efforts.
It’s essential to recognize that adaptation investment is not a one-time need; it will be continuously required in the foreseeable future.
Now you can buy cars online through Amazon!
Amazon, the e-commerce giant, has partnered with Hyundai to announce that it will begin selling vehicles on its website in the second half of 2024. Hyundai vehicles will be the first to be sold on Amazon.com’s U.S. store, with other brands following later in the year.
The Amazon car sales section will allow customers to browse and shop for vehicles in their area based on preferences such as model, trim, color, and features.
Once they’ve selected their preferred car, customers can complete the purchase online, choosing from various payment and financing options.
They will then have the option to pick up the vehicle from a local dealership or have it delivered.
Unlike direct sales models that bypass dealerships entirely, the structure still rewards local dealerships. When vehicles are sold on Amazon, the local Hyundai dealer will be the official seller.
Around 30% of the new consumer class will be coming from India
Consumer class refers to a group of people who have a certain level of purchasing power and engage in regular consumption of goods and services. These individuals typically spend a minimum amount per day, which is often used as a threshold to define this class.
Specifically, the World Data Lab defines the consumer class as those spending at least $12 per day (measured in 2017 purchasing power parity (PPP) prices).
The consumer class plays a crucial role in driving economic expansion, promoting business growth, and enhancing the overall well-being of societies around the world.
The latest numbers indicate that 30% of the 113 million people entering the consumer class in 2024 will be from India
