Author: Awareness News

The Economic Side of the Russia-Ukraine Crisis

March 2, 2022March 11, 2022by Awareness NewsLeave a comment

Reading time: 7 minutes

“A Russian invasion to Ukraine seems more and more probable day after day.”

This phrase was initially written as we started to prepare this article. Time ended up confirming the worst. The conflict escalated quickly, and, on the 24^{th of} February, Russia invaded Ukraine. This is one of the worst disputes in Europe since 1945.

In this article, we do not aim at exploring the history and motivations of the conflict. Instead, we focus on the potential economic impact of this crisis for Europe. It is important here to mention that the EU/NATO condemn the Russian military action and are providing military supplies to Ukraine. This way we can understand the motivations behind the sanctions and the importance of the commercial trading patterns between these countries.

Trade Balance

Ukraine and the EU

The EU is Ukraine’s largest trading partner, accounting for more than 40% of its trade in 2019. Total trade between EU and Ukraine reached €43,3 bn in 2019.

Ukraine exports to the EU amounted to €19.1 bn in 2019. The main Ukraine exports are raw materials (iron, steel, mining products, agricultural products), chemical products and machinery. This is a considerable increase of 48,5% since 2016. The EU exports to Ukraine amounted to over €24.2 bn in 2019. The main EU exports to Ukraine include machinery and transport equipment, chemicals, and manufactured goods. EU exports to Ukraine have been subject to a similar impressive increase since 2016 of 48,8%.

Russia and the EU

In 2020, Russia was the fifth largest partner for EU exports of goods (4.1 %) and the fifth largest partner for EU imports of goods (5.6 %). Among EU Member States, Germany was both the largest importer of goods from and the largest exporter of goods to Russia in 2020. China is the largest Russia trading partner.

Over time the trade balance between Russia and EU has been getting closer to zero due to the decrease in imports from Russia while the exports remained steady. The balance has been always negative but is now closer to zero than ever before.

*Figure 1 – EU goods trade balance with Russia from 2010 to 2020. Source: Eurostat*

The more meaningful exported commodity from Russia is mineral fuels and mineral oils followed by pearls, iron, and steel. Russia also represents around 40% of Europe’s gas, being the biggest gas supplier, and for 26% of EU’s oil imports, crude oil and coal delivered through a sprawling pipeline network. This is one of the main points giving Russia bargaining power over EU. On the counterpart, the EU is the largest investor in Russia.

The Russian secret weapon

Oil (and gas) are the oil of the gears of today’s economies. No different is the case for the European machine which needs to maintain lubrification amid a period of rising oil and gas prices and rising inflation (partly driven by the increase in the price of these commodities). In addition, it needs to do all of that while attempting to punish a nation, which supplies around 35% of its oil and gas.

*Figure 2 – Map of the major existing and proposed Russian natural gas transportation pipelines in Europe. Source:* *Samuel Bailey*

The networks of oil and gas pipelines from Russia to Europe are extensive. Main pipelines include the Yamal-Europe which travels by land across other countries and into Germany and Nord Stream 1 which crosses the Baltic Sea directly to Germany. As of recently, flows of oil from Russia have been slow. Adding to this, Europe has had a winter with especially weak wind which has made its renewable energy production weaker and its energy reliance on oil and gas bigger. Oil reserves are at low levels, all of which is contributing to higher energy prices. These high energy prices give Mr. Putin an ability to exert significant leverage on Europe with a single turning of the tap.

By its very nature, energy reliance is something that is slow to adjust: it takes time to build more diverse energy infrastructure. And, as it stands now, short-term options which may include obtaining oil and gas from other places such as pipelines from Norway (although infrastructure capacity there seems to be already near the maximum), or from the pipeline in the Adriatic Sea or the pipeline through Turkey. Switching to more usage of coal is also a potential option. The EU also has plans to deal with an oil and gas supply emergency and alleviate some of its impact.

As of the 22^nd of February, the approval process of a new pipeline – Nord Stream 2, which has been criticized for contributing to more European energy dependence on Russia – has been halted following the recent actions of Russia with regards to Ukraine.

On the same day, Mr. Putin remarked that Russia planned to continue the supply of oil and gas to the markets without interruptions. Still, this remains as one of the biggest weapons that Putin has in this conflict over the EU.

The EU/NATO Economic sanctions to Russia

As a way to punish Russia from moving forward with the invasion of its neighboring country, and even looking to possibly cause a de-scalation of Russian military actions, EU/NATO applied economic sanctions.

Some of the first measures aimed at putting an immediate stop to the newly installed Nord Stream 2 pipeline, targeting “Russia where it hurts the most” given that it’s a big exporter of energy to the EU. Furthermore, the EU, the UK and the US have gone ahead with blacklisting specific individuals and companies with close ties to the governing. Adding to that, the US have acted upon its threat against Russia’s government debt by blocking the county’s access US capital and financial markets, effectively “cutting it off from western financing”, as per President Biden’s words.

A second package of sanctions was announced later that included actions on the connection to the US financial system for Russia’s largest financial bank, Sberbank (holds nearly one-third of Russia’s banking sector assets); sanctions on Russia’s second-largest financial institution, VTB Bank (holds nearly one-fifth of Russia’s banking sector assets); similar full-blocking sanctions on Bank Otkritie, Sovcombank OJSC, and Novikombank and dozens of its subsidiaries; New debt and equity restrictions on 13 critical Russian financial entities; Additional full-blocking sanctions on Russian elites and their family members and individuals “who have enriched themselves at the expense of the Russian state”; Two dozen Belarusian individuals and entities were also sanctioned for supporting the attack on Ukraine; Russia’s military and defense ministry restricted from buying nearly all US items and items produced in foreign nations using certain US-origin software, technology, or equipment; Defense, aviation, and maritime technology subject to Russia-wide restrictions aimed at choking off Moscow’s import of tech goods.

Later, a major sanction was applied by excluding a selected group of Russian banks from the SWIFT global payment system. Swift has a total of 291 Russian members that represent 1,5% of the messages sent in the platform. This new sanction was announced together with the blocking of Russia Central Bank assets.

The impact of these sanctions does not stay restricted to Russia. Europe is in the front row of potential losers as a side effect of the sanctions. Most of the losses are tied to the energy dependency of some European countries to Russia. Other commodities that are exported by Russia will also likely see an increase in price. This side-effect is especially important given the rampant inflation in the Eurozone and US, contributing to further price increases and pressuring policy makers.

Moreover, in terms of sanctions covering the banking and financial sector, those with subsidiaries operating on Russian soil and/or with close financial ties would also fare badly under these conditions, with once again Europe as the most affected one, particularly Italy, France and Austria, being the most exposed international lenders to Russia.

Effect on financial markets

The uncertainty that surrounds the whole conflict is being reflected in all major international financial markets which have been quite volatile in the past weeks, driven by multiple factors including geopolitical risk.

The invasion of Ukraine by Russia caused an initial panic in risk assets, including European and US equities whose main indices started the day down more than 2 or 3%. They ended up recovering intraday, with Nasdaq index closing the day up more than 1%. Also, the day saw a strong dollar (risk-off asset) and a rally in bonds. On the other side we saw the Russian Stock Market index plunging as much as 50% intraday, a weak Rubble and bond spreads exploding up for Russian debt. Commodities also rallied higher, namely oil.

Conclusion

This conflict recalls some of the darkest times in European history which has lived an extended period of peace. The true cost of this conflict goes well beyond the economic cost and is centered mainly around the lives of those fighting in this conflict. The side-effects caused on European countries by the sanctions seem to be the lowest price possible to defend democracy and liberty from those who want to take it from us.

Sources: CNN, European Commission, Politico, Reuters

Scientific revision: Patrícia Cruz

Diogo Almeida

João Baptista

Inês Lindoso

João Correia

The Inversion of the Eurodollar Yield Curve

February 23, 2022February 23, 2022by Awareness NewsLeave a comment

Reading time: 6 minutes

Despite being the second biggest market in the world after the U.S. Treasury market, the truth is that you most likely haven’t ever heard of the Eurodollar system. This market, where some of the most sophisticated markets participants operate, is giving us warning signs of slowing economic growth. This might clash with some of the inflationary thesis defended nowadays.

