Source: https://commons.wikimedia.org/wiki/File:Cidade_Maravilhosa.jpg

In late 2025, Brazilmania took the Internet by storm: Instagram Reels of travel influencers visiting the country flooded the web. Elected as the 2026 Destination of the Year by Travel and Leisure Magazine, the country is being discovered by foreigners at a scale never seen before. In 2025, the Brazilian Tourism Ministry registered over 9.3 million foreign visitors—a whopping 37.1% increase from the previous year and the largest growth worldwide, according to a 2025 UN tourism report. This is a record-high number, unmatched even during the 2014 World Cup in the country or the 2016 Rio Olympics, leading Brazil to become South America’s most visited destination for the first time ever.

However, the record-high number of tourists and the content’s omnipresence within social media hide a lackluster reality: tourism levels remain relatively modest in comparison to other countries. Similar tropical destinations such as Mexico and Thailand attract an annual 47.8 million and 32.9 million visitors, respectively. Potential exists for Brazil to become the next tourist hotspot, but high air fares, limited English proficiency, and weak international branding have all contributed to Brazil remaining relatively underexplored by global travelers. Through an aviation sector reform, service sector capacitation, infrastructure investments, and continued media exposure, Brazil can develop its recently booming tourist industry and establish itself as a mainstream global destination.

Since 2022, the country’s official tourism agency, Embratur, has been conducting extensive advertising campaigns to attract visitors to the country. Founded in 1966, Embratur plays a key role in promoting tourism by organizing and structuring advertising campaigns, brand positioning, and marketing the country abroad. Embratur operates in tandem with the Tourism Industry, which develops the biannual National Tourism Plan. While results have been positive, its scope is overly concentrated in more traditional, less dynamic media sources such as television and billboards.

Much of Brazil’s tourism boom is due to increased social media exposure. Embratur must adapt to the increasing popularity of social media travel content and start intensifying its social media presence as part of its National Tourism Plan. Creating partnerships with travel influencers visiting the country may strengthen brand recognition. This could be conducted through gaining official financial support or providing free travel experiences and Brazilian goods, emulating a regular business sponsorship on Instagram or TikTok. Additionally, the agency should also invest more in its own social media presence, promoting its own institutional account and its brand account “@visitbrazil.”

By continuing to promote the country overseas, Embratur can play a similar role to Thailand’s Tourism Authority in its own tourism industry development. In the 1990s, Thailand received a similar level of tourists as Brazil currently does. Through active promotion of the country’s brand with campaigns like “Amazing Thailand,” the government transformed tourism into a key economic sector. The campaign involved massive television and billboard advertisement campaigns directed to developed Western markets and China, actively promoting the country’s image as a tourism destination abroad. Today, Thailand is among the top ten most visited countries globally.

Aside from limited social media marketing, Brazil’s air sector is oligopolized and uncompetitive, leading to overly expensive domestic travel prices. Today, the air travel market is concentrated in three main airlines: GOL, LATAM, and Azul, and there are no low-cost alternatives available. This scenario produces ticket prices that prevent tourists from exploring destinations within the country. The average cost of a domestic trip, which can vary extensively depending on distance to destination, is $135 dollars, double that of Peru, the second highest in LATAM, at $70 dollars a ticket.

Underlying this discrepancy is Brazil’s overly bureaucratic judicial system. Brazilian companies are subject to an overarching array of passenger-rights protection acts, most notably the Consumer Defense Code and Brazil’s National Agency of Civil Aviation (ANAC). While offering extensive protection for consumer rights, these well-intentioned measures have flooded the judicial system with endless suits for any minor problems with travel. 90% of all airline-related suits globally are filed in Brazil, despite only containing 2.7% of the world’s flights. On average, one court case or complaint is filed against an airline company every 0.52 flights. By comparison, in America, one court case is filed against an airline every 2,585 flights. This bureaucratic nightmare prevents any low-cost airlines from operating by requiring them to have excessively large and prohibitively expensive judicial departments.

Mexico, once constrained by similar regulatory barriers, offers a useful counterexample. The country’s airline sector, formerly fully served by Aeromexico, was liberalized in the 1990s by the Ley de Aerepuertos, which privatized airports and opened the airspace market to foreign capital. The influx of foreign investment combined with the new airport concession model led to lower prices through greater market competition and increased internal route connectivity through infrastructure expansion. Today, two low-cost airlines dominate the domestic market: Viva and Volaris, offering much more interconnectedness between the country through a democratized, competitive system.

Without significant reforms, Brazil’s airline industry in Brazil will continue to hamper its ability to become a major tourist destination by inhibiting interconnection between the country’s main destinations. To combat this, the government should opt to deregulate the air sector by reforming the regulatory bodies responsible for overseeing aviation. One course of action is to review and condense ANAC’s more than 800 distinct resolutions and norms into a single, centralized code. A clearer compilation of them would provide greater judicial security, allowing more airlines, especially cheap ones, to enter Brazil’s market. More competition would cheapen tickets, improving tourist accessibility nationwide and easing the current overrepresentation in major cities like Rio.

Another alternative measure would be to develop the country’s rail network as an alternative to air travel. Today, there are no major rail networks between Brazilian cities, and road quality is extremely distinct throughout the country, with top-tier expanded highways sharing space with unpaved single-lane roads. Brazil’s geography is also unfavorable for highway travel: the Serra do Mar, a high-altitude terrain close to the coast, forms a significant barrier between beachfront cities and the interior of the country. For example, the trip between Rio and Sao Paulo takes 45 minutes by air but over 6 hours by car under heavy traffic. Plans to build Brazil’s first high-speed rail network between Sao Paulo and Rio, which would reduce travel time to under two hours, are set to begin construction in 2028. Fostering the development of rail links can offer more varied and sustainable ways for traveling between the country’s major destinations.

The lack of English proficiency also represents an important constraint for international tourism, with estimates showing that only between 1-5% of the country’s population has some sort of English proficiency. Brazil’s already existing National Service of Commercial Apprenticeship (SENAC) provides a way for workers to improve their language skills for future work in the tourism industry. SENAC, established in 1945, is a government-sponsored independent institution that provides service-sector workers a wide range of subsidized—and often free—skill courses. By expanding its English language courses and creating a dedicated department for the tourism sector, the agency can support the nationwide growth of the country’s tourism sector by training and certifying professionals all over the country.

Brazil has a critical opportunity to fully leverage its unique culture and diverse landscapes to become a top tourist destination worldwide. By implementing measures such as solidifying its social media presence, deregulating and simplifying airline rules to lower costs, and subsidizing trade school courses for the tourism sector, the country can develop long-term requisites for mass tourism and cement competitive advantages over other similar destinations. In doing so, Brazilmania will not fade as a mere social media trend but become a lasting ethos, promoting economic development and cultural influence commensurate with its vibrant identity and unique geography.

Hugo Bueno (CC ‘29) is a rising sophomore from Rio de Janeiro, Brazil. Passionate about politics, economics, and inclusive education, he seeks to pursue a major in Financial Economics with a minor in Political Science. Hugo hopes to later work in Asset Management or Equity research. In his free time, he enjoys reading, writing, and trying new foods!

Source: Minera Escondida: A Copper Mine for SPACEBEL

Introduction

Chile has demonstrated substantial economic stability in the Latin American region, mainly due to its abundant copper reserves. Copper’s conductivity enables it to be applied across sectors which include: electronics, construction, transportation etc. Given its industry significance, copper plays a vital role in measuring the health of an economy. I contend that copper price cycles do not have a direct influence on Chile’s yield curve - however, based on my bullish outlook for the yield curve in 2026, investors should put on a steepener to profit from the rising spread, but they should be cautious of rising oil prices in the ongoing Middle Eastern Conflict, which could offset any profits from the steepener strategy.

The difference between the 10-year and 2-year government bonds - the yield curve spread, is a key economic indicator representing investor confidence on growth expectations.

The world is in a precarious state, plunged by conflicts with economic ramifications. In view of the ongoing uncertainty, two phases - the 2008 Global Financial Crisis (GFC), and COVID will be discussed. This will inform how copper prices influence Chile’s yield curve spread in these ‘stress test’ periods and serve as an anchor to examine the trajectory of Chile’s yield curve spread forecast for 2026 based on copper futures.

Source: Global Price of Copper (PCOPPUSDM)

Note: Copper prices overall rose in the past two decades - it experienced a huge downturn during GFC (drop in global demand), while it plummeted and rose during COVID (volatile demand from China, the largest importer of copper) and escalated in mid-2025 (heavy investment in AI centers which are driven by copper and supply shocks).

Source: CBoC (Banco Central de Chile)

Note: The spread dropped during GFC due to bearish growth expectations, reflecting a plummet in Chile’s 10-year yield, then rebounded close to 2009, much like the copper prices. On the other hand, the spread rose during the 2020 COVID phase due to relentless slashing of rates by CBoC to boost the economy, resulting in a lower 2-year yield.

Regression Analysis

A commodity-driven economy like Chile utilizes its revenues from higher copper prices as a shock absorber during financially stressful periods. During GFC, the housing market was adversely affected and copper prices plummeted from lack of demand.

Poor financial conditions meant lenders stopped providing short-term loans to Chile and domestic confidence shrunk along with a 23% decline in the CLP. The CBoC responded by sharply cutting interest rates to stimulate economic growth. For my analysis, I conducted statistical modeling where I regressed Chile’s yield curve spread on changes in: copper prices and the CLP exchange rate (against USD), since the latter reflects global sentiment and moves in tandem with copper prices.

As copper prices rise, Chile’s exports generate more revenue. This increases the price of CLP relative to other currencies, leading to its appreciation. It translates into two phenomena simultaneously: the longer end of the yield curve rising due to inflationary expectations in the long-run fuelled by growth, and the shorter end of the yield curve remaining low due to a stronger CLP, steepening the yield curve.

During GFC, a 1% rise in copper prices is associated with a 1.15 bps (0.0115%) rise in Chile’s yield curve spread, ceteris paribus. This suggests Chile’s yield curve becomes steeper and reflects stronger growth expectations for the nation.

COVID witnessed a 1% rise in copper prices being associated with a 1.63 bps (0.0163%) rise in Chile’s yield curve spread, ceteris paribus, having similar implications as GFC. This ties to prices rising because of: reviving demand from China and supply shortages due to mine closures in Peru (second largest producer of copper) - nonetheless, copper supply in Chile hasn’t been as adversely impacted due to mines maintaining their regular operations alongside a relatively less stricter approach towards quarantines and movement restrictions.

However, copper prices do not have a statistically significant impact on Chile’s yield curve in both phases, indicating that copper prices impact the yield curve through the CLP since these factors are strongly positively correlated.

Forecast & Trade Strategy

This analysis is conducted using the coefficient of the copper prices from the regression on the entire dataset. Combining this coefficient with copper futures for 2026 produces Chile’s implied yield curve spread for the rest of 2026. Copper futures are contracts that enable traders to transact copper at a predetermined price on a specific future date. The CLP was excluded here given the high volatility of exchange rates which would be hard to incorporate in a model.

Source: CME Copper Futures - Settlements

Figure 3 shows the spread rising, which can be attributed to various reasons. The first one being that inflation has reached its 3% target, which would prompt the CBoC to lower rates, translating into a relatively low 2-year yield. Next, in early 2026, copper prices skyrocketed due to a combination of factors such as growth in AI and EVs which warrants a higher demand for copper due to its use in tech infrastructure. Also there has been a supply deficit in copper production which will contribute to higher projections of copper prices. This reflects a rise in long-term yields and consequently, greater growth expectations for Chile. The spread direction aligns with the prior periods.

Additionally, the policies of the newly elected president José Antonio Kast emphasize spending cuts to rein in the fiscal deficit (which will be challenging considering the spending pressures on social programs like education, reforms etc.) and his goals to minimize bottlenecks like red-tapism in copper mining. He also intends to reduce corporate taxes from 27% to 23% and enforce greater deregulation to bolster productivity and investment.

Based on the rising yield curve spread for Chile for 2026 alongside Kast’s expansionary policies, I recommend investors undertake a yield curve steepener. The curve will continue steepening as per my analysis. Additionally, the bullish view on copper prices and Chile’s economic growth would elevate its 10-year rate, alongside the 2-year rate being low (in alignment with CBoC’s dovish rate outlooks) - hence investors can purchase the 2-year bond and sell the 10-year bond to profit from the increasing spread.

One potential risk to this strategy is the possibility of CBoC hiking rates if oil prices remain elevated, given the ongoing Middle Eastern conflict. This will raise the 2-year rate which could flatten the yield curve and offset any profits made if the yield curve steepener strategy is undertaken.

Conclusion

During GFC and COVID, the movement in copper prices was associated with a statistically insignificant rise in Chile’s yield curve, and one explanation is that copper prices indirectly shape the yield curve through the CLP, since these factors have a strong correlation. One way to take this forward is improving the regression model to include factors like: growth, interest rates, and global factors which would likely have a pronounced effect on the spread and can inform more robust interpretations.

The forecasted rising yield curve spread based on domestic policies and rising copper prices makes the yield curve steepener an attractive trade. Nevertheless, investors must exercise judgment in their fixed income trades given ongoing conflicts. It remains to be seen how the yield curve is shaped not only by the local regime but also worldwide events in this highly uncertain period.

Pranav Srinivas is a first year in the MA in Statistics program, concentrating in Risk & Financial Modeling (GSAS ’26). His interests lie at the intersection of statistics and macro, especially fixed income & FX. A cinephile, he spends his free time watching films across genres and languages. He is also an avid squash player and represented his undergrad college, Carnegie Mellon, at the club national level.

In early January 2026, the United States conducted a military operation in Venezuela that resulted in the capture of Nicolás Maduro along with his wife. While the official announcement stated that the operation was aimed at charging them with drug trafficking and narcoterrorism, recent policies such as easing sanctions to allow U.S. companies to operate in Venezuela’s oil sector suggest that the operation has a broader economic objective: seizing control over Venezuela’s oil industry.The operation may boost the appeal of oil imported from Venezuela and is often seen as a threat to competitors, such as Canadian oil producers, who compete with Venezuelan producers in U.S. Gulf Coast refineries. However, its actual impact is limited and overstated as Venezuela’s ability to expand exports is constrained by geopolitical instability and long-term structural challenges, including underinvestment in infrastructure, particularly in transportation, and the shortage of skilled labor in the oil industry.

The perception that Venezuelan oil will emerge as a major threat to Canadian oil production overlooks the substantial barriers that prevent Venezuela from increasing production in the near term. The major claim is that, while Venezuelan oil is typically priced slightly higher, investment in Venezuelan infrastructure, especially in transportation, will significantly lower its price. However, the Venezuelan oil industry has experienced decades of underinvestment, leaving much of its infrastructure, such as transportation networks and pipelines, unrepaired. While current policy may open up investment opportunities to repair aging infrastructure, it requires long-term effort and ongoing maintenance and operational investments.

In recent years, Canada has been the largest oil supplier to the United States, accounting for over 60% of U.S. Gulf Coast oil imports. The U.S.’s intervention in Venezuela could improve the reliability of Venezuelan supply, increase oil production through investments in infrastructure and pipelines, and lower export costs for Venezuelan heavy crude. However, it is unlikely to significantly threaten Canada’s dominant role as an oil exporter to the United States. Venezuela’s impact on Canadian oil producers is exaggerated because, although both countries produce heavy oil, there is a significant difference in their conversion rates to light and usable crude oil.

The distinction between oil properties is better understood through industrial metrics of crude oil, such as API gravity and sulfur content, which directly affect transportation and refining, helping to explain why Venezuelan oil cannot fully replace Canadian crude. The Orinoco Belt, which contains the majority of Venezuela’s reserves, is dominated by crude oil with an API gravity of around 10 and a sour content of around 5%. Therefore, the majority of Venezuela’s oil is heavy crude, with a high density (Merey 16, which accounts for most of Venezuela’s oil exports, has an API gravity of 16) and a high viscosity, with a texture similar to cold honey. Compared to lower-viscosity, lower-density oil, which can be processed through straightforward distillation, high-density, high-viscosity oil requires a more complex treatment. Before it can be transported through the pipelines, it must be diluted by mixing with light oil and further upgraded using high-pressure, high-temperature coking machines to break down large hydrocarbon molecules into smaller fractions. In addition to its high density and viscosity, Venezuela lacks a stable supply of diluent, such as naphtha, which is necessary to make heavy oil transportable, further constraining the transportation of Venezuelan oil. At the same time, due to poor maintenance of extraction facilities, Venezuelan oil is at greater risk of contamination, reducing its competitiveness relative to established Canadian exports.

Canadian oil, especially that from Alberta, is also often considered heavy oil. For example, the most common oil produced in Canada, Athabasca Bitumen, has an API gravity below 10, meaning it will sink in water and barely flow at room temperature. However, Canadian oil has an 80-90% conversion rate to light, sweet synthetic crude oil, making it more favorable to refineries in the countries to which it is exported. Additionally, refineries on the United States Gulf Coast that can convert residue often prefer diluted bitumen over upgraded heavy oil because they require heavier crude inputs to balance the growing supply of extra-light domestic shale oil.

Moreover, although some argue that despite all the constraints, Venezuela’s oil productivity could be strengthened by U.S. investment, and will eventually circle back into benefits for the U.S. in the long-term, the cost of repair exceeds $100 billion over the next 15 years. Additionally, restoration not only requires investor capital but also a large, experienced workforce. The outflow of talent in the Venezuelan oil sector over the past 10 years, due to the aftermath of PDVSA’s worker strike, creates additional barriers to restoration.