But what is the Eurodollar system? And how does it work? What signal is this market giving us and why should we care about it?

What is the Eurodollar system?

In its simpler definition, as the name indicates, the term Eurodollar refers to US dollar deposits held at foreign banks or overseas branches of American banks, which originally operated mostly in Europe, hence the name. Indeed, while it is not entirely clear when this Eurodollar market was initiated, it is believed to date as far back as the post-World War II period, when Europe experienced a wide circulation of American dollars via the financial aid that the US provided to the war-torn continent in the form of the Marshall Plan. Thus, when the Eurodollar system began, it was mainly supported by the emergence of dollar money centers in Zurich, Munich and, of course, London.

However, what started as a fundamentally European-based independent and less regulated market of US dollar funds, rapidly spread across the globe in the next few decades, with many American branches opening operations in all continents. Therefore, as globalization grew and this “secondary” dollar market started expanding – going as far as replacing a lot of the traditional roles of global reserve currencies, such as gold – the Eurodollar system became a much more complex concept that now encompasses a much wider dimension of currencies and operations, representing one of the world´s biggest capital markets.

As Eurodollars are largely held and traded outside of US jurisdiction, they are not subject to the Federal Reserve´s regulation, particular in terms of reserve requirements, leading these deposits to be able to pay higher interests. Furthermore, by operating outside of the FED´s radar, this currency-like system of interbank liabilities allows for sophisticated financing and monetary transactions of US dollars to take place, making it so these international banks that deal with Eurodollars get to work with their own money multiplier, thus being in charge of creating and controlling their supply of US dollars.

Overall, the Eurodollar system became an alternative to traditional currency reserves, being able through its independence to provide the liquidity needed to satisfy demand in a way that, on many occasions, other systems (ex.: Bretton Woods) failed to do so, conferring the confidence that this “shadow” money would be the modern alternative to easily supply financing under the panorama of a globalizing world. This has consequently been reflected in high volume circulation of major international capital flows between countries under the Eurodollar system in the past decades, – with most transactions in this market being conducted overnight – which could potentially have significant geopolitical ramifications, seeing the power that this reserve-less, regulation-less system confers to the major international bankers that oversee it.

How does the Eurodollar work?

As mentioned previously, the offshore banks operating in the Eurodollar are not subject to regulations from Central Banks meaning that they don’t suffer from reserve requirements. This allows for a much higher flexibility to create dollars (being it a purely ledger transaction).

The deposits in the Eurodollar system have a minimum amount of $100.000 and are generally above $5 million and are priced in two different ways: either Overnight Deposits or, for longer maturities, tied to the London Interbank Offered Rate (LIBOR).

Overnight deposits are the most common transaction in this market, they mature on the next business day and usually start on the same date they are executed, with money paid between banks. The overnight bank funding rate is computed according to federal funds transactions, certain Eurodollar transactions and certain domestic deposit transactions.

Regarding longer maturities, Eurodollar is a LIBOR-based derivative. In this situation Eurodollar’s price reflects the market gauge of the 3—month U.S. dollar LIBOR, a benchmark for short-term interest rates at which banks can borrow funds in the London interbank market, interest rate anticipated on the settlement date of the contract.

Inversion of the Yield Curve

Eurodollar futures are derivative contracts that allow buyers and sellers to hedge against interest rate risk in the future. It also allows speculators to bet on the future movements of the USD LIBOR rate. In the Eurodollar yield-curve, the short-term tenors are heavily affected by the Federal Reserve actions (namely by the defined interest on reserves – IOR), while the longer tenors correspond to market expectations on inflation and economic growth.

A Eurodollar futures curve can be built similarly to the treasury rates yield curve: the different future contract maturities are plotted on the x-axis and their associated interest rates are plotted on the y-axis. Under normal conditions, the curve should be upward sloping, reflecting the expectation of economic growth further down the line.

Inversion is not a normal shape for the curve, and it has, historically, preceded turmoil periods for global markets. For example, the last inversion happened on the 13^th of June of 2018 where the inversion occurred in the Dec’20 to Sept’21 contracts. This doesn’t mean that the Eurodollar market predicted the Pandemic crisis but that it rather anticipated the deflationary forces existing in 2018 to play-out, namely the collateral scarcity on the Eurodollar system.

*Figure 1 – Eurodollar Yield Curve Inversion in 13^th June 2018. Source: Alhambra Investments*

This same phenomenon was seen on the 1^st of December of 2021, where the Eurodollar yield curve inverted between Sept/Dec’24 and Mar’26 contracts. This means, once again, that the sophisticated participants in this market expect the existing deflationary forces to impact economic growth.

*Figure 2 – Eurodollar Yield Curve Inversion in 1st December 2021. Source: Alhambra Investments*

The inversion of the yield curve in the maturities around 2024, 2025 and 2026, might suggest that the market doesn’t believe that the Federal Reserve will be able to maintain higher interest rates for a very long time. This could be the case because the market believes that the upcoming contractions in the supply of money in 2022 will cause a slowdown of economic activity, which would cause the Federal Reserve to cut interest rates once again.

Conclusion

The inversion of the Eurodollar yield curve, the flattening of treasury yields and the shortage of dollars in the system are some of the signs that indicate that deflationary forces are threatening economic growth. This might invalidate some of the inflationary thesis as the market participants reiterate their belief that there is no monetary inflation. This inversion might also be a response to a possible monetary policy error by Central Banks, as they plan to tighten into a seeming weak economy.

Sources: Investopedia, Alhambra Investments, Fxstreet

Diogo Almeida

João Baptista

Inês Lindoso

João Correia

Women in politics: what keeps the relationship from thriving

February 16, 2022March 11, 2022by Awareness NewsLeave a comment

Reading time: 6 minutes

Did you know that only 15% of mayors across the European Union are women? And that there are 200 more male than female members in the current European Parliament? These are a few among many facts and figures that show how the underrepresentation of women in decision-making positions continues to be quite alarming these days.

*Women’s representation in local politics in EU countries*

Women’s equal participation and leadership in political and public life is essential to achieving the Sustainable Development Goals (SDGs) by 2030, particularly SDG 5, which focuses on Gender Equality. Still, data shows that gender parity in political life is far from being achieved and the underrepresentation of women in power continues to raise serious democratic deficits in the 21^st century, which undermines the legitimacy of the contemporary democratic ideal.

Parity democracy and the promotion of women in decision-making positions are therefore important areas of action for organisations such as the European Women’s Lobby (EWL). Parity democracy implies the equal representation of women and men in decision-making positions, going further than the traditional quota system, since it is not based on the idea that women are a minority: women represent more than 50% of the world’s population and their political representation should be by now much closer to this value.

But why are the values so low?

The EWL shows some possible explanations for women’s underrepresentation, which can be summarized into the 5 C’s. First, there’s Confidence: from childhood to adulthood, women are thought to believe they are not as worthy as men, leading them to doubt their value in putting themselves up for election. Then, we have Candidate Selection: even once women agree to compete with men to be elected, it is often difficult for them to get an electable spot, being constantly passed over by men, regardless of competencies. The third reason is Culture: politics is still a men’s world, crammed with sexism and external threats to the entrance of women. Cash is also a factor that contributes to excluding women from politics, since their campaigns frequently receive less funding than their male counterparts. The last reason appointed is Childcare: across the EU, women spend, on average, twice as much as men on childcare, leading them to be half as available to carry out political positions.

But let’s look at some real-life examples of women in power.

A case of success

Jacinda Ardern is one of the most popular cases of successful women in power. The New Zealand’s politician became leader of the New Zealand Labour Party in 2017 and in the same year, at age 37, became the world’s youngest female head of government. Her time in power has been recognised around the world as a masterclass in leadership. Open, honest and authentic, Jacinda is a new type of leader, who unites strength with kindness and boldness with compassion.