In conclusion, U.S. involvement in Venezuela has a limited impact on Canadian oil production markets, especially over the next 5-10 years, given the need to significantly reestablish investments and train a new skilled workforce. However, in the long-term, it’s also unlikely for Venezuela to replace Canadian oil because of differences in oil properties.

Iris Li is a student at Columbia University (CC ’28) studying Applied Mathematics and Financial Economics. She is interested in investment banking and private equity, especially the technology and healthcare divisions. In her free time, she likes practicing golf at the Chelsea Piers, seeing operas, and trying new restaurants in NYC.

Nations can be rich in resources and poor in outcomes. Nicaragua has long proven this point. Its agricultural exports sustain global supply chains while its own economy remains stagnant, trapped in colonial-era exports that are vulnerable to price shifts and drought. However, Nicaragua’s novel hemp industry possesses the potential to reenergize the outdated textile manufacturing zones into a sustainable hub for North American markets. By enacting legislation mirroring Costa Rica’s regulatory reforms to reframe industrial hemp as an agricultural commodity rather than a controlled substance, Nicaragua can transform its aging textile manufacturing zones into a sustainable export hub for North American markets, catalyzing its transition from a developing country to a developed one.

Before hemp can reshape Nicaragua’s economy, it must first take root in the existing infrastructure. For decades, Nicaragua’s Free Trade Zones (FTZs) have been fundamental to the success of the country’s export-oriented manufacturing. These areas have primarily focused on assembling apparel. Research regarding investment opportunities in the textile industry indicates that these FTZs are equipped with the necessary logistical connectivity and labor pool to handle high-volume production. By utilizing existing FTZ infrastructure, Nicaragua can transition from assembling imported synthetic fabrics to processing raw, locally grown hemp into textiles. Specialized machinery could be integrated into existing FTZ facilities to facilitate the process of ‘decortication,’ which separates the tough outer fiber of the hemp stalk from its inner core. Additionally, Nicaragua’s proximity to major U.S. shipping ports further positions it as a practical supplier for North American brands seeking a low-carbon, high-durability cotton alternative.

In order for Nicaragua to achieve its desired shift in industry, the nation must alleviate the legislative bottleneck that stunts its growth. Since the early 1970s, the “War on Drugs” has impacted Central American policy, casting a shadow over any plant in the cannabis family. Although industrial hemp contains less than 0.3% THC (a psychoactive compound responsible for feelings of euphoria), it is often regulated with the same severity as marijuana. Local reporting has highlighted the various cultural and legal hurdles surrounding the industrial use of the plant, emphasizing that they continue to stall potentially meaningful economic progress. Nicaragua must implement new legislation that focuses on insulating the general public from these unregulated substances while simultaneously transforming hemp into a transparent opportunity for economic growth. To start, Nicaragua must define industrial hemp based strictly on its THC content and remove it from the criminal code. By focusing on eliminating the regulatory hurdles ingrained in the law, Nicaragua can begin highlighting the positive implementation of hemp as an industrial product. Data regarding the Nicaraguan hemp seed market’s potential growth indicates that there is a demand for hemp-based textiles, but the legal framework must be restructured in order to accommodate the market’s potential.

The relationship between export diversification and economic development is well-established. The remaining challenge is Nicaragua’s ability to harness it. The Global Hemp Market Outlook indicates a massive expansion across Latin America, which is in part motivated by an increasing commitment to sustainability. Consumers in North America are increasingly demanding that companies and countries be transparent about their manufacturing frameworks and sustainability efforts. Hemp-fiber textiles offer a sensible economic strategy for developing nations such as Nicaragua, which are looking to decrease their dependence on volatile agricultural products. By providing a clear and stable regulatory environment, Costa Rica was able to reduce its dependence on traditional agricultural exports and attract foreign investment. Through Law No. 10113, implemented on March 2nd, 2022, Costa Rica has solidified its pursuit of a more sustainable agricultural future. If Nicaragua can follow suit, it will be on an upward economic trajectory and transition from a developing to a developed country.

Beyond the economic benefits that Nicaragua can reap from this transition, the pivot to hemp addresses a pressing environmental issue: global warming. Since traditional Nicaraguan exports such as beef are one of the leading causes of deforestation and CO₂ emissions, replacing them with hemp, a regenerative and less-water dependent product, will be beneficial for the environment. Furthermore, hemp’s deep root systems decrease the impacts of soil erosion and enable it to restore land impacted by cattle ranching.

Ultimately, shifting their economy to focus on hemp-based textiles is more than a test of the Nicaraguan government’s democratic responsiveness and governmental foresight, itt is about redefining Nicaragua’s narrative as an efficient industrial textiles powerhouse. By embracing this sustainable fiber, Nicaragua can elevate itself from a historical site of occupation and commodity exploitation to a leader in the modern green economy. The Nicaraguan economy is primed for growth; it just needs the legislative room to realize its potential.

Maverick Au is a freshman at Columbia College and plans to major in Political Science with a concentration in Business Management. In his free time, he enjoys playing and watching tennis, exploring the city with friends, and spending time with his family.

Amidst the 2022 invasion of Ukraine, thousands of Russian tech workers fled to Armenia, rapidly transforming the country into a regional technology hub. This migration quickly expanded Armenia’s IT sector, propelled GDP growth, and transformed the country into a temporary epicenter for displaced technology firms. While many Armenian policymakers celebrate this economic boom as a success story, the foundations and stability of this growth remain uncertain. Unless the Armenian government converts this surge into sustainable growth by strengthening the startup ecosystem, attracting foreign investment, and creating long-term incentives for skilled workers to remain, the country risks economic instability in the face of shifting migration patterns.

The influx of Russian tech firms and people to Armenia can be traced directly to the geopolitical disruptions triggered by the 2022 invasion. Facing political uncertainty and mobilized by fear, approximately 110,000 Russian professionals, namely those in information security, fled the country. Armenia emerged as a leading destination due to its 180 day visa-free policy for Russians, widespread use of the Russian language, and relatively low cost of living. As a result, cities such as Yerevan, the capital, experienced a surge of software engineers, entrepreneurs, and startup founders.

This migration had an immediate and measurable economic impact. By April 2022, the country had nearly 50% more IT workers than during the same period the previous year, reaching over 50,000 engineers by 2026. As of 2025, Armenia is ranked 54th globally for its startup ecosystem, with the last year alone measuring a 22.8% annual ecosystem growth rate. Moreover, the arrival of Russian tech professionals temporarily boosted Armenia’s economy, strengthening its technology sector and positioning the country as an emerging innovation hub. Accordingly, there was a huge jump in GDP with a 6.8% increase from the second quarter of 2021 to the second quarter of 2022.

Despite the tech boom, Armenia’s rapid transformation risks destabilizing the economy due to rising living costs and labor imbalances. One of the most visible effects has been the sharp increase in housing costs, with residential properties recording a rise of 18.6% over the course of 2025. As early as 2022, many Armenians and Russians reported being forced to move or pay significantly more for the same living space. This economic pressure has contributed to growing tensions between local residents and incoming migrants. Moreover, while the tech sector has grown quickly, many of the highest-paying jobs are still being filled by foreign workers, and there is a shortage of qualified professionals.

The long-term sustainability of Armenia’s tech boom remains uncertain, particularly because it relies on foreign workers and companies that may not remain permanently as opportunities elsewhere arise. As migration patterns shift, some firms and professionals have started relocating to alternative destinations, raising concerns about the durability of this growth. To address this challenge, the Armenian government must shift its focus from short-term attraction to long-term retention, using targeted tax policies and regulatory frameworks to anchor businesses within the country.

Government policy, especially in taxation and regulation, will be the most critical factor in determining whether Armenia’s tech sector stabilizes or declines. Armenia has already implemented several tax incentives. Newly established IT firms have been able to benefit from a profit tax exemption and a reduced income tax rate of 10%, significantly lowering operating costs and encouraging rapid business formation. These policies have proven effective, as over 1,200 Armenian companies applied in 2022 alone, more than the previous six years combined. However, even with these incentives successfully attracting firms, they do not necessarily ensure that companies will remain in Armenia in the long-term. Many of these companies are foreign-owned or operate as branch offices, meaning they can relocate quickly if favorable conditions arise elsewhere.

To improve retention, Armenia should offer tax benefits that reward lasting commitment rather than temporary stay. For example, tax benefits could be extended or increased to companies that maintain operations in Armenia for multiple years, invest in local hiring, or establish permanent headquarters. Additionally, Armenia’s use of Free Economic Zones, which offer exemptions from VAT, profit, and property taxes, could be expanded strategically to encourage companies to build deeper roots in the local economy. For example, Armenia could create a tiered incentive system. A company that agrees to stay for at least 5-10 years, hires a majority of local engineers, and partners with Armenian universities could receive additional benefits or extended tax breaks. This not only ensures the long-term economic stability but also strengthens domestic talent pipelines and increases opportunities for locals.

Ultimately, Armenia’s tech boom highlights the benefits and risks of rapid, migration-driven growth. By refining tax incentives and strengthening regulatory frameworks, the Armenian government can stabilize the tech sector and ensure that its recent growth evolves into a sustainable economic foundation.

Helen Liu (BC ’29) is a writer for the Columbia Emerging Markets Review studying Economics. She is interested in how historical developments and technological change shape innovation, economic opportunity, and institutional development in emerging markets.

“What we owe to each other” is a question oft debated. Even in the world of firms and economies, it rings true, especially in the context of developed versus developing countries. When trying to implement sustainability initiatives, who does it fall on?

This debate over sustainability rests on the premise that developing economies tend to produce more pollution, and developed ones less. However—as these emerging actors argue—they are playing catch-up with established states, who didn’t need to comply with such regulations when they were developing. Moreover, the supply chain positioning has these countries contributing to manufacturing of pollutant-heavy products, but not being treated as a final destination, thus reaping unequal consequences. As a result, they claim it’s inequitable and unfair to not be offered the same opportunities to grow.

Cambodia is one such nation debating this issue, and has recently started focusing on implementing some of these Environmental, Social, and Governance (ESG) frameworks. A nation rich in natural resources and biodiversity, this is a particularly important avenue to consider while in the process of emergence. Despite its initiative, however, it is still necessary for developed countries—particularly through institutions such as the United Nations and the European Union—to take a genuine and long-lasting interest in providing assistance to Cambodia in its green development by offering not just monetary support, but also policy structuring advice.

A Devastating Legacy

Developing countries often have a multitude of budgetary issues to consider; not solely those of economic growth. Fighting homelessness, improving accessibility, and providing transportation are just a few of the steps such nations have to take. This is especially exacerbated in Cambodia from the aftermath of the Khmer Rouge regime, causing a genocide that destroyed the lives of citizens, as well as the country and its economy after high mortality rates rattled the education system. The regime had even abolished money overall; the country’s currency, the Cambodian Riel, was only introduced in 1980.

Meanwhile, developed countries have a historical track record of providing aid to foreign countries. Perhaps it’s toppling an allegedly totalitarian regime or subsidizing a seaport’s construction; intervention can be observed across the globe. However, this did not occur during the genocide, with nations reluctant to interfere after observing the region post-Vietnam.

Relations nowadays have much improved, with the U.S. subsidizing the country’s growth towards meeting sustainable development goals and furthering its health sector. The European Union also maintains a long-standing partnership with the country, with €285 million dedicated to its growth from 2021-2027.

We can already observe that Cambodia is a willing participant in remodeling towards ESG principles, as such investment “benefits our long-term competitiveness and economic resilience,” said deputy prime minister Sok Chenda Sophea. The nation wants to embed ESG frameworks in its governance, enabling actions to actually receive follow-through. However, such embedding requires a complicated legal and regulatory framework. For a nation attempting to rebuild as a whole, this will be a difficult task.

The Importance of ESG

An important obstacle seen across international politics is the collective action problem and the issue of countries free-riding. This occurs when something beneficial for one country is also beneficial for another, and thus neither nation wants to take the first step. With climate change, this issue is especially prevalent. But tackling climate change is costly, and economically restrictive in the short-run; most politicians who need to consider short-term performance do not endorse such heavy-handed reform, no matter how beneficial in the long-term.

In Cambodia, climate change is particularly devastating as it is an agriculture-heavy economy with many living in significant poverty. These typhoons, floods, and droughts create food and export inconsistency; the country ranked 12th in most vulnerable to climate change in 2024. Despite lower per-capita emissions relative to advanced economies, the Southeast Asian region (SEA) is unfairly reaping those consequences. The caveat: the region is increasing such emissions at a faster rate than elsewhere in their strive towards economic development.

On a more personal level, climate change is detrimental as health costs rise, species go extinct, and weather events become more extreme. These once-in-a-thousand-years events seem to be happening every other year.

A Path Forward

Effective policy-making is a key cornerstone in attacking climate change: even if money is earmarked, not having a detailed plan explaining where such money is directed means it will fail. This includes meaningfully considering different scenarios—known as scenario analysis—as the dynamic nature of the climate leads to uncertainty and a constantly fluctuating policy atmosphere. Developed countries tend to be more adept at such scenario analysis since they possess superior data, financial resources, and technical expertise.

As a result, while Cambodia has already developed a detailed climate mandate, it can be difficult to put words into action. Through assistance from other global institutions, who already have some effective policy measures in place, Cambodia may be able to attain its goals.

Let’s take a look at effective policy measures in a country that, like Cambodia, is encouraging the growth of manufacturing through low-cost labor and technology transfer. Domestically, India has seen success from passing a Production-Linked Incentive scheme, which offers financial incentives to companies willing to manufacture goods in the country. This measure has been fairly successful, which can be attributed to its highly robust nature. Rather than carving it out as a broad subsidy, there are sectoral, time, and threshold restrictions. If Cambodia were to model its green mandate in this complex manner, it would benefit. But such complexity can be difficult to implement—Cambodia is a smaller nation with a much lower GDP—and for an issue as urgent as climate change, assistance is required.

Many other SEA economies receive climate finance assistance from developed countries. However, these programs often take the form of loans over grants, which can reduce the growth rate of these developing economies. As a result, current systems in place require a makeover, with more than just funding in mind.

A more rigorous expansion and evaluation of the UN Development Programme, which “[helps] people build better lives while protecting the planet,” would be effective. After all, increased collaboration with local governance has shown promise in revitalizing the country. Stricter collaboration is thus required, as only 35% of nations were on track to meet the Sustainable Development Goals outlined by the United Nations. With increased accountability and a reckoning on the program’s true intentions, Cambodia can continue its positive track record.

The largest obstacle, per usual, is financial constraints. Thus, while improvement of such programs would be desired, a more realistic plan would be a combination of stricter adherence and effective policy change enabling domestic drive towards these goals. The European Union’s (EU) Green Deal shows how this combination has succeeded from a tandem of comprehensive policy and explicit funding goals. To see such a plan moved to Cambodia, and perhaps later to the wider SEA region would benefit more than just those regions.

Feasibility in Question

In today’s political environment, such a lofty goal may feel difficult to imagine. Globally, nations have become more protectionist. Both China and Canada, two major U.S. trading partners, announced retaliatory tariffs once Trump’s first round was implemented. Unity grows more unlikely, too, as Trump pulls out of international pacts, including the Paris Agreement, which focuses on addressing climate change.

The applications for Cambodia can be extended for other nations once we see its implications. But the benefits of its success are distinct for Cambodia too: “our environment-focused campaigns are about more than cleanliness—they’re part of our national investment strategy,” says the head of the Ministry of the Environment. While the Western world sat back and watched the Khmer Rouge massacre its own citizens while isolating globally, they should take an active stake as the next battle lies ahead. Cambodia has already shown its willingness to take that next step forward and integrate with the global economy—developed states should join in.

This lack of unity is what makes installing a more unified system all the more necessary. When the League of Nations was first proposed, I’m sure many thought of its possibility of success as ludicrous. Once reformed into the United Nations, we’ve all reaped its benefits. The same can be true of one of its sub-projects, as soon as proper attention is devoted towards bettering the Development Programme; outside of the UN, through inter-state partnership, these developing countries, too, will no longer bear the cost of climate change alone.

Abbey Zhao (Columbia College ‘28) is a writer for the Columbia Emerging Markets Review studying economics and statistics with a minor in political science. She is interested in how policy interplays with innovation, and how that drives forth domestic and international economic growth.

First envisioned in 2012 as the “EuroAsia Interconnector” and officially marking its beginning as a project in December 2023, the Great Sea interconnector is a subsea electric cable connecting Greece, Cyprus, and Israel. With a price tag of €2 billion, the project aims to integrate Cyprus into the European electricity grid while bolstering the energy security of EU member states Greece and Cyprus. The goal was for it to be completed by 2023; yet, as we head on to the second quarter of 2026, why hasn’t it come to fruition?

The project faces multiple challenges: its construction is technically demanding,its costs are steep, and its financial viability remains in question. That said, I believe that these concerns are less the root cause than and rather a diplomatic cover. Cyprus is using prolonged financial scrutiny as a stalling tactic to avoid making any definitive energy commitments that would expose itself to geopolitical risk, particularly from Turkey.

For context, the main sources of electricity production in Cyprus are heavy fuel oil and oil. The GSI’s aim is to strengthen and accelerate the development of the EU’s energy infrastructure. Most importantly, it also serves to connect Cyprus to continental Europe via Greece. Cyprus remains the last EU member state not connected to the European electricity grid. The complex relationship between Cyprus and Turkey dates back to 1974 where Turkey invaded Cyprus following a Greek-based military coup, resulting in the de facto partition of the island into two. Since then, Turkey does not recognize the Republic of Cyprus, the internationally recognized government. Instead, Ankara, the capital of Turkey, recognizes only the Turkish Republic of Northern Cyprus (TRNC), a breakaway state recognized only by Turkey. Additionally, the Blue Homeland Doctrine, the idea that Turkey should reclaim mercantile and maritime power in the Mediterranean, has been the driving force behind Turkey’s maritime claims. Turkey has frequently used its navy to harass drilling ships and research vessels working for the Republic of Cyprus.

Turkey reiterated its opposition to the Great Sea Interconnector, warning that it would obstruct the laying of an electricity cable linking the power grids of Greece and Cyprus. Turkish officials called the project provocative because it disregards the rights of Turkey and the breakaway Turkish Cypriots in TRNC. Despite such claims made in 2025, Greece officials pledged that work to complete the GSI would continue. That said, in December 2025, Nexans, the manufacturer of the GSI cable, cancelled tenders for work related to the GSI, officially marking a pause for the project. With financial claims being mainly on display, I believe that Cyprus’ hesitation and pause for the project stems from fear of Turkish intervention and project blockage.

Financial viability claims made by Cyprus are insubstantial. The Great Sea Interconnector has been a Project of Common Interest (PCI) for years and has been granted €657 million. The European Commission wouldn’t have granted such an amount of money had exhaustive due diligence not been conducted. The project was frozen for Greek and Cypriot governments to reassess its economic and technical parameters and to search for potential investors. At this point, 3 years after the project was supposed to be completed, the project must have already undergone exhaustive investigation by the European Commission, the European Investment Bank and the project’s current promoter, the Independent Transmission Power Operator (IPTO). For the project to receive such a grant and be a PCI, it must have been contingent on passing rigorous due diligence frameworks that verified its technical feasibility and economic necessity. The EU’s core interest in the project is energy market integration. The cable would connect the Eastern Mediterranean region into the Europe Energy Union, promoting a more reliable and unified energy market. For the Cypriot government to insist on additional, updated cost-benefit analyses at this late stage suggests a strategic procedural looping rather than a genuine quest for data. The effect is to shift the public discourse from geopolitics to accountancy. The financial studies being conducted do not actually produce new insights, but they rather produce time, thus, allowing Cyprus to remain in energy isolation while avoiding the immediate risk Ankara’s “Blue Homeland” doctrine.

While the Cypriot government claims that its primary concern is protecting the national economy, its demand for a comprehensive “geopolitical risk” guarantee functions as an unattainable standard designed to stall progress. Nicosia has pressured the European Commission and ADMIE to provide financial assurances that would protect the Cypriots in case Turkish military or diplomatic intervention halt the project’s construction. In reality, however, this is impossible: 100% risk elimination cannot be guaranteed by anyone and no regulator or insurer can offer immunity to a country against a military intervention. The project cannot move forward until the threat from Ankara is neutralized, yet the threat remains active and reveals Nicosia’s unreadiness for a definitive decision with consequences it is not ready to face.

The Ministry of Finance’s cost concerns are not without foundation. At an estimated €3 billion, the GSI would represent roughly 8% of Cyprus’s GDP and nearly a quarter of its annual government expenditure, a scale of commitment that would give pause to any small economy’s finance ministry, regardless of geopolitical considerations. The cost escalation from €1.9 billion to over €3 billion is itself significant: the increment alone exceeds two years’ worth of Cyprus’s recent fiscal surpluses. That said, these figures do not operate in a vacuum. The EU grant of €657 million, the IPTO’s estimate of €8 billion in social benefits, and the European Commission’s own due diligence all suggest the investment’s economic case remains sound. The financial concerns, while numerically real, do not easily explain why reassessment has persisted for years beyond the project’s original 2023 completion date. The current timeline is more consistent with political hesitation than genuine fiscal recalibration.

The main reason for the delay of the project being geopolitical fear from Turkey can be shown following recent updates made on the project. On April 15, 2026, the European TSO network rejected Turkish Cypriots’ plans for cable to Turkey. This announcement was made after Turkish Cypriot energy minister Olgun Amcaoglu had announced last summer that the feasibility study for a 95-kilometre two-way interconnector cable connecting Cyprus and Turkey had been completed, and that applications had been filed to TSO. The energy minister had claimed that the cable would cost less than a quarter of the forecast cost of the Great Sea Interconnector. They also claimed its operating costs would also be far lower. The European TSO said that the GSI project is the only interconnector project in its plans. Following that rejection, on April 21, 2026, Athens and Nicosia sent a joint letter to the European Investment Bank (EIB) requesting financing for the Greece-Cyprus Great Sea Interconnector (GSI), which signaled a shift away from months of inertia and points to renewed political commitment to the project. Had the project’s financial viability been the primary hurdle, this push for EIB funding could have occurred months earlier. Instead, Nicosia’s pivot from hesitation to diplomatic urgency reveals that the delay was a calculated stalling tactic, designed to persist until the geopolitical landscape was scrubbed of any viable Turkish alternative. With Turkey’s request being officially delegitimized by Brussels, the financial arguments have vanished, exposing the reality that the GSI’s biggest obstacle was never the price tag, but the shadow of Ankara.

The joint letter to the EIB was a necessary first step, but it must be followed by a concrete, accelerated action plan. Athens and Nicosia must now move to finalize the regulatory framework and accept the inherent risks of the project as a cost of national sovereignty. Further delay will only increase the financial attrition of stakeholders and signal weakness to regional rivals. The path to energy independence is now clear and unobstructed by competing proposals, thus, Nicosia must find the political courage to handle it.

Sofia Antoniadou (SEAS ’29) is a writer for the Columbia Emerging Markets Review studying Biomedical Engineering. She is interested in exploring the intersection between health and technology.

Palm oil is ubiquitously used in consumer products from pizza, deodorant, to lipstick. But this traditional agricultural commodity also serves as the world’s “strategic bet to reduce dependence on fossil fuels”. With uncertainty on global crude oil supply escalating day by day due to disrupted shipping flows in the Strait of Hormuz, demand for palm oil has been rising as a primary feedstock to biodiesel, an alternative energy source.

Malaysia boasts 33.7% of market share in global exports of palm oil. It’s a key player in the emerging markets where its government has positioned palm oil to be the “backbone” of economic growth with active historical development of government institutions like the Malaysian Palm Oil Board and Federal Land Development Authority. Palm oil continues to be a strategic government-sponsored transition to alternative energy assets, contributing around 9.64 Billion USD to the Malaysian economy.

Malaysia’s leverage of palm oil into an energy-linked asset will strengthen its positioning as a key emerging markets player, given continued tension in the Middle East. However, Malaysia’s domestic economy will face greater potential destabilization from tightened correlation to crude oil price and fiscal pressure from constrained policy flexibility when imposing biofuel mandates.

In early March 2026, the Bursa Malaysia Derivatives Index’s May delivery benchmark palm oil contract “rose by 3.7%”, “to close at MR 4,365/metric ton ($1,105.90/mt)”. The relationship between the increasing volatility of crude oil prices and palm oil is shown through significant changes in the palm oil-gas oil (PO-GO) spread as well. The PO-GO spread between Bursa Malaysia palm oil and ICE Singapore gas oil has significantly narrowed from 328.45$ in 2025 to 177.96$/mt as recorded on March 6th, 2026. What does a narrowing PO-GO spread entail? Gas oil prices trade at a similar price to crude palm oil (CPO), indicating to investors that crude oil and palm oil are equally cost-effective. The opportunity cost to substitute from crude oil to palm oil decreases as prices converge by a tighter PO-GO spread. Thus, palm oil becomes a more viable and competitive resource to traditional crude oil.

The Star notes that the Hong Leong Investment Bank (HLIB) research arm said “intensifying Middle East tensions lifted CPO prices to $4,199 per tonne, supporting near-term upstream earnings”. This narrowing PO-GO spread signifies potentially heightened foreign conviction to invest in palm oil as a direct substitute for crude oil. Yet this implies that depending on unpredictable timing and magnitude of conflicts in Iran, palm oil will lose its stability as a traditionally stable source of agricultural demand and instead depend on the pricing of volatile crude oil.

For the domestic economy, relying on palm oil, an increasingly crude-oil linked and volatile commodity, implies the gravity to diversify the palm oil value chain beyond biodiesel stock and secure more steady-based consumption foreign export deals.

The Malaysian Palm Oil Board notes that Malaysia has been attempting to introduce “value-added (downstream) palm-based products” like oleochemicals and consumer goods to further diversify the industry and “cement Malaysia’s status as a comprehensive palm oil powerhouse”. Minister of Plantation and Commodities Datuk Seri Noraini Ahmed links major palm oil importers like China and India to be forced to move its dependence away from Iran due to growing energy prices. She states that Malaysia is projected to take a larger role in exporting their downstream palm oil products as China and India show “tendency to increase stockpile as a precautionary measure against potential logistical disruptions in the Strait of Hormuz.”

However, contrary to what Datuk Seri Noraini Ahmed claims, China is moving away from consuming Malaysian palm oil, with exports to China falling 35.7% in 2025. According to Reuters, China is having greater signs of importing canola or soybean oil instead of palm oil which is a more expensive commodity. Demand for palm oil is elastic, especially for China, who has established a recent trade deal with Canada and increased transactions to buy Australian Canola. But Malaysia’s exports with India remain resilient, with 20% of India’s palm oil being imported from Malaysia. As India’s Impact and Policy Research Institute notes, India has “flexible tariff-rate quotas” and moved towards establishing a “broader technology relationship emphasizing long-term sustainability” with Malaysia. Malaysia must consider two propositions: 1) undergo efforts to tighten an already stable relationship with India to urge for more consistent public policy on palm oil for the Malaysian government investment in “longer term contracts” and more “effectuated trade facilitation agreements” and 2) promote more diversified palm oil value chain products such as oleochemicals to sustainable trade partners like India.

Domestic policies to spur higher concentration of biofuel blend mandates may also contribute to even more volatility. The Malaysian government currently incurs a B10 mandate, requiring companies to purchase diesel that is 10% biodiesel and 90% regular petroleum diesel. This forces Malaysian companies to domestically purchase palm oil, further constraining global supply and keeping prices at a competitive level to crude oil. Maybank Investment Bank states that “accelerating B50 plan”, mandating the blend of 50% biodiesel and 50% crude oil, will “lift CPO demand and price” as a greater percentage of palm oil is to be purchased domestically. Although establishing greater ties with India for palm oil agreements may contribute to more secure revenue streams, it still is contingent upon India’s policies. Same for domestic government blend-mandate policies as well. It is only when CPO is at a competitive price to traditional crude oil that the increased blend mandates will be effective. If fossil fuels become cheaper due to geopolitical instability, a higher blend-mandate will trigger greater fiscal pressure as the Malaysian government will have to offer greater subsidies for companies who will suffer from being unable to switch to cheaper alternative oils.

But does Malaysia have the infrastructure to be able to resolve such blend-mandate induced fiscal pressure? As Malaysia’s Plantation and Commodities Minister Johari Abdul Ghani tells parliament, “Our engagement with industry stakeholders show that they want the government to finance this but we are not ready to fund it.” Malaysia’s government seems to be lacking mechanisms to fund even a B20 mandate successfully, so projected macroeconomic volatility from palm oil’s transition to become an energy-linked asset may be greater than we ever expect.

Palm oil has been and will continue to be one of Malaysia’s greatest assets for economic development. Strategic government intervention such as implementing palm oil consumption agreements and promoting greater diversified downstream palm oil products with India, in addition to increasing blend-mandates should be implemented cautiously. No matter what policy is implemented, Malaysia must enforce policies that they are equipped to tackle with currently limited infrastructure. Geopolitical conflicts are being more and more tied into crude palm oil price whether we like it or not. Thus, US investors should actively track Malaysia’s moves to establish trade agreements with India, diversification of downstream palm oil products, and volatility from changing blend-mandates to make sound judgments on Malaysian investments for a strong emerging markets portfolio.

Ariane Lee (CC ‘29) is a writer at Columbia Emerging Markets Review studying Financial Economics and History. She is passionate about researching promising energy transitions in emerging markets and economic sustainability in Indigenous communities. Outside of CEMR, she loves playing the violin, investing, and learning about new cultures.

Once hailed as an “economic tiger,” Thailand now finds itself burdened with a far less flattering label: the “sick man of Asia.” The nation now finds itself grappling with severe economic paralysis across its three primary pillars: consumption, manufacturing, and tourism. However, there exists a proposal that could alter this trajectory and reestablish Thailand as a regional economic powerhouse: the Kra Canal. When the Suez Canal was built, it immensely transformed Europe’s trade routes, marking Egypt as one of the world’s most important maritime chokepoints. The Kra Canal holds potential to do the same for Thailand. The canal would significantly rewire Asia’s trade routes as it would allow ships to bypass the Malacca Strait, marking Thailand as a central maritime hub. The traffic that this canal would attract would unlock substantial economic gains for Thailand through transit revenues, the birth of adjacent industries, increased foreign investment, and a strengthened position at the center of global trade.

This project would deepen Thailand’s economic and strategic ties with China, while also risking heightened tensions with the United States, as it would advance Beijing’s interests by providing an alternative to the Strait of Malacca, thereby enhancing the security and efficiency of its trade and energy routes. Although the Kra Canal will strain Thailand’s historical geopolitical neutrality in terms of US-China relations, the project’s potential to attract sustained Chinese capital makes siding with Beijing the most economically advantageous and politically strategic path for Thailand’s long-term ascent as a regional power.

Background Information on the Canal

The Kra Canal project has been a topic of discussion for centuries as the promise of an alternative route to the Malacca Strait, the busiest waterway in the world, would entirely rewire Asia’s trade routes. While the project has never come to fruition due to geopolitical risks and cost factors, its potential impact keeps it in strategic conversations. The project proposes the construction of a channel along Southern Thailand’s Isthmus of Kra to connect the Gulf of Thailand to the Andaman Sea. This would allow ships to bypass the Strait of Malacca, cutting voyages by roughly 1,200 nautical miles, reducing fuel costs, and easing congestion. Currently, over 70% of China’s petroleum and liquified natural gas imports are transported through the Malacca Strait, making it the most important sealine for the Chinese economy. Furthermore, the strait is a strategic vulnerability for the nation, as it is controlled by a US-dominated alliance: Singapore and Malaysia. Therefore, in recent years, China has become increasingly interested in reviving the Kra Canal project as part of its Maritime Silk Road initiative — a component of the Belt and Road Initiative (BRI) — to enhance its energy security. China has voiced its willingness to supply financial and technological support to Thailand in hopes that the canal reaches fruition.

Benefit for Thailand

As a country that has been trapped at a meagre 2% growth rate for the past five years, Thailand is in need of a revitalization project unless it wants to fall behind its Southeast Asian competitors. The Kra Canal would generate a steady flow of foreign currency into Thailand through transit fees and related economic activities. It would also create opportunities for fuel services, including the sale of Thai oil to passing vessels. By allowing all Thai oil tankers – both inbound and outbound – to bypass the Strait of Malacca, the canal would significantly reduce transportation costs, which in turn would lower domestic production costs and ultimately decrease prices within the country. From a national security perspective, the canal would enhance the Royal Thai Navy’s ability to discreetly move personnel and vessels between the Andaman Sea and the Gulf of Thailand, minimizing suspicion from neighboring states. This increased naval mobility would strengthen the nation’s military exercises, patrol operations, and surveillance efforts, bolstering Thailand’s ability to defend its territorial waters.

Cost and Reward Factor

One of the main criticisms of the Kra Canal is that its costs may outweigh its potential benefits, given not only the high construction costs but also the geopolitical risks of straining relations with the United States and regional partners. Yet, as of 2025, Thailand has opted for a $28 billion land bridge project–an overland transport corridor designed to facilitate cargo movement between the Gulf of Thailand and the Andaman Sea–instead of the canal that would have cost approximately $30 billion. This alternative aims to achieve the same economic benefits as the canal without the geopolitical risks. This raises a critical question: if Thailand is already willing to invest nearly $30 billion, why not allocate comparable resources toward a canal that promises far greater long-term returns?

A canal would generate substantially more long-term return for Thailand than a bridge as it would capture value from global shipping traffic, while a bridge would mainly collect tolls from land traffic, which is far smaller in scale. In a canal, ships pay transit fees ranging from hundreds of thousands to over a million dollars depending on cargo size. On the other hand, a bridge only collects tolls from trucks and cars, which are much cheaper per crossing. Furthermore, a canal would produce secondary industries such as oil storage terminals, ship repair, and restaurants or leisure activities for workers around the area. In addition, cities could emerge around the canal similar to Port Said at the Suez Canal or Colón at the Panama Canal. A bridge would generate far more limited spillover economic activity in comparison as it would have a more limited impact on trade routes and draw less traffic.

Furthermore, logistically, a canal would be far more efficient. A land bridge would require ships to dock, unload cargo, transport it across land, and reload. The process is an expensive, labor-intensive process that could take days. On the other hand, a canal would allow ships to pass directly between the Andaman Sea and the Gulf of Thailand without interruption, making the process far more efficient. From a logistics standpoint, a canal is far more attractive to global shipping companies who prioritize continuity, minimal handling, and reduced risk.