In 2018, Jacinda had her first child, becoming the world’s first leader to go on maternity leave while in office. Her approach regarding motherhood and multi-tasking have been crucial in sending a powerful message about women in leadership roles. In 2019, Jacinda was praised worldwide for her rapid response to the Christchurch Mosque shooting that killed 51 people by introducing strict gun laws. More recently, she was hailed for her government’s quick action on the COVID-19 pandemic, which has helped New Zealand avoid the mass infections and deaths that devastated the world.

Over the years Jacinda has become a role model for many girls who aspire political roles.

*Ardern’s career has broken stereotypes about women in power*

Feminist Utopia

Rwanda stands out as what some call the “Feminist Utopia”, since around 61% of the parliament’s seats are held by women. This amount surpasses the majority of so called “developed nations”. Nevertheless, these percentages don’t translate cultural and social aspects of Rwanda that set girls back from their male counterparts for any leadership role.

Unlike other countries, Rwandan women’s access to politics was not achieved through feminist movements. Instead, policy changes were led by one man: President Paul Kagame. These changes were not resulting of change in mentalities, but rather a consequence of the devastating genocide of 1994, where women started to account for 70% of total population. As the president recognized, it was impossible to rebuild Rwanda without women’s participation in public life.

This rapid change, however, was not enough to change mentalities. While a female deputy is expected to stand up for women’s causes in the parliament, in her own household it’s a different story. In Rwanda, husbands still expect their parliamentary wives to polish their shoes, make their food, clean, and so on. And as many deputies have shared, they don’t feel safe to speak up on this matter as they fear retaliations from their partners. This sentiment of fear also comes within the Rwandan government, which is being bombarded with criticism regarding Human’s Rights violations. They have been accused of intimidating and prosecuting anyone, within their party or not, that deviates from the original government’s plan. These accusations shatter the image Rwanda had as a new democratized nation, with female inclusivity seemingly being used to hide authoritarian measures from the public international eye.

Conversely, public improvements provided unimaginable changes in women’s freedoms, such as being able to freely open a bank account without their husband’s permission. So, while mentalities take time to adjust, through education, Rwanda may grow into an equalitarian country where expectations for women and men are the same.

*Rwanda is the number one country for women in power, but they still face many challenges in daily life*

Dealing with sexism

Many stress the importance of female representation in politics. But is this enough to motivate women to choose leadership roles? Let’s consider an Australian example: Julia Gillard, the first female Australian Prime Minister.

Julia Gillard’s time in office was, in fact, turbulent. Not only because of the sexist treatment, but also what some claim to be “personal flaws” that impacted her leadership. The YWCA and University of Adelaide found that women with political aspirations were less likely to pursue them after witnessing how Gillard was treated. Examples are the way media focused on how she looked and the other party’s sexist jokes about her. Nevertheless, after her prime ministership, Australians find it much easier to imagine female political leaders, and Gillard can take a lot of credit for that.

This case illustrates how motivating women to join politics remains a one-sided strategy. Joining an environment that remains toxic for female deputies and leaders, in some cases, does more harm than good for the ones that follow.

*Men and women politics are still differently portraited by the media*

Small but the right steps towards gender equality

Although the progress regarding gender equality is clear, it is still extremely slow and uneven. Women are still underrepresented in politics, parliaments, and public life, making less than 23% of parliamentarians worldwide. As of September 2021, there were only 26 women serving as Heads of State or Government in the world. According to the UN, at the current rate, gender equality in the highest positions of power will not be reached for another 130 years.

The bright side is that there are many organizations working relentlessly trying to reverse these alarming statistics, such as the European Women’s Lobby, UN Women and Women Political Leaders. The European Parliament and the European Commission are also engaging in strategic resolutions regarding this issue, inviting EU institutions (the Council, the Commission) and national EU governments to design and implement effective gender equality policies and multifaceted strategies for achieving participation parity in political decision-making and leadership at all levels, and welcoming gender quotas for elections.

All in all, albeit some positive changes have been made, we still have a long way ahead until political equality is achieved.

Sources: The Conversation, The Guardian, Inter-Parliamentary Union, OECD, United Nations Development Programme, UN Women, The Advertiser, The Sydney Morning Herald, QUARTZ, European Women’s Lobby, Women Political Leaders, National Public Radio, Clio Visualizing History, BBC News, RFI, TRT World, NowThis News.

Madalena Andrade

Magda Costa

Scientific revision: Patrícia Cruz

A Surprising Landslide: What will the Socialist Party do in the next 4 years?

February 9, 2022February 9, 2022by Awareness NewsLeave a comment

Reading time: 6 minutes

On the 25^th of October of 2021, after long negotiations between the left-wing parties, the Portuguese Government’s Budget for 2022 was rejected by the Parliament. The ruling Socialist Party (PS) had been dependent on either the Left Bloc (BE) or the Unitary Democratic Coalition (CDU) for the approval of each year’s Government Budgets since the 2019 elections. In October of last year, these two parties sided with their right-wing counterparts and voted against the government’s 2022 State Budget. Consequently, on the 5th of December, President Marcelo Rebelo de Sousa officially decreed the dissolution of the Parliament and called for snap legislative elections on the 30th of January.

*Figure 1 – President Marcelo Rebelo de Sousa officially dissolving the Portuguese Parliement and calling for snap elections. Picture from Diário de Notícias.*

What did the polls say?

On the day of the election, the average of polls created by Rádio Renascença put the Socialist Party ahead in the polls with 36 % of the vote and the main opposition party, the Social Democrats, with 32.3% of the vote. Nobody could predict the winner of the election since both parties were within the margin of error, and most political analysts did not expect a defining result until long into the early morning of the next day. It was also clear that no party was polling close enough to obtain an absolute majority and the election would result in a hung parliament. The only question was: which party would come in first place?

*Figure 2 – Polls of polls by Rádia Renascença.*

Election day

As the exit polls came out at 8:00 pm on the main four news channels in Portugal, everyone could see that the ruling Socialist Party was on their way to a landslide victory over the Social Democrats. By late night on election day, the news networks announced the Prime Minister party had elected a majority of the deputies of the Assembleia da República and would be able to govern without the support of any other political party, a rare phenomenon in recent political history in Portugal.

*Figure 3 – Prime Minister António Costa speaking to the nation after learning his party won a majority in parliament. Picture by Semanário Novo.*

The results are still provisional but as of this moment, the Socialist Party won 41.7% of the vote and elected 117 deputies (116 needed for a majority) while the Social Democrats had 29% of the vote and elected 76 deputies. In third-place, came the right-wing populist party Chega, and in fourth-place came the social and economic liberal party, Iniciativa Liberal. As for the two old partners of the government, the Left Block and the CDU lost a combined 355 thousand votes compared to the 2019 election which resulted in a reduction in their number of deputies from 31 to 11. In seventh place came the conservative Popular Party with 1.9% of the vote and, because of the characteristics of the electoral system, failed to elect a deputy for the first time since the 1974 democratic revolution. In eighth and ninth place came the animalists party PAN and the eco-socialists Livre respectively, who gathered enough support in the district of Lisbon to elected 1 deputy each.

*Figure 4 – Election results from Expresso*

Socialist Party’s proposals for the next 4 years

Let us look at what the Socialist Party, also known as PS, defends in its electoral program on three key essential points; economic, social, and foreign policies. The program is 122 pages long, so it is impossible to cover everything, but we will try to go over the most important parts.

1. Economic policies

One of the most important economic and fiscal policies proposed by the governed is the creation of two additional income tax (IRS) brackets, which would give a 150 million euros tax break to the middle class and increase the progressivity of the tax. Additionally, PS proposes to increase the time span from 3 to 5 years of the IRS Jovem, a tax benefit that reduces income taxes paid by young people by an annual average of 22%. As for the minimum wage, PS defends an increase from the current 705 euros per month to 900 by 2026. Another target is the 20% increase in the average income of Portuguese workers over the next 4 years.