However, a significant danger of the canal would be its potential to exacerbate southern Thailand’s separatist movement: a long-running, violent insurgency that has persisted since 2004. The movement has been primarily driven by segments of the local Malay-Muslim population who seek greater autonomy or full independence from the Thai state due to grievances over cultural marginalisation, political representation, and economic inequality. The conflict has involved guerrilla attacks, bombings, and targeted killings, and has resulted in over 7,000 deaths over the past two decades. By physically dividing mainland Thailand from its southern provinces, the Kra Canal would heighten perceptions of separation and marginalisation. As a consequence, this could strengthen the insurgency’s narrative of exclusion, making territorial integration more difficult and reinforcing separatist sentiment.

While concerns about internal fragmentation are often raised, such risks must be weighed against the broader opportunity for Thailand to assert itself as a regional power and reshape its strategic position within global maritime trade networks. Instead of being too afraid to reckon with their neighbors, it is about time Thailand steps up as a leading force in Southeast Asia. With the canal, Thailand could have strategic control of trade routes and gain geopolitical leverage similar to countries controlling major maritime choke points: Egypt with the Suez Canal and Panama with the Panama Canal.

Geopolitical Consequences of the Kra Canal

For China, the Kra Canal would address its “Malacca dilemma“ : the vulnerability of its maritime trade routes to potential blockades by rival naval forces, particularly the United States. A hypothetical China-controlled canal would enhance Beijing’s control over its supply chain and maritime security, while boosting its geopolitical influence in the region. Notably, the canal would enable China to establish a stronger presence in the Indian Ocean, allowing the PLA Navy greater operational flexibility and enhancing its ability to protect critical sea lanes.

Given these benefits to China, US hostility would stem from opposition to Thailand directly accelerating the future of their trade rival. However, it is important to note that the United States has never issued any formal policy position specifically condemning the Kra Canal project, nor has it taken an active role in shaping its development. Instead, American engagement has largely been limited to strategic analysis within policy and academic circles as the project has remained largely hypothetical. This limited direct engagement, however, should not be interpreted as indifference. US foreign policy in the Indo-Pacific has been broadly structured around containing Chinese influence. Central to this strategy is the preservation of influence over the Strait of Malacca, where the United States relies heavily on its alliance with Singapore and Malaysia, to sustain maritime access and security cooperation. The Kra Canal would represent a structural disruption to the existing maritime order by offering an alternative passage that bypasses a US-aligned corridor, thereby weakening Washington’s indirect leverage over one of the world’s most critical trade arteries.

Singapore, a nation whose entire existence rests on controlling and processing maritime flows, would suffer a significant economic blow as traffic deviates away to the Kra Canal. This project would reduce Singapore’s significance as a central shipping hub, diminishing its leverage in global politics. On the other hand, the canal would alarm India as it would give China direct access to the Bay of Bengal, strengthening China’s maritime footprint near their sphere of influence.

The canal would also have significant implications on relations within ASEAN as it would reshape regional trade routes, alter economic hierarchies, and introduce new tensions between its member states. The increase in Thailand’s strategic importance would shift the balance of power within the trading bloc as Thailand gains more leverage over decision-making. This shift could therefore generate economic rivalry and diplomatic friction within ASEAN. However, the canal could also encourage regional cooperation as other countries may also aim to capitalize on the gains of the canal; ASEAN countries might invest in connected ports or railways to integrate the canal into broader regional supply chains.

The Strategic Case for Aligning with China

Often called the “Switzerland of the East”, Thailand has long had a history of political neutrality. However, in an era of intensifying US-China rivalry, such strategic ambiguity risks becoming a liability rather than an asset. In recent years, Thailand has already begun tilting toward China through deepening economic ties and expanding military cooperation. Since 2012, China has become Thailand’s largest trading partner, with Chinese capital flowing into key sectors such as manufacturing, infrastructure, and tourism. This shift is particularly notable given Thailand’s historical alliance with the United States, one of Washington’s oldest in Asia, dating back over seven decades. Yet that relationship has shown signs of strain, especially following Thailand’s 2014 military coup, after which the U.S. suspended military aid and distanced itself from the new government. In the years since, Thailand has moved closer to China, reflecting both pragmatic economic considerations and shifting geopolitical realities. Some analysts argue that this realignment anticipates a broader transition in global power. The United States is perceived as entering a period of relative decline – marked by overextension in international conflicts and mounting economic pressures – while China has positioned itself more cautiously and strategically on the global stage. From this perspective, aligning more closely with China could allow Thailand to better position itself within an emerging international order increasingly shaped by Beijing’s economic and geopolitical influence.

Conclusion

Ultimately, the Kra Canal would be a redefining strategic choice about Thailand’s future position in the global order. While the risks ranging from domestic instability in the south to heightened geopolitical tensions with the United States and regional partners are real and cannot be dismissed, they must be weighed against the scale of transformation the canal could unlock. At a time when Thailand’s economic growth has stagnated and regional competitors are accelerating ahead, incremental solutions such as the land bridge may preserve neutrality but would not deliver the same magnitude of long-term gains. The canal, by contrast, offers Thailand the opportunity to reposition itself as a central hub in global trade. In doing so, it would inevitably deepen Thailand’s alignment with China. Rather than clinging to a model of neutrality that may no longer be sustainable in an increasingly polarized world, Thailand must consider whether strategic alignment, if carefully managed, can serve as a vehicle for national advancement. The Kra Canal, therefore, is not simply a question of cost or feasibility, but of ambition: whether Thailand is willing to accept short-term geopolitical trade-offs in pursuit of long-term economic and strategic ascendancy.

Prim Atikarnbodee is a student at Barnard College, majoring in Economics and Political Science. Her main areas of interest lie in political economy, with a focus on emerging market development, international relations, Global South politics, and energy security. She is passionate about examining how global trade and capital flows shape growth, inequality, and development outcomes, specifically in Southeast Asia, the Middle East, and North Africa.

Source: https://meteoric.com.au/caldeira-project/

The recent outbreak of the Iran war and the rise of China’s global economic influence – from semiconductors to critical minerals – have incentivized the U.S. to strategically enhance its bilateral cooperation with Brazil in the rare earth elements (REEs) and critical mineral sector. As a subset of critical minerals, REEs are critical to U.S. national defense and contain 17 metallic elements, known for their magnetism and heat resistance in the manufacture of weaponry. Amid intensifying U.S.-China hegemonic competition and shifting tariff policies, China’s dominance over the REEs supply chain has become a major “foreign dependency risk” for the U.S. – accounting for over 69% of the global REEs mining and nearly 90% of its later-stage processing. On March 28, 2026, the Brazil–U.S. Forum on Critical Minerals was held in São Paulo. The U.S. Chargé d’Affaires Gabriel Escobar stated: “The United States is already investing more than $600 million in critical minerals projects in Brazil, and we see the potential for billions of dollars of additional U.S. investment in this area.” Beyond facilitating foreign direct investment in Brazil’s critical mineral sector, the growing global demand for REEs supply diversification presents a potential pathway for addressing Brazil’s longstanding regional sectoral divergence by integrating enhanced technology and green energy industries into traditional mining regions such as Minas Gerais.

Although Brazil’s Gross Domestic Product (GDP) has increased by a factor of 365 in the 21st century – from $599.64 billion to over $2.19 trillion – its national economic growth masks a significant divergence in regional sectoral composition. A large portion of Brazil’s economic activity is concentrated in its Southeast region – accounting for over 57.4% of the national GDP — in the states of São Paulo, Rio de Janeiro, and Minas Gerais. Within this region, São Paulo dominates economic output, generating over 60% of the GDP with sectoral concentration in finance, advanced manufacturing, and fintech. In contrast, the state of Minas Gerais contributes only about 14.4% of the region’s output with heavy reliance on the traditional mining and commodity-based sectors. In fact, Minas Gerais’ mining sector is historically rooted in the late seventeenth-century Brazilian “Gold Rush” under Portuguese colonial rule, where gold extraction was structured through highly unequal labor systems from the transatlantic slave trade, laying the foundation for a lasting, path-dependent reliance on extractive industries. The legacy of this institutional colonialism continues to be reflected in the sectoral GDP distribution of the state of Minas Gerais.

Despite an increase in GDP per capita of 4.1% – comparing the fourth quarter of 2024 with the same period in 2023 – Minas Gerais remains disproportionately dominated by traditional, labor-based sectors. This has heightened the urgency for the Brazilian government to mitigate such sectoral dominance, especially amid global supply chain instability following the COVID-19 pandemic and the ongoing geopolitical conflict in the Middle East. Specifically, of their total GDP of R$1.06 trillion, R$593.9 billion or over 56% is attributed to the service sector, followed by industry and agriculture, livestock, and forestry. Although tradeable, high-skill intensity services in finance and consulting are highly rewarding, reliance on non-tradable local services – such as those in retail and hospitality – not only constrains external demand but also reinforces Brazil’s persistent wealth disparities and socioeconomic inequalities, including the female labor participation rate gap. Accordingly, sectoral divergence – both between São Paulo and Minas Gerais and between the Southeast region and the rest of Brazil – has prompted the government to expand Minas Gerais’ industrial capacity and broader economy through a new industrial policy plan focused on energy transition and infrastructure, building on earlier responses to premature deindustrialization in the 2000s, such as the “Brasil Maior” Plan (PBM).

In 2022, the Caldeira Project was launched to facilitate Brazil’s goal of developing one of the largest REE deposits in the world outside of China. Located in southwestern Minas Gerais, the Caldeira Project constitutes the largest alkaline deposit in South America, with an estimated resource of 1.5 billion tonnes. One key sustainability initiative of the Caldeira Project is its technique of “ionic adsorption rare earth mineralisation,” which excludes the conventional drill and blast mining practices. This significantly reduces carbon emissions intensity and its relevant environmental impact, while the unmineralised clays will be dewatered and recycled to the landscape to eliminate tailing storage facilities. In January 2025, the Caldeira Project allocated over US$903 million from national organizations like BNDES and the Funding Authority for Studies and Projects (FINEP) to strengthen Brazil’s decarbonisation and energy transition initiatives. In addition, the Caldeira project is listed on the Australian Securities Exchange under the mining company Meteoric Resources, which allows it to raise capital from global retail and institutional investors. Therefore, Caldeira’s low-unit operational cost of approximately US$9.78, large resource base, and ESG-friendly potential have positioned it as a rising player in global and regional emerging markets for green technology on top of the traditional mining industry, with the potential to balance the economic output and sectoral divergence within Brazil’s southeast region under governmental support.

The Araxá Project is another world-class niobium mining operation located within the Barreiro Carbonatite complex in Minas Gerais. This 5km-wide carbonatite hosts significant hard-rock niobium reserves, with roughly 95.47 Mt of the total niobium pentoxide, accounting for roughly 80% of the global niobium supply. Although not part of the REEs, niobium is classified as a critical mineral and plays a crucial role in integrating Minas Gerais’ mining operations with high-technology supply chains. Its primary forms – ferroniobium and niobium oxide – both have substantial market demand: ferroniobium is widely used in the steel production for pipelines and automobiles, while niobium oxide is essential in producing optical lenses and high-temperature alloys for aerospace and defense. Beyond its rich deposit, this project is particularly attractive due to its sustainability approach and exploration upside, as only around 10% of the total project area has been drilled. Its proximity to the city of Araxá has fostered a well-developed industrial and operational ecosystem, providing access to low-cost water, transport infrastructure, and an experienced mining workforce and market. In February 2025, the project was acquired by St. George Mining Limited (ASX: SGQ), which demonstrates a growing interest of Australian mining entities in Brazil’s REEs and critical mineral sector, while posing an asymmetry between the foreign ownership of this state-owned reserve. Although such foreign acquisitions bring capital inflows and valuation upside in the short run, the diminished role of the Brazilian government as a value-chain leader may introduce investment risks through potential regulatory change – such as export restrictions and higher taxation – which could delay project development and reduce profitability.

Thus, although Minas Gerais’ economy has been heavily dependent on its mineral extraction industry, it is essential for the state to distinguish itself from São Paulo’s economic model by focusing on the intersection of mineralization, high technology, and cross-border collaboration, building on the privilege of possessing rich natural resources. The launch of the Caldeira Project and the Araxá Project not only signals Brazil’s leading role in critical mineral development but also serves as a gateway to addressing regional divergence by introducing green energy and high-technology initiatives integrated with mining and extraction. The importance of the REEs in national defense manufacturing presents a strong opportunity for Minas Gerais to pivot its export structure from agriculture-based and traditional mining sectors, such as iron ore and coffee, toward more advanced industrial minerals for sectoral diversification. For investors, despite the promising investment upside for Brazil’s REEs boom, it is important to pay attention to Brazil’s regulatory and compliance risks, particularly in relation to the government industry policies or geopolitical alignment with the U.S. and China, especially as a leading member of the BRICS.

Isabella Fang (BC ‘28) is a sophomore studying Political Science and Economics with a minor in Portuguese. She is interested in the intersection between law and economics, particularly across the U.S., China, and the Lusophone world.

In 2024, Samsung’s factories in Vietnam generated $62.5 billion in revenue. This was roughly one-sixth of the country’s entire GDP, yet the profits flowed back to Seoul rather than Hanoi. This single statistic captures the central paradox of Vietnam’s economic miracle: a country that has industrialized at remarkable speed while remaining structurally dependent on foreign capital to do so. Vietnam’s foreign investment-led growth model has been transformative, but it has also created a dependency that threatens the country’s long-term development. To escape it, Vietnam must reform its tax incentive system to level the playing field for domestic firms and enforce stronger domestic sourcing requirements on foreign investors. Most importantly, it must direct public revenue into building the homegrown industrial base that foreign firms have never been required to create.

Vietnam’s openness to foreign investment was not inevitable. It was a conscious political decision born from crisis. By 1986, the country was on the brink of economic collapse. Inflation had exceeded 700 percent and food shortages were widespread. The centrally planned model borrowed from the Soviet Union had proven unworkable. The ruling party responded with the Doi Moi, or ‘renovation,’ reforms. This abandoned central planning in favor of a market-oriented economy and actively courting foreign capital through the Foreign Investment Law of 1987, which even allowed 100 percent foreign ownership. The logic was pragmatic. Vietnam had no domestic private sector to speak of and no accumulated capital or manufacturing base. Foreign firms offered all three.

The strategy worked impressively in its own terms. By the end of 2024, Vietnam had attracted $502.8 billion in total registered FDI, with a record $25.35 billion disbursed in that year alone. Samsung and Intel built major production facilities in northern provinces, joined by Apple suppliers such as Foxconn and Pegatron. Electronics now account for over 30 percent of Vietnam’s total exports, worth more than $72.6 billion in 2024. The country went from near-collapse to middle-income status within a generation.

The problem is that Vietnam largely built someone else’s economy. The World Bank’s 2024 report found that foreign firms account for 73 percent of Vietnam’s total exports, while domestic firms’ participation in global supply chains fell from 35 percent in 2009 to just 18 percent in 2023. The report concluded that Vietnam captures only a fraction of the value embedded in the goods it exports. When a Samsung phone leaves a factory in Thai Nguyen, the design was done in Seoul and the key components were sourced from South Korean and Taiwanese suppliers. The profit returned to Samsung shareholders. Vietnam supplies the labor; its local companies capture little of the value.

This is not simply a matter of bad luck. Research Policy found that productivity spillovers from foreign firms to Vietnamese domestic suppliers are indirect and limited. For instance, Samsung sources most of its inputs from non-domestic suppliers, creating weak linkages to the local industrial base. The root cause is that Vietnam encouraged foreign investors before it had built a domestic private sector capable of participating alongside them. As a result, the two economies now operate largely in parallel.

Part of what sustains this two-track economy is the tax system Vietnam built to attract FDI in the first place. Foreign investors receive corporate income tax holidays: zero tax for four years, then a 50 percent reduced rate for nine more years. In comparison, domestic firms face the standard 20 percent rate far sooner. This asymmetry was rational when Vietnam had nothing to offer but cheap labor and tax breaks. Today it means foreign firms remain structurally more competitive because the Vietnamese state subsidizes them at the expense of local rivals. The stakeholders who benefit most from this arrangement are multinational corporations and provincial governments that compete for their investment that have little incentive to change it.

Geopolitical exposure makes the stakes concrete. Vietnam exports nearly 30 percent of its goods to the United States and relies heavily on Chinese intermediate inputs for its manufacturing sector. When the U.S. initially imposed a 46 percent tariff on Vietnamese goods in early 2025, economists at OCBC Bank estimated it could shave 1.2 percentage points off GDP growth, while Bloomberg projected Vietnam could lose 25 percent of its U.S. exports in the long term. The tariff was eventually negotiated down to 20 percent, but the episode showed exactly how little control Hanoi has over the conditions of its own growth. An economy whose export fortunes hinge on decisions made in Washington and Beijing is not yet a fully autonomous one.

Vietnam is not without options, and the government has shown it understands the problem. The National Semiconductor Strategy sets out an ambitious plan to build a domestic chip design ecosystem, targeting at least 100 homegrown chip design firms and 50,000 trained semiconductor engineers by 2030. This is a meaningful shift in ambition from assembly toward ownership. But strategy documents are not enough.