Regarding the government debt, which is one of the largest in Europe, PS promises to continue its policy of aiming towards a balanced budget and to reduce the debt to GDP ratio from 127.5% to 110% by 2026.

In terms of economic growth, PS does not specify concrete numbers but aims to have the GDP per capita of Portugal converge with Europe by growing 1% above the Eurozone and 0.5% above the European Union averages.

*Figure 5 – Minimum wage in Portugal (PT) compared to some EU countries.*

Regarding education, PS aims to invest in new educational practices and scientific-pedagogical training, as well as improving the access to higher education. The party also proposes to invest in the National Healthcare Service by constructing or renovating 100 healthcare units, increasing primary care centers and strengthening palliative and continued care, as well as issues concerning mental health.

As for the climate crisis, the only target for 2026 is to increase to 80% the weight of renewables on energy production, however, the program sets a 55% cut on greenhouse emissions by 2030.

Although the parliament had already voted to legalize euthanasia last year, the veto by President Marcelo Rebelo de Sousa in late November means the new parliament will have to vote on this topic again this year. The PS program does not mention this topic at all, but only 7 out of 108 socialist deputies voted against the measure last year, so it is likely to pass again in 2022 with the support of the Left Block and Iniciativa Liberal.

*Figure 6 – Protests infront of the Assembleia da República against Euthanasia. Picture from Liberation.*

3. Foreign policy

Regarding the European Union, the Socialists want to continue to monitor the implementation of the 2021-2027 Multiannual Financial Framework and monitor the implementation of the Porto Social Committee that occurred last year during the Portuguese Presidency of the European Council.

As for the United Nations, the program aims to support the current reforms of the Secretary-General, elect Portugal to the UN Security Council in the biennium 2027-2028, and host the second World Oceans Conference in Lisbon this year.

In terms of bilateral relations, the program of PS wants Portugal to give priority to nearby countries, such as Spain, the UK, France, Italy, and the US. The latter is important to affirm the country’s role in being a diplomatic bridge between Europe and North America. The program also defends a reinforcement of our diplomatic network by the opening of new embassies in some countries in Africa and Asia.

*Figure 7 – European leaders after signing the Porto Social Commitment. Picture from the Portuguese Government.*

What will happen now?

It is impossible to predict if the Socialist Party will be able to implement the proposals or reach the targets we can find on their electoral program, but for the first time in Antonio Costa’s premiership, his party will be able to pass laws and the government budget without the support of any other political party, meaning the responsibility of what happens in the next 4 years is now, almost for its entirety, the responsibility of the Prime Minister and his party. In 2026, or maybe even earlier, all Portuguese voters will once again head to the polls and decide whether they have indeed delivered on their promises.

Sources: RTP, Diário de Notícias, Electoral Programs of PS, BE, CDU, CDS, IL, PAN, “Livre” and “Chega”, Público, Jornal Económico, Jornal de Notícias, Expresso, Electoral Program of PSD

Afonso Monteiro

Hugo Canau

João Sande e Castro

André Rodrigues

Maria Mendes Silva

Supply Chains Constraints: Can the solution be delivered on time?

December 21, 2021December 21, 2021by Awareness News1 Comment

Reading time: 6 minutes

The Covid-19 pandemic has disrupted global supply chains. These are still facing huge challenges and struggling to bounce back in a period where demand has surged. This is leading to increases in the prices of products, shortages, and delays in deliveries. With Christmas around the corner, a season with above average consumption, the situation is only expected to worsen as the problems in the supply chain don’t seem to have an end near.

But what exactly are global supply chains? What led to the problems that we are observing worldwide? What have governments done to ease the situation?

What are the Global Supply chains?

Nowadays, a desire for something can be fulfilled with a simple click, but it was not always easy as today. In fact, a dramatic change occurred in the markets around the 80’s with the globalization, and liberalization of world’s markets, lower transports costs, advances in information and communication technology, and innovations in logistics. From that moment forward, low cost, high quality and satisfied customers became the buzz words, and with this new reality in global markets a new concept was implemented: Global Chain.

Global chains are networks that can span across multiple continents and countries with the purpose of sourcing and supplying goods and services. It also involves flow of information, processes and resources across the globe enhancing its efficiency. With this new concept, firms and organizations could now have its production broken into different parts in different countries to achieve high quality while lowering costs. The importance of the global chain is so notable that since 1995 intermediate manufacturers represent more than half of manufactured exports and imports at a global level.

Different geographical regions have a different net effect in the global chain. Africa and Oceania export more intermediate goods as a share of their manufactured exports than others. In Europe there is a balanced intermediate imports and exports. Meanwhile in Asia imports exceed exports as a share of their intermediate imports and exports.

However, the pandemic disrupted the normal functioning of the global supply chain. These difficulties showed up at the beginning of the pandemic with countries like China, South Korea, Germany, and Southeast Asian countries, being forced to reduce their production since workers were sick or in lockdown, leading to an overall decline in global supply with shortages in food, toys, chips, etc., driving prices up.

*Figure 1 – Supply Chain Problems by Matt Kenyon.*
*Source: Financial Times*

The causes behind the disruption in Global Supply Chains

Many factors lie behind the explanation for the supply chain crisis that the world has been facing. Overall, it is a culmination of lingering Covid-19 disruptions and a sudden surge in demand, with the supply side not being able to adapt quickly enough to demand´s rapid pace. Indeed, on the demand side, in the past few months, with many restrictions being lifted, the economy has been experiencing an unparalleled boom in demand. However, on the supply side of the issue, we face a still slowly recovering productive industry from the hardships imposed by the past year’s Covid-19 restrictions.

Many factories were forced to shut down, some have had to cut back on the number of workers and as such production still falls quite behind pre-pandemic levels, being unable to keep up with this increase in demand. Moreover, general labour issues across the globe, particularly a shortage of workers, have also greatly contributed to a clogging up of transportation networks. The lack of sufficient truck drivers has been a troubling concern in multiple countries, particularly in the UK as recent months have shown, with Brexit having greatly contributed to it. In the US, significant labour shortages have been felt in warehouses companies and major ports. This reality, combined with inadequate infrastructures and a shortage of the proper space and equipment to deal with the surging demand have resulted in warehouses running out of space and ports working under full capacity, leading in turn to port congestions and blockages in multiple cities.

Adding to all of these, the punctual raw material shortages as well as a scarceness of key components (such as the case of the microchip crisis), have also compromised timely deliveries of final products. Indeed, one of the biggest issues with the supply chain crisis is that the way the productive and distributive chain of a large deal of activities is organized, with numerous intermediaries and bottlenecks along the route from the assembly line to the final consumer, it makes it so that as one supplier depends upon another´s delivery, and the delays end up feeding on each other, amplifying the effects of the disruptions.

*Figure 2 – Number of vessels sitting in the main ports.*
*Source: Refinitiv Eikon*

*Figure 3 – US active truck utilisation. Source: Bloomberg*

What has been done to ease the situation?

In the U.S., the Biden administration has been increasing its dialogue with the corporate sector to try to ease some of the ways that supply chain issues could affect consumers. Namely, the U.S. Gov. has secured pledges from retailers such as Walmart and from shipping companies UPS and FedEx to increase their working hours in an effort to ease some potential difficulties that could arise during the hectic holiday shopping season that is expected to be strong this year due to the fiscal stimulus pursued by the Biden administration. They are also urging rail and trucking companies to increase their transportation capacity, but labor shortages in these areas have made this difficult, which has contributed to worsening the bottlenecks. Moreover, the FTC (Federal Trade Commission) has requested information from big retailers to monitor whether they engage in dishonest business practices which might amplify the damages form the supply chain problem.

In September, in the U.K., to help with problems in the supply of fuel, the government resorted to the military to help deliver fuel to gas stations. A shortage of fuel would be even more devastating to other supply chains as it wouldn’t allow transportation of goods by truckers. Also in the U.K., the Treasury introduced measures to freeze taxes on the trucking sector, to attempt to ease supply chain pressures there. However, logistics companies say that this does not address the truck driver shortage that is bottlenecking many of their operations.