Fixing this requires structural reforms to Vietnam’s fiscal and regulatory environment. Vietnam should progressively phase out preferential tax treatment for foreign firms while simultaneously cutting domestic firms’ compliance burdens and improving access to financing. It should tie future FDI licensing to binding domestic sourcing commitments, requiring multinationals to source a rising share of inputs from Vietnamese suppliers over time. It should also use the revenues from FDI activity, which are real even if the profits leave the country, to fund the vocational training and R&D infrastructure that domestic firms currently lack. South Korea and Taiwan followed comparable paths: they welcomed foreign capital and extracted knowledge from it while building domestic champions alongside it. Vietnam is at a similar crossroads today.

Vietnam’s development story since Doi Moi is one of the most remarkable in modern history. But the next chapter cannot be written by Samsung. Thirty-eight years after the ruling party chose to open Vietnam to the world out of necessity, the country now has the leverage to renegotiate the terms of that openness. The question is whether it will use it. Growth that cannot be owned is growth that cannot be sustained. Vietnam has spent nearly four decades building someone else’s factory. It is time to start building its own.

Rohan is a sophomore majoring in Financial Economics with interests spanning technology and the interaction between people and markets. Having lived across multiple countries, he brings a strong cross-cultural perspective and enjoys connecting diverse communities. He is particularly interested in emerging ideas and understanding how industries evolve over time.

Over the past decade, the Mexican government has adopted an aggressive regulatory framework targeting ultra-processed foods and beverages, imposing constraints on their marketing and sales. Mexico has one of the highest obesity rates in the world, with roughly 70% of adults classified as obese or overweight in 2020. This statistic is driven in part by extraordinary consumption of sugary beverages and unhealthy snacks, which accounted for 23.1% of Mexican daily intake in 2020. Children are impacted by this trend as well; in fact, UNICEF found that the highest rates of consumption were among preschoolers, for whom these products comprised nearly 40% of their daily caloric intake. Faced with mounting healthcare burdens and obesity concerns, the Mexican government has begun treating food regulation as an economic policy as much as health policy. Despite seeming like a public health intervention on the surface, this measure is quietly redrawing the competitive landscape of Mexico’s food industry and forcing firms to compete on strategic adaptation rather than relying on scale-driven advantages.

Mexico introduced a one-peso-per-liter tax on sugar-sweetened beverages in 2014, mandatory front-of-package warning labels for products high in sugar, fat, or sodium in 2020, and bans on junk food sales in schools in 2025. Though states like Oaxaca and Tabasco had implemented their own health-forward regulations in 2020, these federal regulations expanded the scope of impact significantly. Thus, it was necessary for companies to adapt in order to continue reaching certain consumers in Mexico. For multinational food and beverage giants with few prior limitations in a $21 billion food-and-beverage sector (as of 2021), this represented a significant shift.

The long-run effectiveness of Mexico’s nutrition regulations, however, will depend on the government’s ability to sustain strict enforcement, which is already proving costly and difficult. Monitoring compliance across Mexico’s approximately 255,000 schools is logistically intensive, and informal vendors outside 77% of schools–where children frequently purchase candy, chips, and sugary drinks–fall largely outside the scope of direct regulation. So far, investment has still been politically viable. High-profile measures–such as the implemented soda taxes and school bans–generate immediate signaling value, allowing political leaders to demonstrate action on a widely recognized public health crisis. However, these incentives may weaken over time, leading to two possible trajectories. First, as these policies become less novel and their political returns diminish, the current governing party may face declining incentives to sustain the same level of financial and administrative commitment. Second, if political leadership changes, successor governments may have even weaker incentives to allocate substantial resources toward enforcing policies that are no longer politically “owned” by them, particularly given the high costs and diffuse benefits of enforcement. In both scenarios, gradual erosion of enforcement intensity may ease pressure on firms, allowing greater flexibility to adapt and regain competitive ground.

Despite future uncertainty, enforcement is currently in full swing for the aforementioned reasons. The consequences of these policies become most visible when examining firms that once dominated Mexico’s consumption landscape: beverage multinationals like Coca-Cola and PepsiCo, which built massive businesses around sugar-sweetened drinks and have experienced measurable constraints in volume and revenue since the implementation of these policies. For Coca-Cola’s Mexican bottler, Coca-Cola FEMSA, beverage volume declined 6.5% from 2024-2025, despite a 3.3% increase in revenue. This divergence reflects a structural challenge: demand for sugary beverages weakened under regulatory pressure and labeling requirements, strict taxes further hurt profits, and thus, firms were forced to rely on pricing to maintain revenue. This dependence is unsustainable for future growth since soda is a price elastic good within Mexico, where consumers are being encouraged to switch to healthier alternatives, regardless of price. PepsiCo has experienced similar constraints: its Mexico revenue declined 2.5% year-on-year in 2025, demonstrating direct revenue pressure in one of its most important consumer markets.

This regulatory pressure has not been uniformly distributed across firms. Mexico’s dominant domestic food company, Grupo Bimbo presents a striking counterexample, demonstrating strong economic performance over the same period. Grupo Bimbo Mexico’s revenue grew approximately 26% between 2023 and 2025 (driven by both volume and pricing), reflecting sustained demand and expansion. The company also announced a $2 billion investment in Mexico through 2028, conveying confidence in future domestic growth. Unlike Coca-Cola and PepsiCo, Bimbo’s growth has not been constrained by declining consumption volume in its core categories.

Though all three firms have responded strategically to Mexico’s regulatory environment, their adaptation capacity differs significantly. Grupo Bimbo has undertaken the most comprehensive reformulation effort. It reformulated 82% of its daily-consumption products to reduce sugar, sodium, and fat, and by 2025, 95% of its portfolio met positive nutrition standards–allowing the company to avoid warning labels and maintain steady consumer demand as tastes shifted (due to increased public messaging and education around nutrition). Bimbo also eliminated key regulated ingredients such as high-fructose corn syrup and partially hydrogenated oils, demonstrating proactive regulatory compliance. Coca-Cola and PepsiCo, by contrast, face limitations in reformulation because sugar-sweetened beverages inherently rely on sugar as a core ingredient. While Coca-Cola has expanded zero-sugar product lines (zero-sugar beverage volume grew 31% in 2024), these products represent a partial rather than complete substitution for traditional products. Coca-Cola FEMSA has also delayed some distribution investments due to regulatory uncertainty and tax impacts, indicating greater caution in expanding operations.

Comparing Bimbo with Coca-Cola and PepsiCo suggests that regulation has had asymmetric effects across sectors, constraining beverage companies more heavily while allowing food producers greater flexibility to maintain volume growth. Coca-Cola, PepsiCo, and Grupo Bimbo were initially compared because all three have enormous market scale in Mexico, guaranteeing that differences in performance reflect structural regulatory factors rather than size alone. Yet, attributing this divergence solely to sectoral differences would be misleading. To isolate whether this pattern reflects firm strategy or industry constraints, it is necessary to examine multinational firms operating within the same food categories as Grupo Bimbo.

Within Mexico’s packaged food sector, Grupo Bimbo still outperforms multinational peers like Nestlé and Mondelez International, suggesting its advantage is not purely sectoral. In 2021, Bimbo held a 13.7% market share within the health and wellness packaged food segment, while Nestlé similarly experienced strong pre-regulation growth (12–13% in revenue, 4.7% in volume), reflecting favorable demand conditions for multinationals. However, as more of Mexico’s nutrition regulations took effect and consumer patterns adjusted by 2024, Nestlé’s revenue growth slowed to 3.1%, while volume growth declined to -0.8%, indicating an outright contraction in real consumption, while Bimbo continued to thrive. Mondelez International faced a similar structural trend to Nestlé, with slight revenue increases increasingly driven by price adjustments rather than sustained volume expansion.

Grupo Bimbo’s adaptation strategy of a complete reformulation also differs fundamentally from those of Nestlé and Mondelez, contributing to its comparative success. Nestlé’s strategy stresses product diversification instead, with an announced $1 billion investment in Mexico indicating a long-term effort to develop new product lines compatible with regulatory requirements. Mondelez, meanwhile, has focused more narrowly on marketing and packaging changes (smaller packaging to fall below labeling thresholds and advertising that emphasizes taste and smaller portions rather than health claims). Regardless of strategic differences, Bimbo’s advantage also came from its flexibility to act more quickly: multinationals must balance adaptation in Mexico with global consistency, slowing their response. On the other hand, Bimbo, deeply rooted in the Mexican market, was capable of moving faster.

In spite of current trends favoring this domestic firm, Grupo Bimbo’s success cannot be attributed solely to its standing as a local company. Rather, its dominance reflects its anticipatory reformulation strategy, which allowed it to adapt more effectively than multinational competitors. Additionally, its steady investment in Mexico further reinforces its competitive position.

Beyond these established players, the strategy of new firms in Mexico’s food sector further reinforces that regulatory pressure is reshaping industry behavior at the point of entry, not just among incumbents. For example, local startup Propel Foods (founded in 2022) is building its business models around health-conscious formulation from inception, developing plant-based and hybrid protein products with nutritional profiles optimized by their AI technology. This approach ensures alignment with both regulatory standards and evolving consumer preferences, where over half of consumers report substituting toward plant-based foods (further indicating the commercial viability of health-conscious products). Similar nutrition-focused strategies appear in other emerging firms, like Smart Bites and Better Balance, demonstrating that regulation is not only altering incumbent strategies, but also setting health-conscious production as a baseline expectation for new firms–in order to fulfill newly shifted market demand.

As enforcement dwindles, adaptation improves, and firms develop compliant product lines, the competitive gap between Grupo Bimbo and multinational firms may narrow. Yet, that newer market entrants are crafting health-conscious brand identities and challenges to multinational conglomerates still prove that regulation has had significant impacts in the past five years, and is expected to continue to do so in the near future. Mexico’s nutrition regulations have disrupted the traditional growth models of multinational food and beverage firms by suppressing volume-driven expansion and forcing a greater reliance on pricing strategies. These effects have been asymmetric across sectors, with beverage companies facing sharper constraints due to the inherent difficulty of reformulating sugar-based products, while food producers retain greater flexibility to adapt. Ultimately, regulation is reshaping competition by rewarding adaptability over scale, forcing even dominant firms to compete on responsiveness rather than reach.

Hi, my name is Aarushi Deswal and I’m in the class of 2029! I’m majoring in Financial Economics, minoring in Applied Statistics, and am interested in the healthcare, fashion, and wellness industries outside of my schoolwork. Beyond academic interests, I love spin, pilates, cooking, concerts, and exploring the city!

Dakar Railway Station (via Wikimedia Commons)

Sub-Saharan Africa has become subject to growing pains—aging infrastructure, political instability, and burgeoning overpopulation. Among them lies an overlooked but substantial difficulty: traffic gridlock. In the modern era, transportation within the African continent has been mostly relegated to cars and minibuses. This standard, however, comes at an immense cost. The lack of reliable and efficient transportation often cripples the economies of the cities it plagues; affecting local residents and consistent trade. Senegal has had the most apparent deviation from this established standard, highlighting the benefits of investing in public transportation — suggesting its neighbor, The Gambia, should follow suit.

The Gambia, with a population of nearly two million residents, is economically dominated by its capital city, Banjul. About ¼ of the country inhabits the Greater Banjul Area, and it serves as an integral trading location for the country via its port. The Port of Banjul accounts for about 90% of the country’s foreign trade, while acting as a major distributor of cargo to neighboring countries of Guinea and Mali. This centralization of living and trading, specifically within Banjul, has transformed the city into an urban hellscape—gridlocking the city’s main arteries. In a 2011 diagnostic study, the African Development Bank noted The Gambia’s need to integrate various transportation modes for economic development—highlighting their failing infrastructure as a main source of economic loss.

The Gambia’s situation mirrors that of its neighbor, Senegal. Senegal, a country of an estimated 16 million people, is similarly economically centered on its capital city, Dakar. Dakar, a major port city, is integral to the country’s trade — serving not only Senegal, but also Mali, Mauritania, and The Gambia. Recent studies conducted by Senegal’s Agency for the Promotion of Investment and Major Works, reported that traffic jams accounted for over $200 million annually in losses—a staggering metric for the country’s economy; roughly 1% of the country’s economic output. Senegal, unlike The Gambia, has made significant progress in investing into a public rail network — alleviating part of their traffic issue. Senegal’s Train Express Regional (TER) connects Dakar with the neighboring city of Diamniadio. Constructed on a fully electrified standard gauge track, the network runs for 36 kilometers and serves 13 stations, becoming fully operational in December of 2021. The rail network has cut travel times for commuters, with suburban residents able to reach Dakar within 45 minutes. Additionally, the rail network has generated over €33 million, while also decreasing CO2 emissions by 92,000 tons.

While Senegal has taken immense strides, The Gambia has remained stagnant. However, recent development is pointing in the right direction. As a member of the Economic Community of West African States (ECOWAS), The Gambia has become involved in talks to further interconnect the region via rail with other West African partner countries. Such discussion, however, has yet to lead to anything concrete; a lack of action is apparent within plans for further development. In evaluating Senegal’s efforts, in both establishing economic profitability, cutting travel times, and simultaneously decreasing air pollution, The Gambia’s choice in the matter should be clear.

In 2025, The World Bank approved over $52.5 million to improve the Gambia’s aging transportation infrastructure, moving The Gambia in the right direction. While currently focused on road enhancement, the Gambia should reconsider such development. The country should rather prioritize connecting Banjul to its surrounding communities in a similar fashion to Senegal and its urban commuter-based line. In doing so, The Gambia opens itself up to both better trade and reliable transportation. While road development is important, such developments are often cited to have a more negative long-term impact, only increasing the amount of cars on the road, and furthering gridlock. Through a rail line, residents of the Greater Banjul Area would experience decreased travel times, allowing for greater productivity, and also easier accessibility to local businesses, further stimulating the economy. With a decrease in cars on the road, carbon emissions would decrease significantly, while allowing freight movement to experience faster transportation times—better positioning Banjul as a hub for trade and development, and living.

Therefore, The Gambia stands at a unique opportunity. The World Bank’s $52.5 million investment, if redirected towards rail rather than roads, would allow the country to be fundamentally reshaped in a similar manner to Senegal. While ECOWAS focuses on heavier intercountry travel, starting out with a smaller regional network would better position the domestic sector—which is more heavily impacted by traffic gridlock. The country doesn’t need to incur a similarly expansive growth as the TER network; a line connecting Banjul and Serrekunda, for example, would positively impact over 500,000 residents—while being on the small scale of 14 kilometers, keeping costs low and implementation realistic. Senegal makes the case crystal clear; with decreased carbon emissions, and millions in generated revenue, The Gambia too, can reshape travel—prioritizing rail travel before gridlock becomes destabilizing.

Mansour Dieng (CC ‘29) is a writer for the Columbia Emerging Markets Review studying English on a Pre-law track. As a writer, he aims to explore the Sub-Saharan Africa region, more specifically countries within Western Africa. He hopes to explore intercontinental relations amongst African countries and more deeply evaluate the intersection between international relations and the worldly economy, especially within emerging markets and their political and economic transformations.

Source: https://www.bakerinstitute.org/research/power-problem-nearshoring-and-mexicos-energy-sector

In 2023, Mexico surpassed China as the U.S.’s largest trading partner, heralding a broader shift of global supply chains towards North America. Mexico exports automotive, machinery, and agricultural products to the U.S, while importing refined petroleum, vehicle and electronic machinery, and other agricultural products. A key driver of Mexico’s importance as a manufacturer is nearshoring, the relocation of factories and supply chains from countries like China closer to American markets, which has been accelerated by the implementation of the United States-Mexico-Canada Agreement (USMCA) in 2020. However, the rapid rise in manufacturing has proven to be a double-edged sword, especially in Mexico’s northern industrial hubs: electricity costs, Mexico’s primary constraint, have doubled in comparison to the costs in the US and China, water scarcity is exhausting already overexploited aquifers, and strained infrastructure is increasing costs for manufacturers. These constraints need to be mitigated through reforms that encourage private and government investment in electricity and infrastructure and boost a shift towards renewable energy.

The USMCA ensured stable, trilateral free-trade between Mexico, the US, and Canada. Companies that relocated to Mexico contributed approximately $3.58 billion in goods and services in 2023. Mexico attracts nearshoring because of its geographic proximity to the US market, its large, relatively young industrial labor force, and more accessible and free trade under the USMCA, especially as global supply chains become increasingly protectionist. Existing manufacturing sectors like automotive manufacturing, electronics, and medical devices allow firms to integrate quickly into North American supply chains.

Additionally, escalating trade tensions between the US and China, exacerbated by a series of tariffs on Chinese goods introduced during the Trump administration, have incentivized companies to shift production away from Asia. Mexico is the primary beneficiary: overland shipping from Mexico to the US takes between two and five days, while container shipments from Asia take about four weeks. The US-Israel military strikes on Iran in February 2026 and the following blockade of the Strait of Hormuz, through which approximately a fifth of the world’s oil was supplied, have made supply chains with Asia riskier and pushed companies to move production closer to the US. The geographical proximity of Mexico and the US is advantageous in a world where supply chain resilience has become a priority.