The U.K had also previously implemented 25 measures to try to tackle the chronic shortage of HGV (heavy goods vehicle) drivers, including increasing capacity for testing new drivers by the Driver and Vehicle Standards Agency (during the pandemic these tests had been severely decreased) and, generally, making it easier for new drivers to enter the truck-driving labor force. The U.S. new infrastructure bill would also allow drivers as young as 18 to drive trucks across states (currently the minimum is 21).

Conclusion

Economies all over the world have been struggling with a global crisis in supply chains in result of the pandemic. Even though governments have put forward legislation to help ease these problems, the issue is still very present. Higher prices, shortages and delays in delivery are just some of the problems that consumers and businesses have been dealing with. These problems won’t last forever but they are likely to get worse before they get better.

Source: CNDC, Bloomberg, BusinessInsider.

Diogo Almeida

João Baptista

Inês Lindoso

João Correia

Do not bet against these biases

December 15, 2021December 15, 2021by Awareness NewsLeave a comment

Reading time: 6 minutes

How many of you bet on Placard, or Bet click, or any other similar gambling website? How many of you have gone to the casino, or want to go and play in the slot machines? All these games generate feelings of excitement, that rush of not knowing what the outcome might be, and if we are going to win or not. But maybe next time you decide to bet on your favourite sport’s team or go to the casino, there are some things you must take into consideration, such as fallacies and biases we sometimes, unconsciously, fall for. With this article, we will explain some of the most common ones, how they work and how they are present in our daily lives.

*Cognitive biases influence us more than we are aware of*

The Conjunction Fallacy

The difference between plausibility and probability is the source of this fallacy. Normally, we are more inclined to believe in the probability of an occurrence the more detailed it is, when in fact, and according to our statistics and probabilities lessons, it is exactly the contrary: the more exact and detailed an event is, the less likely it is to occur. For example, the probability of a person being a teacher is higher than the probability of a person being a teacher and a woman (even though, when describing a person with these characteristics, it is more plausible if we add more detail and, therefore, can incur in the mistake of thinking that it is more probable).

This is called the conjunction fallacy as it refers that the probability of the conjunction, P(A&B), must be always smaller than the probability of its constituents, P(A) and P(B), as “the extension (or the possibility set) of the conjunction is included in the extension of its constituents.’’

We can relate this fallacy to sports, as there is a lower probability of an event to happen if we add more restrictions. So, for example, let’s assume that:

Probability of A, P(A), is equal to team A scoring a goal (and the result to be 1-0)
Probability of B, P(B) to correspond to team B scoring a goal (0-1).

Therefore, the probability of A and B, P(A&B), is equivalent to both team A and team B scoring a goal (and the result to be equal to 1-1). As the probability of the conjunction of A with B, P(A&B), is always lower than the P(A) (or P(B)), then we can assume that the likelihood of a draw is lower than the probability of just one goal.

*Picture showing that P(A&B) £ P(A) or P(B)*

Applying this to real life, when you bet on Placard, the more you specify the occurrence of an event, the more an outcome, if positive, generates higher rewards, as the probability of occurring is lower. For example, betting on Benfica winning Sporting or Sporting not scoring any goal, if true, generates less money than betting Benfica will win and Sporting will not score any goal.

Hot Hand Fallacy

Another quite common mistake that many people who bet incur in is the Hot Hand Fallacy. As the term suggests, this comes from the bias that people tend to have regarding the likeliness of something that has been successful in the past to continue that way in the future. Because, if for instance, a specific horse keeps winning race after race, it means that next time it will result in the same outcome, right? Well, not necessarily…

In fact, we are only considering a small number of random events, instead of analysing the bigger picture. Although a goalkeeper may be in a “hot streak”, defending every possible goal that comes his way, his average save percentage can be way different. People wrongly assume that a small number of occurrences give the possibility to make safe predictions of what is going to happen. In other words, people infer future outcomes prematurely based on small and recent samples of evidence, disregarding other sources that have been recording performance data for years.

This fallacious reasoning comes from human’s inevitable propensity to formulate patterns and find trends to make sense of the environment that surrounds them. Such usually leads us to have a hard time assessing randomness, viewing events as dependent while they are actually independent of each other.

So, how can we overcome this? Although it is difficult, people should think twice before jumping into conclusions, regardless of how exciting things can be going for them. There’s a need to check and ensure how things usually play out in the long run, to derive better and more rational decisions.

The End-of-Day Effect

Moreover, have you ever noticed that you tend to incur in higher risk when something is about to end, that being either an event or around in the casino, regardless of your previous results being losses or gains?

Once again, let’s use the casino example: you are preparing to leave, and this is going to be your last bet. If your previous results were of gains, then you will tend to incur higher risks, as explained by the hot hand fallacy. On the other hand, if you accumulated losses, then you also tend to incur higher risks, but in this case in an attempt to recover said losses. The end-of-day effect relates to the fact that gamblers are more willing to have higher risks at the end of the session, either to make up for losses or due to the hot hand fallacy. This effect occurs because perceived endings cause participants to be more concerned with gains rather than losses, and this increase in risk-taking in the final round is mediated by a motivational incentive. This motivational stimulus caused by time perception affects the ability to process information in the frontal lobe, interfering with decision making and impulse control.

*People tend to incur higher risks when it is the end of something*

The Recall Biases

Lastly, the Recall Bias: it can be explained by the tendency to remember and overestimate wins, whilst forgetting about or underestimating losses. Let’s use our old casino example: you have played and lost in the roulette 2 times in a row. However, when you play it a third time, you end up winning. The outcome will be for you to overvalue that win, and forget the other losses, consequently deciding to play one more time, confident that you will win, even though your net effect might still be negative. Another implication of this bias is that losses will not act as an incentive for individuals to stop gambling, since they believe that they will eventually win.

Conclusion

All things considered, any kind of gambling can be addictive and frequently a dangerous behaviour. Examples of individuals getting addicted to gambling, ruining their bank accounts and having negative effects on their own personal lives exist to no end, and the biases and mechanisms presented throughout the article are certainly part of the causes of many of them. Thus, next time you responsibly consider making any bets we recommend you to be mindful and try not to fall into these behavioural traps.

Sources: The Economics of Sports, The Decision Lab, Frontiers in Psychology, ESPN, American Psychology Association, Springer Link, Forbes, Peel Research Partners, VSin.

Benedita Elias

Mariana Gomes

The Vaccination Mandate Crisis

December 8, 2021December 8, 2021by Awareness News1 Comment

Reading time: 5 minutes

As of November 2021, the COVID-19 pandemic has spurred over 250 million cases and taken the lives of over 5 million worldwide. Though it has been two years since the first reported case of this new strand of the SARS‑CoV‑2 virus, its impacts have not stopped leaving their mark: countries are reporting or anticipating a fifth wave of infection; others are on the verge of a renewed national lockdown, and others, still, are urging towards a third dose of the vaccine for risk groups.

It seems the world might yet need to adapt to this ever-evolving health crisis. The glimmer of hope in recent times has come in the form of a Digital COVID Certificate, which indicates either full vaccination, immunisation (due to recent recovery), or negative test result. It provides support in ensuring restrictions can be lifted in a coordinated manner. Among other scenarios, it exempts the holder from free movement restrictions and enables larger capacity inside closed venues. As of late, countries have considered and begun to impose vaccination mandates as a labour requirement, which is being met with mixed responses.