Mexico’s Foreign Direct Investment (FDI) surpassed $40.9 billion, a 15% year-on-year increase and record high, in the first three quarters of 2025. Almost a third of this capital was invested in the manufacturing sector, which is led primarily by automotive and transport equipment and accounts for almost half of all manufacturing FDI. Furthermore, sectors like aerospace, semiconductors, and electronics are also attracting investments. This matters because higher-complexity industries work with specialized suppliers and engineers, making the industrial system more attractive to other manufacturers. The Mexican Business Council for Foreign Trade (COMCE) forecasts nearshoring-related export growth of 6% in 2025 and 6.5% in 2026—if accurate, this will expand external sales toward $700 billion.

Moreover, nearshoring has geographic significance. Northern states such as Nuevo Leon, Chihuahua, Coahuila, and Baja California attract a large share of nearshoring FDI, allowing maximum use of industrial parks, skilled labor, and access to US trade routes. In particular, the Bajio corridor has emerged as a high-tech manufacturing center. The nationwide low average manufacturing wage of $4.90 per hour makes it a cost-competitive base for companies exiting or diversifying from Asia. Although FDI has strengthened Mexico’s industrial sectors, it has pushed industrial parks, energy systems, and infrastructure to their maximum capacities.

The opportunity nearshoring brings is limited by three structural constraints: electricity, water, and logistics. Mexico’s transmission grid was designed to meet national demand in 2018, not the industrial economy it has become today. According to the Mexican Institute for Competitiveness (INCO), the demand for national electricity grew by 3.4% in 2022 and 3.5% in 2023, while the transmission network expanded by just 0.09% and 0.10% in those same years. In 2023, CFE, the state electricity utility, invested only 21% of what it had planned to maintain and expand the grid. The consequence is visible: 91% of Mexico’s industrial systems have experienced power supply failures, and over 60% of the national transmission network works at almost full capacity. The worst congestion is concentrated in the northern corridors that drive the nearshoring.

To address the electricity shortage, the government has intervened through regulation. The Sheinbaum administration’s new Electricity Sector Law was published in March 2025 and mandates that CFE must supply at least 54% of all electricity on the national grid. This leaves private sector producers to supply 46% of electricity. The law also opens pathways for private sector participation, as firms that provide project development services are required to contribute to electricity generation.

Water scarcity caused by nearshoring is a more difficult problem to overcome. According to the National Water Commission, over 45% of Mexico’s aquifers in the north are overexploited in a region with the lowest rainfall in the country. Nuevo Leon, a major industrial corridor, faced protests in 2022 due to domestic water shortages as the industrial demand from new factories led to water scarcity. Across municipal and federal agencies, water infrastructure is aging, and climate change is worsening the frequency of droughts in northern Mexico. Furthermore, the new energy and semiconductor facilities are water-intensive, worsening existing water scarcity.

The logistics constraint also continues to grow as the volume of goods transported increases. The Port of Laredo, the busiest land port in the United States, handled about 3 million incoming trucks from Mexico in 2023. With increasing nearshoring, congestion has increased pressure on customs facilities and cross-border trucking capacity. A decade of underinvestment in port infrastructure has also strained Mexico’s seaports as volume grows. Cargo theft along logistics corridors further adds costs to operations. Projects like the proposed $10 billion Laredo-Monterrey freight corridor—a dedicated route that connects one of Mexico’s largest industrial cities to the busiest land port in the US—and the planned expansion of the World Trade Bridge are steps in the right direction, but will take years to be executed.

A formal review of the USMCA will occur in July 2026, determining whether the agreement is extended for sixteen years, renegotiated, or allowed to expire. The review is not a formality. One of Washington’s main concerns is Chinese tariff circumvention: manufacturers have routed goods through Mexican assembly operations to reclassify them and access the US market at USMCA rates they would not qualify for. This means that a Chinese factory ships its goods to Mexico, performs minor assembly or repackaging, and exports the product to the US under a Mexican label, using Mexico as a route to avoid the US tariffs on Chinese goods.

However, in December 2025, Mexico’s Senate approved tariffs of up to 50% on 1,463 categories of Chinese goods. This is likely to shape the decisions of the US negotiators on the USMCA: Mexico’s tariffs on Chinese goods will reassure the U.S. that its tariffs are not being evaded. A successfully renegotiated USMCA could make Mexico the North American manufacturing hub as factories gain duty-free, quick, and efficient access to the U.S. market and benefit from a stronger labor force.

Mexico’s resource constraints are already impacting investment decisions, and addressing them requires specific action. For electricity capacity, the private involvement paths through the March 2025 Electricity Sector Law are the most practical short-term solutions. Instead of waiting for CFE to increase transmission capacity, industrial parks can be encouraged to use self-consumption options like behind-the-meter solar combined with battery storage to decrease reliance on the grid. Increasing renewables is one solution, but fast-tracking grid corridors in Nuevo Leon, the Bajio, and the northern border states should become a national economic priority. For water, important projects should be combined with demand-side reform. Incentives for on-site water reuse and mandatory studies on water impact for new industrial facilities will be effective starting points. The logistics bottleneck mostly concerns security and infrastructure investment: while increasing port capacity is important, bolstering physical security in the corridors may prove most effective.

Global supply chain disruptions, geopolitical tensions, and the trade advantages created under the USMCA have driven Mexico’s nearshoring shift, leading to a rapid expansion of manufacturing capacity and trade with the US. Although Mexico’s nearshoring advantage opens new economic avenues for the country, its growth is currently unsustainable, facing growing constraints in electricity, water, and logistics. Without swift policy action and increased investment, Mexico’s factories may outpace the electricity, water, and roads needed to support them.

Kritvi Kalani is a rising sophomore intending to major in Economics and Mathematics. Having grown up in India and later lived in the UK and the United States, she has witnessed stark economic differences between these nations, which sparked her interest in development economics. She is passionate about researching macroeconomic challenges in developing countries and the policies and technological innovations that can help address them.

Photo Credit: U.S. Naval Institute, Public Domain

China’s Polar Silk Road, a component of the global Belt and Road Initiative (BRI) focused on developing Arctic shipping routes and infrastructure, is often portrayed as an effort to shorten Asia-Europe transit times or advance scientific polar research. Yet rather than prioritizing transit efficiency alone, a more consequential objective can be seen in China’s securing of equity and long-term offtake positions, or contracts that guarantee a fixed share of future output, in Arctic liquefied natural gas (LNG) projects. This development has shifted China from a price-taker to a stakeholder with priority supply access. As global LNG flows become increasingly politicized and supply chains are exposed to geopolitical risk, China’s deepening involvement in Arctic energy infrastructure, particularly the Yamal LNG and Arctic LNG 2 Plant projects, serves a strategic purpose beyond commercial returns. By financing, building, and securing long-term access to Arctic LNG production, China is quietly reducing dependence on volatile gas markets while enhancing its energy security for the next decade. The Polar Silk Road, therefore, allows China to redefine volatility by deliberately shifting risk away from its own future supply and onto the global energy system.

China’s participation in some of the largest Arctic LNG projects, notably Yamal LNG and Arctic LNG 2, demonstrates this strategy by enabling partial upstream control over Arctic energy production while reducing reliance on global spot markets. At Yamal LNG, which produces at or above its annual capacity of approximately 16.5 mmt, the China National Petroleum Corporation (CNPC) holds a 20 percent stake, the Silk Road Fund owns an additional 9.9 percent, and an additional $12 billion in Chinese financing proved critical amidst Western sanctions imposing restrictions on Russia’s access to capital markets. This involvement has generated two key benefits for China in the past decade, seen in the shared financial profit from Yamal LNG global exports for Chinese firms and preferential access to physical LNG shipments.

However, this control remains partial and constrained. Since LNG from Yamal is sold globally, China does not command full allocation of its output, and access is mediated by all contractual parties rather than China’s sovereign control. Arctic LNG 2, another Russian project led by the second-largest Russian natural gas producer, Novatek, further highlights these limitations. Although designed to reach 19.8 mmt annually, its development has been slowed by U.S. sanctions targeting financing, technology, and shipping, delaying full capacity beyond the initial 6.6 mt liquefaction train that began operating in 2023–2024. These constraints underscore a key tension in China’s strategy: while direct investment in Arctic LNG reduces exposure to market volatility, China remains vulnerable to secondhand geopolitical risk and delayed project development from its partnership with Russia. Even without full output control, China’s equity positions and offtake agreements allow it to secure a predictable share of production, insulating part of its energy supply from LNG price volatility.

Often underemphasized in analyses of the Polar Silk Road, the scale of Arctic LNG projects underscores their strategic potential in reducing Chinese exposure to energy volatility while simultaneously revealing the constraints of partial control in production. At full capacity, Yamal LNG and Arctic LNG 2 could produce a combined output of 36.3 mmt annually, the sum of 16.5 from Yamal and 19.8 from Arctic LNG 2. Compared with China’s 67 mt of LNG imports in 2025, this theoretical capacity would equal approximately 54.2 percent of China’s current LNG imports. However, in practice, not all of this production would be directed to China, as the produced LNG is diversified amongst global consumers, especially in the current environment where sanctions disrupt shipping and financing. Even so, if China were able to secure a meaningful share, such as 10–20 mt annually in proportion to its equity stake, Arctic LNG stands to comprise a meaningful portion of China’s long-term gas supply.

The shift towards upstream energy control is driven by vulnerabilities in China’s existing energy import structure, particularly an overt dependence on LNG passing through maritime chokepoints and politically-sensitive supply chains. According to the U.S. Energy Information Administration (EIA), China became the world’s largest LNG importer in 2023, surpassing Japan, as total LNG imports reached approximately 71 million metric tons (mmt).

Figure 1. China’s LNG Imports. Source: Kpler; chart by Ron Bousso, Reuters.

As seen in Figure 1, these imports remain concentrated among a small group of suppliers led by Australia and Qatar, while Russia, Malaysia, and Indonesia also contribute significant and growing volumes. Chinese energy firms have additionally signed long-term supply agreements with American producers. According to Reuters, companies including PetroChina, CNOOC, and Unipec have signed nearly 20 LNG contracts with U.S. exporters that total around 25 million tons (mt) per year, with many agreements lasting 20–25 years. However, this demand uptick and prioritization of supply diversification is emerging as traditional supply routes face increasing geopolitical pressure. Many LNG shipments from the Middle East must pass through vulnerable maritime chokepoints, with around 20% of global flows passing through the Strait of Hormuz in Iran and around 23% across the Strait of Malacca, which lies between Sumatra and the Malay Peninsula. These routes are often exposed to geopolitical tensions, regional conflicts, and potential naval blockades, resulting in what Chinese strategists often describe as the “Malacca dilemma.” Furthermore, the presence of sanctions, namely those imposed by the U.S. and European Union (E.U.) on Russia following its invasion of Ukraine, has contributed to higher energy prices and supply constraints. In this environment, the mainstream narrative of seeking route diversification for energy corridors only partially shields Chinese demand from risk. China’s Arctic engagement therefore alternatively presents an opportunity to secure stable direct ownership in energy production while reducing major reliance on contested transit routes.

Domestic energy dynamics further reinforce the necessity of LNG diversification, as rising demand for natural gas continues to outpace domestic self-sufficiency. Over the past decade, Beijing has increasingly promoted natural gas as a transition fuel in order to reduce coal dependence and improve air quality in major cities, leading to consistent consumption growth that has increased reliance on imports. According to Duan Zhaofang, Head of Natural Gas Research at the China National Petroleum Corporation (CNPC), China’s natural gas consumption is expected to grow roughly five percent in 2026, driven primarily by industrial demand and recovery in exports after recent trade disruptions including tariffs, export controls, and regulatory restrictions. This follows an average annual growth rate of approximately eight percent since 2017, driven by both economic demand and policy incentives that have encouraged cleaner energy. Although domestic natural gas production is expanding, projected to reach “approximately 300 billion cubic meters by about 2030” as outlined in Beijing’s 15th Five-Year Plan (2026–2030), domestic output is unlikely to keep pace. Additionally, China has encouraged enterprise participation in Arctic ambitions through its 2018 Arctic Policy white paper, outlining the “exploitation of oil, gas, and mineral resources in the Arctic” while controversially coining itself a “near-Arctic state.” As such, China’s reliance on imported LNG appears to be an increasingly important economic fixture, increasing the value of securing stable long-term supply through overseas investments.

Russia has emerged as a central partner in this Arctic strategy, but also introduces clear geopolitical risk complications. In February 2026, Russia supplied China with more than 2 million barrels of Urals crude oil per day, cementing it as China’s largest oil exporter while remaining its second-largest LNG supplier (after Australia). This dual role highlights the growing concentration of China’s energy imports in a single partner. However, Russian LNG possesses rising strategic value: unlike oil, which is traded on volatile spot markets through real-time contract pricing, LNG supply has allowed China to secure predictably accessible long-term contracts through equity stakes and offtake agreements. This strategy has consequently been undermined by U.S. sanctions on Russian energy projects following the 2022 invasion of Ukraine, which have targeted financing, shipping insurance, and technology for projects such as Yamal LNG and Arctic LNG 2. At the same time, the European Union has announced plans to phase out Russian LNG imports by 2027: these restrictions have further slowed project timelines and reliability of supply transportation, particularly by targeting Russia’s so-called “shadow fleet” used to move sanctioned energy exports.

Sanctions have also raised participation costs for Chinese firms, shifting risk from volatility exposure to operations and bargaining. In June 2024, Chinese engineering firm Wison New Energies withdrew from Arctic LNG 2 construction under Western pressure, while subsequent reports suggested that Chinese ships continued delivery of large power-generation modules to the site under more opaque conditions to avoid sanctions reinforcement. These disruptions exemplify how geopolitical constraints can directly delay construction and complicate project execution. Conversely, sanctions have strengthened bilateral energy dependence, allowing China to become a primary buyer and partner amidst reduced Western purchasing of Russian LNG and oil. This relationship has been recently reinforced by major infrastructure projects such as the 4,188-km Eastern Siberia-Pacific Ocean (ESPO) oil pipeline and the 5,111-km Power of Siberia natural gas pipeline, which were both designed to channel Russian energy exports directly into Asian markets. However, pricing and supply disagreements over the proposed Power of Siberia II pipeline, which sought to transport gas from Arctic fields into China, have highlighted the fragility of this relationship. China’s continued involvement therefore reflects a tradeoff between securing long-term LNG access while accepting absorption of secondary sanction effects and reduced bargaining leverage.

China’s investment in Arctic shipping infrastructure further complements its strategy by extending control over energy transportation routes. The Northern Sea Route (NSR), a September 2025 joint Russian venture running along Russia’s Arctic coastline, offers a shorter alternative to the Suez Canal for transporting LNG between Asia and Europe that has been bolstered by melting ice in the area. In support of this route, China has invested in specialized icebreaker LNG carrier ships and polar research vessels to expand its ability to operate in Arctic conditions: “industry projections suggest that as many as 15–17 nuclear icebreakers may be required to support projected cargo volumes of 100–150 mt annually along the NSR,” driven largely by Arctic exports of LNG, crude oil, and metals. Domestic shipyards now produce a growing range of research and “polar-capable” diesel-electric-propelled vessels that are able to navigate all-season conditions, including modern icebreakers such as Xue Long 2. Although China’s polar fleet is still limited to five ships, Beijing’s continued investment in specialized “heavy” ship design and polar-region engineering within the past two years advances a long-term effort to strengthen capabilities for Arctic vessels capturing commercial benefit, especially through reducing foreign reliance in the shadow of Russia’s 57 icebreaker fleet. While the NSR presents a unique challenge due to harsh conditions and seasonal constraints, China’s commitment to develop independent logistical capabilities not only facilitates Arctic energy transport, but reduces reliance on Western-controlled maritime infrastructure.

Ultimately, China’s Polar Silk Road reflects a strategic shift from open-market dependence toward increased control through Arctic energy supply. By securing equity stakes in Arctic LNG projects, investing in transport infrastructure, and deepening ties with Russia, China is not eliminating risk but reshaping it, exchanging exposure to energy pricing volatility for more concentrated geopolitical and operational risks, including sanctions pressure, project delays, and dependence on a single partner. If current Arctic projects eventually reach full production capacity, or if further initiatives are slowly resurrected over the next decade, Arctic LNG could supply tens of millions of tons of natural gas annually to not only China, but global markets, bolstered by its geopolitically-diversified advantage. In this sense, the Polar Silk Road is not merely a shipping corridor extended from the BRI, but a long-term energy strategy to anchor China’s LNG security by concentrating risk exposure from its growing energy demand within an expanded Arctic presence.

Annabelle Lu (BC ’28) is a writer for the Columbia Emerging Markets Review studying Economics with a concentration in Political Economy. She is interested in the geopolitical, cultural, and technological dynamics that are currently shaping investment and innovation in emerging markets.

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In March 2025, Türkiye offered a sharp test of conventional assumptions about emerging markets. The detention of Istanbul mayor Ekrem İmamoğlu triggered a market rupture that pushed the lira to a record intraday low, weakened local bonds and equities, and forced policymakers into emergency stabilization measures. The central bank reversed its easing cycle and raised the policy rate to 46 percent, as political instability translated directly into currency pressure and inflation risk. This episode unfolded during a broader period of dollar weakness, a context in which many investors anticipated improving conditions across emerging markets. The contrast highlights a more nuanced reality: although a weaker dollar can support emerging economies, its effects are neither automatic nor uniformly distributed. Its impact depends on domestic structures that determine whether global financial relief can translate into sustained local stability.