*Figure 1: Digital COVID Certificate becomes more widely compulsory for entry into closed venues and crowded spaces.*
*Picture from Public Health.*

In the United States, where an average of about 1,100 – mostly unvaccinated – Americans are dying daily from COVID-19, President Joe Biden has declared such a mandate. It states workers at U.S. companies with at least 100 employees must be vaccinated against COVID-19 or be tested weekly starting the 4^th of January 2022 – affecting around 84 million workers. Workers in healthcare facilities and nursing homes, participating in the Medicare and Medicaid government healthcare programs, are also required to get their shots. Failure to comply is expected to trigger fines of about $14,000 per violation, with a chance to increase. Washington’s declaration was met almost immediately with opposition from Florida, Iowa, and Indiana governors, who argued infringement on individual freedom. Lawyers and companies, opposing the federal vaccination mandate, have been successful in interrupting its implementation, following an Appeal’s Court ruling. Nonetheless, there seems to be majority support of the vaccine mandates among citizens, with only about 1% of the total workforce refusing to comply with these measures.

*Figure 2: Protests in the US ensure Washington’s decision to impose vaccination mandates for firms with more than 100 workers.*
*Picture from Reuters*

In Europe, however a similar majority public support, these mandates have been met by a larger labour force and populace opposition.

Italy, the first European country to make the Covid-19 vaccine mandatory for healthcare workers and where vaccination rates stand at around 85%, has seen an increase in the periodicity, size and hostility of protests. The country’s Green Pass, compulsory for all employees as well as customers at all public or private sector workplaces, has been accused of undermining individual freedoms and of damaging the economy by the centre-right block. This sentiment seems to be growing among the general populace since Italy’s health ministry extended the use of the Covid-19 health pass system until March of 2022, led by a significant increase in positive cases week-on-week.

Similarly, attempts to mandate vaccination in France have been met with public backlash. In July of 2021, President Emmanuel Macron issued an ultimatum for public and private healthcare workers to be vaccinated. In September, still, tens of thousands remained unvaccinated and about 3000 workers were suspended without pay. Correspondingly, the immunity passport requirement was met with protests in Paris, Marseille, and other cities: some citing anti-vax sentiments; others pro-liberty; and others, still fed up with Macron. Nevertheless, the administration has not backed down from its efforts. Unlike the US, French courts say the “health pass” is constitutional, showing less judicial system resistance.

In contrast, the UK has not yet issued a mandate, requiring health workers to be vaccinated against COVID-19 only by April of 2022. Though it might still be early to measure its impact, the high NHS staff vaccination rate – at around 90% – and the majority of public support in both Tory and Labour voters, would indicate low resignation from workers in protests.

*Figure 3: Healthcare officials defend freedom of choice against mandatory vaccination.*
*Picture from New York Times.*

Thus, the question arises as to the legitimacy of said mandates. The large debate centres around the right to freedom of choice. The majority advocates a utilitarian approach, claiming personal choice should not interfere with the wellbeing of the collective. Few preach freedom, equating vaccine mandates to a form of tyranny and oppression and evoking the Human Rights Act, which states any individual has the right to body autonomy and to refuse any medical treatment.

The latter holds that – though not a direct match to forced vaccination – the resulting social and economic conditions are indirect coercion mechanisms. The prohibition from entry into establishments and weakened job positions impairs return to normality.

Additionally, recent studies by Goldman economists estimate vaccination mandates may result in lower employment in the short run, resulting in refusal to comply.

Many argue, however, that this argument is used to mask the true driver of vaccine resistance: politics. One example can be found in US politics, where a successful vaccination campaign could mean a successful Biden administration, spurring the desire for agitation.

The utilitarian school of thought stands on the benefits of vaccination, defending vaccination compulsion against many diseases has been taking place for generations now and that the upsides outweigh any freedom of choice objection. Scientific testing and recent developments have provided evidence that (1) unvaccinated people are in higher risk of contraction, (2) are more infectious, and (3) are more likely to require hospitalisation, placing additional stress on the health care system. Mandates would, therefore, be expected to improve public health, decrease total infections and diminish contagion rates.

Furthermore, supporters are of the opinion that the predicted short-run unemployment will be more than offset by economic recovery and relaunching. During periods of high infection and death rates, consumption and spending fall, resulting in output contraction and lower employment rates. Thus, long-run recovery is possible only after the resolution of the public health crisis.

Though possibly not ideal, vaccination mandates have emerged as the contemporary solution to the two-year-long public health crisis of the COVID-19 pandemic. While some view these measures as an attack on freedom of choice, the majority acceptance and support has driven its implementation from political debate to reality. It remains only to be seen if these mandates will enable the return to normality.

Sources: New York Times, Reuters, The Guardian, France24, BBC, ABC News, NPR, CNBC, Politico

Afonso Monteiro

Hugo Canau

João Sande e Castro

André Rodrigues

Maria Silva

Back to the basics: How is inflation measured?

December 1, 2021December 1, 2021by Awareness News1 Comment

Reading time: 6 minutes

Inflation has been making headlines all around the globe, as prices increase at unprecedent rates. But how is inflation measured? Are the measures presented by policy makers trustworthy?

Inflation has always been a hot topic of discussion – and a particular favourite of central banks all over the world. Indeed, with price stability as one of the core objectives of virtually all central banks across the globe, it comes as no surprise that inflation targeting is seen as the key guiding point for monetary policy.

So, if inflation is such a key determinant of economic activity in the eyes of most central banks, how do they go about measuring it? Multiple measures are generally and simultaneously used, with the most common being undoubtedly the CPI (Consumer Price Index) – used for example by the FED in the US – as well as its EU counterpart, the HICP (Harmonised Index of Consumer Prices), favoured by the ECB.

One may ask to what extent are all these measures able to fully capture the actual inflation that is being felt in the economy, and what role do central banks play in assessing inflation and its respective expectations, seeing as the ultimate decision of when and how to act when it comes to inflation targeting falls entirely upon them.

*Figure 1 – Euro Area Annual Inflation and main components. Source: Eurostat*

Measuring Inflation – From the CPI to more complex metrics

Most Central Banks stated primary objective is to maintain price stability. In the Euro Area and in the U.S., the European Central Bank and the Board of Governors of the Federal Reserve normally have their eyes set on a long-run target of 2% annual inflation. For Central Banks to keep track of the effect that their monetary policy is having on current inflation they need measures of… well, inflation[1]! Unfortunately, there is not one which is truly accurate or one which could take everything into account, and commonly used measures, such as the CPI (Consumer Price Index), are regularly subject to criticism of their methodologies and their over or under-estimation of inflation, depending on when and who you ask.

The CPI is one of the most mentioned measures of inflation and, generally, consists of, at a first stage, obtaining a set of weights to give to different expenditure items based on the consumption pattern of the average consumer (In the U.S., the U.S. Bureau of Labour Statistics, which publishes the CPI, calculates this based on its Consumption Expenditure Survey). Next, in the case of the U.S., for example, the U.S. Bureau of Labour Statistics obtains data on the prices of over 90,000 goods. Based on the previous weights, the index is then calculated and with it, we should get an idea of how the price of the average consumer’s basket of goods has changed.

*Figure 2 – The 8 major groups of the Consumer Price Index*

However, there are many pitfalls associated with its interpretation, especially in the context of informing monetary policy. For example, a considerable percentage of consumers’ income is spent on energy consumption. As has become quite apparent recently, these commodities are subject to wild price fluctuations. However, despite being largely caused by factors other than the monetary policy of Central Banks, the recent price increase in energy has reflected strongly on the CPI. To combat this, we may remove energy and food (which may also be quite volatile) items from the CPI and present only the Core CPI.

And we may go even further and say that, in fact, the Core CPI may still be providing a biased estimate of inflation due to large changes in specific items and that, instead, we should look at the Trimmed CPI, which has the top 8% and bottom 8% biggest price increases and decreases chopped off. Others may say that we should look also at the Median CPI which measures the price change of the 50^th percentile good on the basket list.

Taking all these different measures into account we can build a better, more complete picture of whether recent inflation measured by headline CPI in the U.S. is simply related to wild swings of a few items due to supply shocks, or whether it is a broad-based, demand-driven phenomenon resulting from expansionary monetary policy.