The conventional macro-financial framework is well established. A softer dollar reduces the local-currency burden of servicing dollar-denominated liabilities, eases global financial conditions, and tends to support capital inflows into emerging-market assets. Institutions such as the Bank for International Settlements emphasize these financial-channel effects, while market commentary has similarly noted investor diversification toward developing markets during periods of dollar depreciation. This framework captures the external impulse effectively. However, it does not fully explain the variation in outcomes across countries. The key distinction lies not in the presence of the external tailwind, but in the domestic capacity to absorb and transmit it.

Türkiye illustrates the limitations of this transmission. By early 2026, macroeconomic indicators suggested partial progress. Inflation declined from 49.4 percent in September 2024 to 30.9 percent in December 2025, while GDP growth remained relatively resilient. Yet these improvements did not resolve underlying vulnerabilities. Structural dependence on imported energy and intermediate goods continued to sustain a current-account deficit, while external debt remained substantial, with a significant portion concentrated in short-term obligations. This composition maintains elevated rollover risk and exposes the economy to shifts in investor sentiment. As a result, even within a favorable external environment, the domestic balance sheet constrains the extent to which global relief can translate into durable stability.

One critical mechanism shaping this outcome is the structure of external liabilities. In principle, a weaker dollar should reduce the burden of foreign-currency debt. In practice, the benefit is limited when refinancing needs are large and confidence remains fragile. The March 2025 shock disrupted reserve positions and weakened an already delicate disinflation process. Even as growth projections stabilized, persistent political uncertainty and reliance on short-term external funding continued to weigh on financial conditions. Under such circumstances, improvements in global liquidity do not eliminate refinancing risk; they merely moderate it.

The second constraint is exchange-rate pass-through. For a country to benefit cleanly from dollar weakness, exchange-rate movements have to translate into easier domestic price conditions rather than into renewed inflation instability. Türkiye does not meet that condition. After the March 2025 market shock, Reuters reported that officials were working with an estimated 40 percent exchange-rate pass-through assumption when assessing the inflation effects of the lira move. Pass-through changes the meaning of currency relief, and in a low-pass-through economy, exchange-rate appreciation can help anchor prices and loosen real financial conditions. In a high-pass-through economy, depreciation quickly reappears as higher inflation, which weakens the exchange rate’s stabilizing role. An IMF working paper published in 2026 argues that exchange-rate volatility has been central to Türkiye’s inflation process, even as services inflation remains more inertial than goods inflation. A recent NBER working paper makes the broader point even more sharply: Türkiye’s inflation and exchange-rate dynamics since 2021 are best understood not as a simple external shock story but as the result of weak monetary policy and impaired credibility. That is why the weaker-dollar thesis is too shallow on its own. It treats the exchange rate as a transmission channel; in Türkiye, the exchange rate is also a source of macro instability.

The third constraint is credibility, and this is where the Turkish case becomes decisive. A weaker dollar can buy time. It cannot substitute for a trusted nominal anchor. The IMF’s 2025 Article IV makes this explicit: to strengthen transmission and bolster policy credibility, directors called for a simpler monetary framework centered on the policy rate, enhanced communication, and stronger central-bank independence. Reuters’ earlier reporting on Turkish monetary policy documented repeated central-bank leadership turnover under President Erdoğan, a history that continues to shape how markets interpret every policy move. Credibility therefore does not enter this story as a vague institutional preference. It determines whether lower external pressure actually becomes lower inflation expectations, lower term premia, and more stable portfolio flows. Without credibility, the external tailwind remains reversible. With credibility, it becomes cumulative.

This is why Türkiye should not be treated as a counterexample that disproves the weaker-dollar trade. It is better understood as a case that clarifies its limits. At the aggregate emerging-markets level, the logic still holds: BIS research and Reuters’ market reporting both show that dollar weakness can improve financial conditions and revive demand for emerging-market assets. But the Turkish case shows that the magnitude of that benefit depends on the domestic political economy. Where external debt is short-term, pass-through is high, and monetary credibility is still being rebuilt, dollar weakness produces only partial relief. In this context, a weaker dollar functions less as a universal solution and more as an opportunity whose benefits depend on underlying resilience. Where financial structures are stable and policy frameworks are credible, external relief can reinforce positive dynamics. Where vulnerabilities persist, the same relief may remain partial and short-lived. Türkiye’s experience underscores the importance of these distinctions, illustrating that global tailwinds alone are insufficient to ensure sustained economic stability.

Hi, my name is Dylan Wang, class of 2029. I’m planning on majoring in Operations Research with a concentration on Financial Engineering, and I’m interested in wealth management, information technology, and the private credit industry. Outside of academics, I love to rock climb, creative write, do content creation, and play basketball.

African nations hold 30% of the world’s most vital carbon sinks within their dense forests, savannas, and other natural ecosystems. In the realm of climate finance, this corresponds to a high value for the global economy in Africa’s ability to absorb carbon emissions. But despite the environmental potential, Africa’s climate finance market remains greatly underfunded by foreign investment—and the root causes are trust and transparency.

While Africa’s environments position its countries as strong contenders for carbon market investment, their potential is often underutilized because developed countries avoid investment due to financial risks, such as political instability and uncertainty about returns on early-stage projects. This inhibits the potential economic growth for Africa in the field of climate finance, as it hinges upon credible government management and international collaborative funding. Considering the climate finance strategies in two particular case studies—Ghana, the first African nation to establish international carbon credit partnerships and experience the associated structural financial risks, and Kenya, whose newly launched carbon registry represents the continent’s most deliberate attempt to build investor credibility at the government level—reveals that lack of credibility is the main cause for limited foreign investment opportunities, fueling a persistent climate finance gap between Africa and the developed world. To counter foreign investors’ aversion to financial risk, the strongest approach for African countries would be to utilize transparency to direct investment growth and sustained development in climate markets: Kenya’s recent national carbon registry, which establishes credibility in its climate finance projects, offers a promising mechanism to do so.

In 2016, Article 6 of the Paris Agreement established international carbon markets, where intergovernmental trading offers financial support for climate mitigation in developing countries, as a key force for achieving global conservation goals. Carbon markets function through countries and companies that buy carbon credits (units of carbon dioxide reductions) from other countries implementing climate mitigation efforts; these credits then count towards the purchasing country’s requirements for fulfilling the Paris Agreement goals. This enables developed nations to buy credits from developing regions that hold more natural resource opportunities, such as vast forests of carbon sinks, like Africa.

In recent years, countries in the Sub-Saharan African region have consequently adopted national and technological policies that suggest an economic tactic of nationalized focus on climate finance. The approach directs funding towards countering drastic climate deterioration, to which Africa has been especially vulnerable. Simultaneously, internationally-funded climate mitigation creates its own sphere for investment where developing countries can channel economic growth. In theory, focusing on climate projects would thus amplify substantial investment into African countries; however, the impact of weak governance on carbon tracking credibility has limited the execution of this investment potential.

Ghana’s 2022 Transformative Cookstove Project, a collaboration with Switzerland, was one of the first tangible implementations of Article 6’s international climate finance system. The Swiss-based KliK Foundation financed the distribution of over 180,000 improved cookstoves to smallholder farmers across Ghana, in exchange for carbon credits to count toward Paris Agreement requirements. This was the first use of merging foreign investment with climate mitigation, marking a strong step in international economic collaboration, and even creating a credit currency called Internationally Transferable Mitigation Outcomes (ITMOs). By July 2025, Ghana had transferred 11,733 tons of ITMOs to Switzerland, while simultaneously experiencing fuel efficiency gains and health improvements for Ghanaian farmers and households, leading to economic savings.

Despite the perceived success of the project, the system features a hidden financial drawback for Ghana by positioning the country away from market investment control. The Switzerland-Ghana agreement establishes a relationship of economic imbalance; Switzerland handles all the high-value roles of controlling investment, verification, and process design, while Ghana is mostly limited to labor-based implementation. Though foreign investment provides financial relief, the system restricts Ghana to low-level roles in a growing carbon market sector, setting up the country and neighboring African participants for a future of continued financial dependency and stagnated economies. As United Nations University scholars have noted, on a global level, climate finance mechanisms can consequently inadvertently reinforce existing economic asymmetries when developed nations control investment design while developing nations execute the work. This pattern is prominent in Sub-Saharan Africa, where the division between investor-controlled design and African-led implementation is structural, rather than a reflection of technical capacity. Ghana’s limited voice in setting credit valuations and verification standards compared to Switzerland reflects this dynamic.

Countries that hold domestic autonomy over their own development frameworks attract investment on better terms because they can credibly set the conditions under which capital enters. Thus, for sustained economic development, remaining in the implementation tier of the climate finance sector is not sufficient; to ensure integration into future thriving financial sectors like carbon markets, African nations need to prove their ability to attract and manage climate finance projects.

The key mechanism by which carbon market investment can be attracted is to target the root of the issue: lack of transparency. Kenya’s climate finance projects in past years, specifically for land reforestation, locate the potential for this approach. Kenya’s Watershed Services Improvement Project aims to deploy $200 million towards restoring and managing watersheds to help with landscape restoration. Funding will be divided into various climate mitigation spheres, with 57% directed towards forestry. Economically, restoring watersheds promotes sustainable development and opens up agricultural job opportunities, but also establishes stronger management over Kenya’s land and reduces conflict over natural resources, lending towards economic and ecological stability. But as a relatively newer, wide-scale project, the watershed plan remains solely backed by the World Bank’s International Development Association (IDA), financially limiting its ability to expand beyond the current scale—which is where Kenya’s latest government tactic comes in.

On February 17, Kenya launched a novel effort to establish itself in the international climate finance sphere: a national carbon registry that tracks, manages, and trades all carbon credits in Kenya. The registry is controlled by the National Environment Management Authority, which oversees all Kenya’s environmental activities in accordance with the Paris Agreement, centralizing the country’s carbon credit activity at a governmental level. The registry reports all carbon market activity between Kenya and the developed nations financially backing them in one comprehensive, structured platform—but its particular strength comes from a strict focus on credibility.

A significant cause for the lack of investment in African countries in the climate finance sector is the financial risk associated with inaccurate carbon tracking. Due to repeat offenses of double counting emission removals, weak oversight of offset projects, and inflated reduction claims, scrutiny of international climate finance has increased, diminishing the confidence for developed nations to invest in carbon markets. With this in mind, Kenya’s registry combats the lack of investment through its emphasis on recording project approvals and providing transparent nationalized accounting systems to verify reduced emission numbers and prevent double-counting of carbon units. Crucially, Kenya has also included individual sector-based registries within the national carbon tracker; for example, the forestry carbon registry allows for a comprehensive division dedicated to managing agriculture-based climate investment as its own industry. These sectors allow investors to directly track project prioritization and progress to decide where to invest their money. Finally, through the financial backing of over $2.6 million USD of German investment, this national registry presents itself as not only internationally compliant, but actually collaborative in its accordance with the Paris Agreement.

Already receiving 80 project proposals from interested investors, the registry indicates an effective approach towards integrating African countries into more powerful positions within carbon markets, simply by utilizing government oversight to emphasize transparency, build cross-border trust, and mitigate risks to entice investors. Most importantly, the registry also facilitates and transfers the issuance of reliable carbon credits itself, establishing an international trust in Kenya’s ability to serve a higher-value position in the carbon market sector. This is the key piece that distinguishes the new path Kenya is forging from previous climate finance attempts in the region: the focus on building transparency and reliability garners trust as a more central player in the market, providing an opportunity to capture more of the value of the carbon credit transfer process. Kenya has further legitimate control and awareness over its carbon credits, allowing for stronger bargaining power to retain a greater share of the financial benefits generated by carbon markets.

However, Kenya’s registry was also financed partially by German investment, which creates a particular complexity to the approach of using carbon registries to achieve investment control. For previous similar cases, foreign aid patterns have found that aid donors can shape the domestic policy choices of recipient countries, since autonomous nations attract investment on better terms when they set their own conditions. Because the technical standards embedded in Kenya’s new registry are designed primarily by international partners to meet international investors’ expectations, Kenya could fall to governing its market according to other developed nations’ rules, which may trade one form of dependency for another. For this reason, Kenya must prioritize control over the standards its own registry enforces, beyond just the control over its carbon assets, to avoid further foreign dependency. However, Kenya’s partnership with Singapore and the United Kingdom in the Coalition to Grow Carbon Markets, which establishes shared principles for carbon credit use among companies and sets policies to restore international confidence in carbon markets, shows that Kenya is taking steps to shape global standards rather than simply comply with them. As a co-author of those principles, Kenya has taken a position of influence over the rules of the market it is entering, which ensures the country’s ability to build institutional credibility without excessive foreign dependence.

It is also important to note that Kenya’s international-funding approach can feature qualitative consequences on domestic companies due to tighter governance. The clearest recent example is the collapse of KOKO Networks, a clean-cooking company serving 1.5 million households with subsidized bioethanol fuel. When Kenya denied KOKO authorization for the volume of credits they wanted to export internationally, concerned that the company would monopolize Kenya’s market quota, the company collapsed. This raises a significant concern for Kenya’s carbon market infrastructure: if implemented improperly, rigorous government oversight could counter the primary intention of clean-energy projects, which depend on their authorization for carbon revenues. In this case, African countries must maintain clear transition mechanisms in the national registry implementation process to prevent government regulation from inadvertently debilitating climate mitigation projects.

Although Ghana previously established a similar national carbon registry platform, their implementation lacked the key Kenyan approach of highlighting transparency in the carbon market, converting carbon tracking into a foreign investment strategy. By promoting transparency and emphasizing the prevention of problems like double-counting emission reductions, Ghana can attract more foreign investment from additional countries beyond Switzerland towards efforts like the Cookstove Project.

Additionally, Ghana could benefit from employing Kenya’s sector-based organization strategy to manage the several climate projects they are currently initiating; more importantly, the strategy would provide clear progress data for investors to see what particular efforts to invest in. For example, the approach could be extremely beneficial in light of Ghana’s newest climate-smart rice cultivation effort, scaling out an irrigation technique to reduce 30% of farmers’ water expenditure on rice fields by 2030, while also maintaining or even improving their crop yields. While this specific project is also backed by Switzerland, additional investments from other buyer countries could sustain the project at a higher scale, and more importantly, provide financial support to implement the irrigation technique in other agricultural avenues beyond the current rice cultivation deal. In this case, the sector-division registry approach would provide a comprehensive portfolio of agricultural projects, where explicit future data on successful carbon emission reduction in the rice cultivation effort could attract additional foreign investing countries directly into similar projects.

Overall, the key to employing this registry approach is maintaining a foundation of credibility, the force that draws in capital from developed economies toward developing ones, especially for the relatively unfamiliar territory of climate finance. Credibility will allow Ghana to be trusted in the role of managing this carbon credit currency, and having control over that currency means much greater control of its transference within carbon markets, and greater value capture of climate finance profits.

Ultimately, Ghana and Kenya’s cross-border credit systems are great examples of converting the Paris Agreement requirements into a collaborative climate finance sphere, while integrating into growing future economic sectors at the global scale. However, beyond enacting climate mitigation projects, Ghana and Kenya must solidify their place as a financial manager and powerful investment player within carbon markets in order to gain longevity in their economic development. By building national registries that centralize credible carbon credit management and establish sector-division organization, Ghana and Kenya can transition from low-value project implementers to higher-value countries controlling credit issuances and competitively attracting investors. In this manner, credible carbon registries are not just a useful resource, but a foundation for a future of sustained investment growth and economic development in climate finance.

Risa Cidoni is a freshman at Columbia College studying economics. She has a background in social justice, business, and journalism, and is interested in research at the intersections of economics, politics, and social and gender inequalities. Her hobbies include writing, baking, thrifting, and playing music.

Imagine ordering groceries in the world’s most traffic-congested city and having them delivered within the hour. This has become the reality for Istanbul residents, made possible by Turkey’s reinvestment into logistics infrastructure. A digitized government, widespread buy-now-pay-later (BNPL) usage, and a growing network of dark stores across the city have together shaped a logistics network that quietly outpaces delivery speeds in many higher-income countries. Turkey’s logistics system is unusual because its delivery networks, payment habits, and e-government infrastructure developed together, creating an ultra-modern domestic supply chain ecosystem.

Turkey’s credit-card installment system, known as ‘Taksit,’ dates back to the 1990s, when hacking bank transactions into installments led Yapi Kredi to launch its TaksitCard. This new system drew from a century-long legacy of vendor and consumer financing by making credit feel like routine rather than an unusual exception.

The 1980s liberalization exposed Turkish masses to banking, enabling 80M active cards today, with 40% of transactions being installments, compared to only 1.1% in the US. The IMF notes that deregulatory policies, such as liberalization of interest rates, credit allocation, and capital controls, enabled innovation to flourish, contributing to the digitalization of modern Turkey, including the ‘Taksit’ system, which predates American counterparts like Klarna by decades.

Getir, the largest Turkish delivery app, pioneered the use of dark stores, enabling 10-minute urban delivery times through geospatial analytics. These micro-warehouses, operating out of empty businesses, accelerate grocery and fast-moving consumer goods (FMCG) deliveries by reaching population crevices more efficiently. Recently, Uber also invested $200M+ to create a tech hub in Istanbul, recruiting 95% of taxis onto the app and nearing 100M rides, showing the potential for modernization of many systems. Additionally, Uber’s $700M acquisition of delivery service Trendyol Go demonstrates the profit potential of these platforms.