Beyond the usual metrics – The importance of Inflation Expectations

The focus of Central Banks to meet their inflation targets is highly correlated with inflation expectations. These are simply the rate at which people expect prices to rise in the future. They matter because actual inflation depends, in part, on what we expect it to be. Let’s say that everyone expects prices to rise at a 4% rate over the next year; then, businesses will want to raise prices by at least that amount, and so will want workers to increase their wages. All else equal, if inflation expectations rise by one percentage point, actual inflation will tend to rise by one percentage point as well.

This means that for Central Banks it is important to anchor expectations at their inflation targets. The absence of anchoring, in a period of high inflation, can create a wage-price spiral. This term defines the cause-and-effect relationship between rising wages and rising prices. The wage-price spiral suggests that rising wages increase the demand for goods and cause prices to rise. These price rises will then increase the demand for higher wages and the cycle repeats.

*Figure 3 – Household inflation expectations and HICP inflation. Source: ECB*

Conclusion

Most of the younger European generations have never experienced high inflation. Still, the inflation rate was not always stable and low. In the ’70s, with deregulation of the international monetary system and two oil shocks, inflation had climbed to values never seen before (around 12% – 13%) only declining in the next decade (80’s). With some fluctuations over the years, this measure has seen a downward trend over the years laying down values between 0.18% in 2016, 1.7% in 2018 and 0.5% in 2020.

This trend can be changing. In the past months, inflation has been alarmingly increasing, now reaching values that are further away from the usual target, with the EU currently registering around 3.6% inflation rate and the US a concerning 5.4%.

The fact that inflation is rising is not entirely unexpected, as expansionary monetary policies such as the ones that have been conducted for the past year and a half as a response to the COVID-19 pandemic – characterized by massive bond-buying initiatives that provide ample injections of liquidity in the economy and incredibly low interest rates – are usually followed sooner or later by a rise in inflation as demand starts to pick up once again. Coupled with this, the skyrocketing energy prices that come as a natural response to the global energy crisis that we are currently facing have also contributed to pushing this raise in prices even higher.

Nevertheless, even though the inflation values that exclude these energy fluctuations are a bit more promising (EU = 1.8% and US = 4%), they are still off from the recommended ones (especially the US), which indicates that a Central Bank intervention should be imminent, particularly from the FED where the scenario appears to be worse. Still, Central Banks are in-between the sword and the wall. On one side we see rising inflation pressure but, on the other side, there is still an economy that is recovering from the impacts of the pandemic crisis. Nonetheless, it is clear that the current landscape would not be sustainable for long, so it could be said that the Central Banks’ reluctance to act upon it will inevitably have to come to an end in the near future.

[1] Central Banks also often look at measures of inflation expectations to guide their monetary policy.

Sources: EBC, Investopedia, IMF, Trading Economics

Diogo Almeida

João Baptista

Inês Lindoso

João Correia

Africa’s food crisis: Can sustainable agriculture be the answer?

November 24, 2021November 24, 2021by Awareness NewsLeave a comment

Reading time: 6 minutes

Food crisis has been a reality in Africa for many years, and at this point images of malnourished African people, although still shocking, are no longer news. In 2020, due to the pandemic, we saw a tremendous worsening of world hunger. This calls for an urgent change in the primary sector, mainly to more sustainable practices.

If we don’t change the way we are operating in the agri-food systems we won’t be able to achieve the SDGs (sustainable development goals), and the goals for 2030
Food and Agriculture Organization of the United States Chief

*Mother and child in Nigeria suffering from hunger and malnutrition*

The primary sector still stands as the main driver of African economies. Modernization and research on this matter are, however, far from its potential, as most workers are still unqualified. Aligned with this is the lack of farmers commitment to change their practices and see the long-term results of overexploitation. Consequently, responsible and fact-based agriculture is rare, especially in rural areas. These damaging agricultural and pastoralist methods, alongside climate change and its resulting extreme weather conditions, will be unsustainable for African ecosystems. As consumers begin to value organic and chemical-free production, a greener approach could improve both the environmental and economic situation of African nations. Sustainable agriculture is an almost perfect fit with Africa’s current state.

But what is meant by sustainable agriculture?

This concept consists of managing renewable natural resources in such way that provides food, income and livelihood for present and future generations, while maintaining or improving the economic productivity and ecosystem services of these resources. This type of farming combines environmental safety with economic profitability and efficient use of non-renewable resources. Conserving water resources, reducing the use of chemicals, developing ecosystem and crop biodiversity are just some of the goals of sustainable agriculture.

Over the years, value and demand for organic products has increased, thus by adopting sustainable agricultural practices, Africa would distinguish itself from most of the developing world that, unfortunately, has been increasing its use of pesticides and synthetic fertilizers, as it is the case of Brazil and Bangladesh. In addition, to purchase those same pesticides and fertilizers, farmers need to request loans, limiting household budget as debt accumulates. Thus, unlike their counterparts, organic farmers have increased their earnings and food security.

*Graph 1: Increase in pesticide use, from 1990 to latest data (2007-12)*

The benefits of sustainable agriculture

An example that clearly illustrates the benefits of sustainable agriculture is Ethiopia. In the degraded region of Tigray, a 10-year experiment, starting in 1996, provided evidence that organic and sustainable agriculture does have benefits to poor farmers and communities. To do so, ecological agricultural practices were introduced, including composting, water and soil conservation activities, among others.

The impact of compost on crop yield was rapidly visible, and data collected from 2002-2004 indicated that, on average, composted fields gave higher yields, sometimes double, than those treated with chemical fertilisers. Moreover, the positive effects of compost can remain up to 4 years, opposite to the latter that must be applied every year. With this, farmers have not only been able to cease debt resulting from fertilizers purchases, but also, since they are obtaining higher yields, it leads to economic returns. All this just by changing from fertilizers to compost.

Furthermore, since organic production focuses on smaller and more diverse crops, communities have access to a wider variety of nutrients and vitamins that help fight hunger and malnutrition. This also has a positive impact on HIV/AIDS patients that when malnourished, develop the full symptoms of the disease at a faster pace. Other health benefits include the reduction of illnesses and deaths due to agrochemical exposure.

A more independent continent

Nevertheless, as we all know, foreign aid is a very present reality for Africa, which contributes for it to be overshadowed by other nations. Thereby, offering local people work-for-food opportunities allows them to take care of their immediate food needs, while ensuring that they feel ownership of a project they have built themselves. This type of model encourages long-term participation for a truly sustainable system, and it improves physical capital, since market accessibility becomes a requirement. By building a network between farmers, NGOs and the government, many infrastructures would improve, as the agriculture industry tends to move forward in these African nations.

An indirect benefit would be African communities’ view on education, as their traditional knowledge builds up with new information. Educational programs on agriculture have been proven effective in other regions. In China, for example, farmer field schools helped reduce pesticide usage while raising crop yields. By seeing their educational and technological improvements literally bear fruit, governments can value sustainable agriculture differently and ensure children attendance at school. An increase in productivity can benefit the latter, since selling production surpluses will help paying for school fees. Similarly, an increase in labor demand for related activities could increase women’s participation in the economy and generate different sources of income for households.

However, it is not that easy…

Some challenges arise for African countries when seizing opportunities regarding the adoption of sustainable agricultural practices, especially in terms of market access difficulties and building productive capacities. This happens mainly due to the absence of economic incentives from the African Governments and their decision to implement policies, such as agrochemical subsidies, which makes the transition even less appealing.

*UN calls for more funding for organic farming in Africa*

A further constraint is the lack of awareness, not only at the farm level but in the whole society. The fact that this type of agriculture is completely absent from its agricultural education and R&D leads to massive misinformation barriers that inhibit its implementation. Related to this is the fact that no system can become operational if it is not institutionalized: in many African countries, research and development in agriculture are inadequate and suffer from lack of trained personnel, facilities, and motivation, making it difficult to build satisfactory research traditions and local expertise.

Additionally, there are three conditions that are crucial to analyze when studying the possible implementation of sustainable agriculture in a country: reasons for non-sustainability must be known, there must be sufficient information on the resource base to target activities that will foster sustainability, and the resource base can be monitored to evaluate sustainability. The problem is that these are uncertain in almost every African country. Another relevant restriction is the fact that developing countries do not have the appropriate research methodology to implement sustainable agriculture. Fundamental questions, such as what treatments to implement, what measurements to consider, how the data can be analyzed and how long the experiments should be conducted, are yet to be answered.

The challenges are worth surpassing

All in all, sustainable agriculture is assured to have a positive impact in Africa, but it requires appropriate incentives and intensified financial and technical assistance to ensure food security and social stability. It is essential for African governments to create awareness on the subject so that private organizations can contribute to the implementation of sustainable agricultural practices.

In a time where the world population does not seem to cease increasing, additional land will have to be cultivated, which gives even more importance to this issue: since all the major causes of land degradation are the result of poor land management, sustainable agriculture will do a great job preventing it.

Sources: The Borgen Project, Vox, African Wildlife Foundation, Stein T. Holden, Regional Office for Africa, African Business, Rainbow for the Future, Science Direct, Taylor & Francis Online, UNDP, Agence Française de Développement (AFD), The African Exponent, African News, Africa Center, United Nations Conference on Trade and Development, Third World Network.

Madalena Andrade

Magda Costa

Is Biden in trouble?

November 18, 2021November 18, 2021by Awareness NewsLeave a comment

Reading time: 7 minutes

It has been almost 11 months since Joe Biden took the oath of office and replaced Donald Trump as President of the United States. The early success of the coronavirus vaccination process and a rapid economic recovery from the sharp decline in GDP experienced in 2020 due to the government-imposed lockdowns, made most political commentators think the new President was on his away to an easy political year. So why has Biden’s popularity plummeted over the last few months and why did his party loose the gubernatorial election in Virginia, a state governed by the Democrats for the last 12 years and on which Biden beat Trump by more than 10 percentage points?

*Figure 1: Decline of Biden’s approval rating and increase of his disapproval ranting over the last few months.*
*Picture: 538*

Anus horribilis?

Contrary to what was initially predicted, Joe Biden’s first year in office has been marked by a number of serious setbacks. Over the rest of the article, I will focus on 3 that are believed to be causing the increase in discontent with the new President and his party.

Vaccination hesitancy

On April 30th, the President’s promise to deliver 100 million vaccines on his first 100 days was met two times over and around 46% of the population had already received at least one dose of the vaccine, a percentage twice as high as that of the EU and six times that of the rest of the world. Daily new Covid cases and deaths were on a decline and a return to normal was on the horizon.

The early success of the vaccination process was, however, hiding the effect of the large vaccination hesitance in the country. According to a poll conducted for The Economist, around 30% of the population does not want to be vaccinated or is unsure, the highest rate in the developed world. Once those willing to get the jab received their doses, the US vaccination rates plummeted, creating the perfect ground for the new Delta Variant to hit the US in a dramatic way. Daily covid cases and deaths increased tenfold and new poorly communicated restrictions had to be imposed to halt the spread of the virus. For someone who had ran on a platform of bringing the coronavirus pandemic “under control”, this return to restrictions and rise in deaths was seen as failure by the President, and has resulted on sharp decline of his approval on handling covid from 63% to 49% in just six months.

*Figure 2: Anti-vacination protest.*
*Picture: Daily Beast*

Evacuation of Afghanistan

When Biden became President the war in Afghanistan was already the longest conflict in US history. After 2448 US servicemen deaths, a cost of $2.3 trillion (around $7000 per American), and 19 years of conflict, the Taliban maintained a significant and growing presence in Afghanistan. The war had become very unpopular among voters, and both 2020 candidates ran on ending the war. In February of 2020, Trump stroke a deal with the Taliban to leave Afghanistan, and on April the 14^th, despite a strong push from the Pentagon to remain until the Afghan security forces could assert themselves against the Taliban, Biden delivered on the deal and announced the US would pull all troops out of the country by September 11^th.

As the American troops began to be pulled out, the Taliban went on the offensive and made rapid gains on the country. As the world saw the Afghan struggling to push back on the Taliban offensive, Biden defended his decision by saying it was “highly unlikely” the Taliban would ever take control, but a little over a month later the Afghan government fled the country and the Taliban were entering Kabul virtually unopposed.

Once the government fell, the NATO forces organized a massive airlift of nationals, embassy staff, and Afghan citizens who worked with coalition forces. The chaos and panic that ensued at the Hamid Karzai international airport following weeks was broadcasted all around the globe, with heartbreaking pictures of desperate people hanging on to wheels of planes and falling to their deaths as they took off.

Although these awful images were already a stain on Biden’s Afghan policy of redrawing all troops, the worse episode came on August 26^th when a suicide bomber and gunmen from ISIS targeted a gate at the airport where thousands of people were crowing trying to find a way out of the country. A total of 182 people lost their lives, 13 of them being US servicemen. Despite the chaos of the evacuation, by August 30^th the US last military airplane took off with the last remaining troops, officially ending the 19^th year military intervention. Over the 17 days that followed the fall of Kabul, the US and its allies evacuated over 120 thousand people out of the country. This success was not, however, enough to offset the horrifying scenes broadcasted from the airport over the next few days, with a poll by ABC News showing that 60% of Americans disapproved Biden’s handling of Afghanistan.

*Figure 3: Biden receives bodies of us servicemen killed in the airport terrorist attack at Dover Airbase.*
*Picture: The Times*

Gridlock in Biden’s agenda

On the 2020 elections, Biden’s Democratic party not only won the Presidency but also won a majority in the Senate and maintained their majority in the lower house, the House of Representatives. It is although important to note that the majority held in the House of Representatives, also known as just the House, was cut down to just 9 seats, the lowest majority held by any party since 2000. In the Senate, the Democrats are tied with the Republicans with 50 seats each, but Vice President Kamala Harris can also vote in the Senate which gives the party control of this chamber as well. Although a bill needs 60 votes to be passed by the Senate, the Democrats can use a special rule to avoid this called “Reconciliation” and approve certain legislations with just 51 votes.

These two razor thin majorities in congress have made it very hard for the President to move forward with his legislative agenda without having every single senator and all but 4 congressmen on board. The long and complicated negations have severely delayed two important bills, a $1.2 trillion bill that aims at modernizing the country’s infrastructure and a social spending $3.5 trillion social spending bill combines major initiatives on the economy, education, social welfare, climate change and foreign policy. These two bills are highly popular among voters, with a Quinnipiac poll giving them a 60% approval, however, the party infighting between moderate and progressive Democrats has delayed the passage of this bills for months.

This deadlock in congress and failure to deliver on electoral promises has created an image of an incompetent party and President, and according to a Emerson College poll, a plurality of voters now want Republicans to regain control of both the Senate and the House in next year’s midterm elections. If this were to happen, Biden would have little to no chance of moving forward with any of his legislative agenda as Republicans would try to block any Democratic bills.

Troubling times

There are several other reasons for Biden’s fall in popularity among the American public: the slower than expected economic recovery, the fears of inflation or maybe it is just normal for Presidents to see their approval rates decrease as their “honeymoon” period wears off. Whatever the reason is, it seems to be a big problem for Democrats even though the 2024 elections are still three years away. One should note, however, that even despite the fall in support, Biden’s most likely opponent, Trump, is even more unpopular than the current President. This was seen in Virginia, a state Biden won easily in 2020, where the Republican Glenn Youngkin won the state’s gubernatorial election, but he did so by distancing himself from Trump and focusing on local issues. Also, Afghanistan will most likely not be on people’s minds by then, and the current gridlock in congress seems to be coming to an end, as congress has finally passed the infrastructure bill and is moving closer to find a consensus on the 3.5 trillion social spending one. The signs are not good for Democrats coming into next year’s midterm elections, and current projections show they will lose the majority they currently hold in both chambers of congress, but a lot can still happen in one year, and especially in three.

Sources: The Atlantic, Our World in Data, NPR, 538, Daily Beast, New York Times.

João Sande e Castro

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