Despite all this domestic success, many of these systems have not been able to translate into other markets. Getir, for example, has tried expanding into many urban European and American markets. However, they recently had to pull out due to profitability struggles, proving that this ecosystem has its flaws, too.

On top of this, the transition to a completely digitized government, called e-Devlet, with ‘Devlet’ being Turkish for ‘government’, has established efficiency by centralizing all legal records, like contracts or taxes, into one portal, even tracing 10-generation family trees. 96% of the population uses the app to manage their legal documents, streamlining bureaucracy.

Having grown up in Turkey and spending every summer with my grandparents in Istanbul, I’ve seen the use cases of e-Devlet first-hand, too, with my parents handling all of my legal paperwork for taxes, military service, and driving license on a single app.

However, digitizing the whole country doesn’t come without its issues, as many elders who have never used the internet give their e-Devlet logins to trusted people, often before acknowledging potential consequences. Giving one person access to their whole lives poses the issue of corruption. Countless elders are taken advantage of for their life savings, especially if they don’t have anyone trustworthy in the family to manage their lives. Additionally, there is a risk that rural inhabitants may lack sufficient internet access to work with these digitized systems.

Despite these drawbacks, though, why does this system work so well exclusively in Turkey?

Turkey is vastly more urbanized than other relative nations: 78% of Turks live in cities, which is more than double the 32% who did in the 1960s. Istanbul alone has over 16 million inhabitants with a population density about 26 times the national average, making short, high-frequency runs more economically viable than in rural or sparser urban communities by creating a dense consumer base for quick delivery services.

On top of this, Turkey also ranks highly among the most digitally adept emerging markets, making widespread digital mandates like e-Devlet uniquely hard to replicate in other developing countries with weaker digital infrastructure.

Additionally, Turkish spending habits are a global outlier as the domestic economy is uniquely propped up by installment loans. However, due to Turkey’s volatile economy, especially with a rapid depreciation of the Lira, BNPL payments pose a way to finance this monetary instability. Consequently, Turkish banks have to set 50% annual APR rates to combat inflation, as opposed to average American rates of ~20%. Thus, ‘taksit’ is less about convenient shopping, but more a practical way to hedge against currency and inflation uncertainty.

Uniquely though, to bolster consumption, many Turkish retailers offer interest-free installments at the point of sale. Without implementing similar incentive systems in other markets, it is tough to achieve such levels of installment ‘debt’ and spending. Personally, I believe low economic confidence is the cause, as the average Turkish consumer simply does not trust banks enough to keep their money risk-free while also providing them with any significant ROI under such unknown exchange rate circumstances. Overall, this leads to Turkish households having near-zero saving rates, compared to 7% for American consumers and 15% for European ones, highlighting how consumer behavior prioritizes current spending over long-term saving.

When combined with e-Devlet and UYAP, the digital judicial system, these factors reduce friction for companies exchanging money and for citizens interacting with the rest of the economy.

Furthermore, global investment has turned Turkey into a cross-continental hub for logistics and exports, siphoning deep supply-chain expertise to the country. Deals like a $1.1 billion takeover of a multipurpose app HepsiBurada by Kazakh investors, or a $1.4 billion Alibaba investment into Trendyol directly treat Turkey as the world’s premier fulfillment nation.

Even as Turkish firms like Getir exit external markets, they continue to keep domestic business as a core segment. This underscores the favorability Turkey’s one-of-a-kind ecosystem brings, where often more scattered, car-dependent, and administratively fragmented western counterparts fail.

For Western markets looking for insights, the uncomfortable truth is that it is nearly impossible to clone a digital Turkish business model without its three specific pillars: urban density, a unified electronic government, and consumerism fueled by installment-based debt.

Ultimately, the Turkish prototype is not a replicable one. The ultra-fast fulfillment services for urban Turkish residents are, unfortunately, built upon foundations woven into daily life through a forty-year transition from ‘third-world’ to an ‘emerging market,’ representing a specific historical trajectory that alas cannot be exported.

Erin Konak Kandiyoti (SEAS ’29) is a writer for the Columbia Emerging Markets Review studying Financial Engineering. He is interested in going into finance after graduating.

Yemen’s rising inflation has led the nation to a critical juncture in its banking sector. This article will explore two options that could dictate the future of Yemen’s banking position: first, pivot to cryptocurrency, and second, continue using the hawala network system but with a new currency that invalidates the original Rial. The lens this article will be looking at these options through is one with the aim of lowering inflation and getting around sanctions that control the central banks. It is not an article that aims to support the Houthis, but is rather a demonstration of the Houthis’ options to decrease inflation. It also must be recognized that local information surrounding cryptocurrency may be sparse due to Houthi suppression of the news, as cautioned by the Committee to Protect Journalists.

The History of Yemen

Yemen, a country on the Arabian Peninsula, borders Saudi Arabia and Oman. It is situated on the Red Sea to the west and the Gulf of Aden to the east, occupying a key geographical location: the Bab el-Mandeb Strait, through which 12% of the world’s cargo passes through. The importance of the Strait has made the civil war in Yemen particularly important to the United States, as the Iran-backed Houthis have taken over much of the country’s oil production. Amid civil war, the U.S. has enacted sanctions to combat the Houthis. On September 21, 2014, the Houthi rebels took over the capital of Yemen, Sana’a. This marked the start of the current civil war in which, according to the Arab Center in Washington, D.C., the Houthis now control 70% of the population, which is just over 20 million people. The other portion of Yemen is controlled by the U.S.-backed Dr. Rashad Al Alimi, the legitimate president of Yemen. Once the rebels first took over and fully embedded themselves in the economy, the value of the Yemeni rial crashed by 80%. Now with inflation on the rise, the country is expecting an 18.5% increase this year alone. The cause of this inflation is the extensive U.S. sanctions on the Yemeni Central banks under Houthi control and the Houthi Blockade of the Bab el-Mandeb Strait, making it extremely hard for Yemen to import or export goods, a key factor in building and sustaining stability in the nation’s economy. Thus, Yemen is in desperate need to find a feasible solution to reduce inflation in both the Houthi and legitimately controlled areas of the country.

The Benefits of Cryptocurrency

In the last 10 years, the Houthis have worked towards digitizing their currency system: first with vouchers in 2016 that failed, then with an app in 2019 that failed but is still active, and now they are working on the Rial Currency. According to Chainalysis, a blockchain data platform, the digital Rial currency has led to Yemen ranking 16th globally in cryptocurrency adoption. The advantages of cryptocurrency include its ability to circumvent U.S. sanctions and lessen inflation. Cryptocurrency has the potential to combat inflation by allowing a flat cap on the amount of currency that can circulate, setting limits on what the government can control in financial output. For the Houthis, cryptocurrency serves multiple valuable purposes. First, digitized finances are extremely difficult to track, making laundering and moving money around sanctions far easier. Second, the shift towards cryptocurrency leaves the Houthis’ controlled region less reliant on the country’s Rial. This is a beneficial alternative, given the persistent friction between the internationally recognized Yemeni government and the rebel group over managing the nation’s funds. This discord is seen in the AP news article that reports that the Houthis have issued their own coins that are not recognized by the established government.

To add, Yemen is not the only country looking to cryptocurrency to avoid inflation. In 2016, Nigeria faced similar setbacks, and were ultimately successful in lowering inflation when the nation’s citizens shifted to stable coins. Today, cryptocurrency in Nigeria has made cross-border payments (remittances) far smoother due to a far lowered cost. Because Western banks are often highly expensive, cryptocurrency offers a cheaper alternative, allowing for the transfer of money in seconds with little cost. Yemen could see similar benefits, as the nation also faces the same remittance challenges.

The Negative Implications of Cryptocurrency

Although cryptocurrency serves the Houthis’ governmental goal of curbing inflation, implementing it poses many challenges, as they lack regulatory frameworks, infrastructure, and education. The primary infrastructure needed in Yemen is high-speed internet, of which Yemen ranks 148th, making the nation one of the slowest internet networks in the world. The implementation of these components is crucial for cryptocurrency to be used recreationally, which can only help the Houthis. These additions are in the rebels’ best interest because the ability for everyday citizens to use cryptocurrency would help cement their monetary control, demonstrate their governance capacity, and increase the revenue available for taxation.

To make cryptocurrency safe for everyday citizens, the Houthi authorities would need to implement two-step verification, encrypted user data, and enable offline storage options such as a vault or wallet. Without such security measures, the Houthis would struggle to expand cryptocurrency access nationwide for everyday users. Further, Yemen currently has no regulations on cryptocurrency, making it extremely dangerous for any citizen to invest in it, as there are no protections for the customer. Customers also need to be concerned about regulations that protect them from the government. There needs to be established citizens’ rights pertaining to the use and holding of cryptocurrency. What happens if cryptocurrency is stolen while in the citizen’s account – is it insured? These are questions that must be answered before country-wide implementation. Money laundering is also a concern. Organizations using cryptocurrency for money laundering can make Yemen a home for international criminal organizations, other than just the Houthis and multiple other rebel groups.

Finally, cryptocurrency requires a steep learning curve, and therefore, it is important for Yemen to educate its citizens on how to use it and how to keep their money safe. Yemen today reports that multiple citizens have fallen victim to fraud schemes, resulting in financial losses. Therefore, it is necessary for education to be provided on cryptocurrency and how to use it safely. Cryptocurrency can also be very volatile. Yemen today reports the concerns about cryptocurrency, including its volatility, with the possibility for the currency to make dramatic value changes in a matter of a few hours. Further, if cryptocurrency is lost or stolen, it is almost impossible for the victim to get their funds back, which further underscores the need for regulation.

The Benefits of the Hawala Networks

Yemen’s other option is to replace Hawala networks with a new currency other than the current Rial. Hawala networks are trust-based money transfer systems in which, according to Sanna’a Center for Strategic Studies, 70% of current money transfers are made in Yemen, making it the main source of banking for the country. This comes amid sanctions aimed at Houthi-controlled central banks. Hawal networks are unique in how they operate. For example, when I go into a local market in Yemen, I would see a shopkeeper who operates in the hawala network. I would then give them 50 bucks and tell them where I wanted the money to go. I further hold a unique number, code, or password. When I go to the specified location, where I wanted the money to be sent, I would give the other storekeeper the agreed-upon password and then receive my 50 bucks. This system requires no name and no paper trail, making it popular among people who want to bypass the strict sanctions of the U.S. hawala networks, which also require no new infrastructure or education to be put in place. Hawala networks are already established, and the most popular form of banking, with no infrastructure needed, thus they would offer more points of sale faster than if cryptocurrency were put in place.

The Negative Implications of the Hawala Networks

Hawala networks do not fix the inflationary problem in Yemen because they operate using Fiat money, meaning money backed by the government. The government already has too much money in circulation, which is a major driver of inflation. To reduce inflation, slowly taking some of that money out of circulation would be necessary. Hawala networks could still work if the government issues a new currency, thereby reducing the amount of money in circulation. However, there is nothing stopping the government from continuing to produce more of a new currency, meaning it would be a temporary fix.

Concluding Statements

Although cryptocurrency and Hawala Networks have different pros and cons, they are united by one problem: a fractured government. Both governments have different visions of how they want to run the country economically. A big help to the inflationary issue would be one of uniting the government so that all central banks and economic policy makers are under one roof.As mentioned, the two central banks – the Bank of Aden and the Bank of Sana’a – have had severe disagreements on banking policy, as they each continue to make staunchly different currency decisions. An example is implementing coins accepted in one half of the country but not the other, as reported by AP News. Further, the sanctions would likely be lifted under a single, internationally recognized government that is not deemed a terrorist organization. This would make free trade much easier, thereby lowering prices. Although both ideas have their drawbacks, for cryptocurrency to be implemented on a national level, the government needs to ensure it does so responsibly, or else it will further the economic destruction of the country.

Austin is a part of Columbia College’s class of 2029 and plans on majoring in Economics and Political Science. His future goals include law school, though he has deep interest in international relations and economics. Austin’s areas of interest are the emerging markets of Latin America and the Middle East.

Across the Middle East and North Africa (MENA) region, the informal, unregulated ‘shadow economy’ often shines brighter than its more formalized counterpart. In Algeria, government estimates suggest that approximately $76 billion USD circulates entirely outside the formal banking system, or in the shadow economy. While mainstream economic development narratives prioritize state or foreign-led interventions, the digitization of religious giving reveals that religious institutions and their financial arms can act as alternative mediators for financial inclusion. Zakat – the mandatory Islamic alms of 2.5% on one’s assets – can be expanded through fintech infrastructure in Islamic states like Algeria, whose fintech investment has long trailed behind its regional partners. These faith-based fintech developments can accelerate the formal financialization of vulnerable populations, such as those in rural areas without reliable access to financial services, while promoting broader technological innovation and economic stability.

The core of Algeria’s financial inclusion problem begins not with a lack of resources, but a profound lack of trust. A significant majority of the population, particularly vulnerable populations like ethnic minorities and the elderly, remain wary of traditional banking due to a perceived lack of security, transparency, and efficiency. In this vacuum, religious institutions are socially and politically salient. Approximately 99% of Algerians identify as Muslim, and religious beliefs strictly prohibit riba (interest-based transactions), leading many to avoid conventional banks entirely. This general avoidance was only exacerbated by the COVID-19 pandemic; Algerian public banks experienced a fall in liquidity and subsequent consumer withdrawals of savings, highlighting the vulnerability of formal financial institutions and the need for alternatives.

Islamic finance offers a compelling alternative because it emphasizes equity-based financing and risk-sharing, rather than speculative trading or the lack of transparency in financial contracts (gharar). Zakat, specifically, serves as a built-in socioeconomic stabilizer. During periods of recession, the amount of zakat disbursed for public welfare will be higher due to reserves saved during periods of economic expansion. By redistributing income, zakat encourages investment and helps mitigate the adverse impacts of economic recessions, with secondary benefits like reducing inflation and unemployment.

Historically, the Algerian Zakat Fund, founded in 2002 under the Ministry of Religious Affairs and Endowments, has been the primary vehicle for zakat funds. However, the Fund has struggled with managerial and governance challenges, including fund theft arising from its arguably outdated cash payment system. Here, Fintech provides a transformative solution. One alternative example Algerian researchers have pointed to is Nigeria’s Qitmeer Blockchain for Transparent Zakat Management. By recording every transaction on an immutable public ledger and automating calculations, the platform has boosted donor confidence, curbed corruption, and enhanced the impact of anti-poverty initiatives. Through the blockchain, each contributor is assigned a unique ID, with the system integrating with government databases to verify recipient eligibility and to ensure that funds reach those most in need.

To understand why digital zakat has not yet achieved total market penetration in Algeria, researchers have examined social acceptance toward Islamic fintech. A survey of 460 Algerian zakat payers conducted by Robbana et al. (2025) reveals a complex psychological landscape regarding fintech adoption. While users find the concept of a zakat platform beneficial, the research identified two negative correlations between Perceived Usefulness (PU) and behavioral intention (BI), analyzing the negative effect of service quality on PU. High-quality service is important for user convenience, but it could also be seen as excessively complicated or even less useful than traditional platforms. These findings suggest that for zakat platforms to succeed, they must focus on making the user experience more transparent, intuitive, and tailored to target communities to encourage adoption.

Fintech also offers the unique possibility of empowering vulnerable groups who have been historically excluded from financialization due to geographic and socioeconomic barriers. Mobile money is a critical driver in developing economies; the percentage of adults with mobile accounts in 2024 was 40%, which is a 16% increase since 2021. In areas where there is minimal trust in financial institutions is endemic, mobile money can promote transparency and inclusion. Still, this transition is not without risk. Vulnerable groups are disproportionately affected by digital fraud, cybersecurity breaches, and financial illiteracy. The elderly and less educated often lack the knowledge or experience necessary to navigate secure technologies. With a financial inclusion rate of only 22.59%, Algeria must develop hybrid models that integrate fintech with user-friendly designs, offering a ‘human touch’ to financial efficiency and transparency.

Despite the high domestic demand, the Algerian fintech ecosystem is still in its infancy. In 2021, only 44.1% of Algerians had a digital financial account. Several systemic barriers remain, such as high regulatory costs, infrastructure deficits, funding gaps, and talent recruitment. There is still no major Algerian ‘super-app’ that serves as a comprehensive Sharia-compliant financial services hub, unlike Malaysia’s Finterra or the UK’s Wahed Invest, making it an anomaly among its neighbors with strong Muslim communities.

While systemic challenges loom, Algeria’s potential for fintech growth is immense. The global Islamic fintech market is projected to reach $341 billion by 2029 with an annual growth rate of 11.5%. To capitalize on this momentum, Algerian governmental, financial, and religious organizations need to collaborate on simplification, education, and institutional reform. Platforms must feature user-centric, intuitive designs that prioritize transparency, especially for populations like rural or elderly Algerians. The national Algerian Zakat Fund must transition toward blockchain-based management to regain the trust of payers who prefer to give alms directly to beneficiaries. By treating zakat not just as an obligation but as an opportunity, Algeria can guide its shadow economy to the light, creating long-term development through investments in fintech infrastructure.

Audrey Jones is a freshman at Columbia University (CC ‘29) studying Political Science and Religion as a John Jay Undergraduate Scholar. She is interested in the intersections of religion and public policy, socio-economic development in the postcolonial world, and political theory. She hopes to pursue a career in academia or policy research. Audrey enjoys writing creative and academic pieces, reading, and exploring New York City’s Five Boroughs.