EY: Argentina Publishes Decree Implementing Incentive Regime for Large Investments (RIGI)

The Argentine government sets detailed guidelines for the long-awaited RIGI, outlining tax and customs benefits aimed at boosting large-scale investments in key sectors.

On 23 August 2024, the Argentine National Executive Branch published Decree 749 in the Official Gazette, providing operational guidelines for the Incentive Regime for Large Investments (RIGI). This regime, first established under Title VII of Law No. 27,742, offers significant benefits to both foreign and local investors who commit to executing large-scale investments. The primary goal of RIGI is to provide these investors with predictability, stability, legal certainty, and protection of acquired rights in tax, customs, and foreign exchange matters.

[caption id="attachment_27228" align="aligncenter" width="900"] Argentina: Buenos Aires[/caption]

With Argentina continuing to face economic challenges, including high inflation and a complicated business environment, the publication of the RIGI decree is a crucial step in the government’s efforts to stimulate economic recovery and attract foreign direct investment (FDI). Investors are looking for stable and transparent frameworks to guide their decisions, and this decree sheds light on many of the key aspects of the regime that had previously been unclear.

Below, we explore the main clarifications and provisions outlined by the decree.

Activities Included in the Incentive Regime

The decree provides more detailed definitions of the sectors eligible for benefits under the RIGI, specifying the types of activities that qualify within each sector. The sectors are diverse and encompass key industries vital to Argentina’s economic growth. Here’s a breakdown of the activities included:

Forestry Sector: This includes activities where wood is the primary input for production, extending to the planting and development of forests. The sector is seen as critical to both the environment and industry, particularly given the global focus on sustainable development.

Tourism Sector: Activities here focus on lodging and accommodation services, a vital industry in a country like Argentina, which has a robust tourism sector driven by its natural and cultural attractions.

Infrastructure Sector: This covers the construction of physical structures, networks, and systems essential for transport (including road, rail, maritime, and air transport), logistics, and public services. Importantly, it also includes infrastructure for leisure projects, such as resorts and entertainment facilities, and critical services like healthcare, education, telecommunications, and national security.

Mining Sector: This includes activities involving the exploration, development, and exploitation of mineral substances, as well as specific processes defined under existing mining laws. Mining remains one of Argentina's most significant sectors, especially given the country’s rich natural resources.

Technology Sector: Innovation is at the heart of this sector, which covers the production of goods and services in areas such as biotechnology, nanotechnology, artificial intelligence (AI), and aerospace. Argentina is positioning itself as a hub for technology development, and the inclusion of this sector under RIGI is intended to spur growth and attract investment in cutting-edge fields.

Steel Industry: This includes the processing and industrialisation of iron ore, steel, and its alloys, vital for the production of both primary and finished goods.

Energy Sector: As Argentina continues to diversify its energy sources, this sector covers activities related to the generation, storage, transport, and distribution of electrical energy from renewable and non-renewable sources. It also includes bioenergy production and carbon capture technologies, which are key to the country’s transition to a low-carbon economy.

Oil and Gas Sector: This encompasses a wide range of activities, from the construction of oil pipelines and storage facilities to the production and export of liquefied natural gas (LNG). Offshore exploration and petrochemical refining are also included, recognising the importance of the energy sector to Argentina's export economy.

Local Suppliers of Goods and Services

The decree also clarifies the role of local suppliers within the regime. Goods and services suppliers who import merchandise for use in RIGI projects will be exempt from import duties, statistical fees, and customs withholdings. However, these benefits are limited to inputs and intermediate goods that are intended exclusively for transformation into capital goods or information technology products as defined by Mercosur’s Common Nomenclature.

This exemption also applies to suppliers who rent such goods to RIGI projects. In effect, the decree incentivises the development of a local supply chain that can support large-scale investment projects, with the aim of boosting the national economy.

Minimum Investment Amounts

To qualify for the RIGI, investors must meet minimum investment thresholds, which vary depending on the sector. These thresholds are substantial, reflecting the regime’s focus on large-scale, long-term projects. The minimum investment amounts per sector are as follows:

Forestry, tourism, infrastructure, technology, steel, and energy sectors: $200m.

Mining: $200m (including both exploration and mineral extraction).

Oil and Gas (offshore exploration, gas intended for export): $600m.

Long-term strategic export projects: $2bn.

These minimum investment requirements ensure that the regime targets only the largest and most impactful projects, driving significant economic growth.

Investment Limitations

While RIGI offers generous benefits, there are limitations on the types of investments that qualify. For instance, acquisitions of shares in companies, real estate, and certain concessions are capped at 15% of the minimum investment requirement. This ensures that the regime’s benefits are directed towards productive, long-term investments rather than financial transactions or short-term asset acquisitions.

The decree specifies that this 15% limitation applies to:

Acquisitions of shares or participations in companies, including the acquisition of other VPUs (Promoted Entities).

Real estate investments.

Mining, oil, and gas exploitation concessions.

Local Supplier Development Plan

A critical element of the RIGI regime is the requirement for Promoted Entities to commit to sourcing at least 20% of their project’s investment from local suppliers. The decree defines a Local Supplier as an individual or legal entity domiciled in Argentina, with at least 51% of its share capital owned by entities or individuals also domiciled in the country.

This local content requirement aims to ensure that the economic benefits of large-scale investments extend beyond the projects themselves, fostering the growth of local industries and creating jobs.

Pre-existing Projects

The decree also addresses the issue of pre-existing projects. It clarifies that expansions of existing projects can qualify under RIGI, but the benefits of the regime will only apply to the expansion itself, not the original project. To qualify, companies must either maintain separate accounting for the expansion or establish a dedicated branch solely for the expanded project.

This provision encourages investors to expand current operations, providing a pathway for growth while ensuring that the original project remains distinct from the expansion in terms of incentives.

Transfer of Tax Losses and Export Proceeds

A particularly attractive feature of the RIGI regime is the ability to transfer unused tax losses to third parties. The decree establishes that the Argentine Tax Authority (AFIP) will regulate the process, ensuring that losses can be transferred after five years if not fully utilised. This provision adds flexibility for investors, allowing them to maximise the value of their tax benefits.

In terms of export proceeds, the decree provides further clarity on the "non-entry of exports" benefit, defining the start of activities as the first export of the project’s primary product or the completion of 40% of the minimum investment amount. This ensures that investors have a clear timeline for when they can begin to realise the benefits of the regime.

Non-cumulative Benefits

The decree also specifies that fiscal benefits from other regimes, such as those under the Mining Law, cannot be combined with RIGI benefits if they are of a similar nature. This prevents double-dipping and ensures that investors choose the most appropriate regime for their project.

Looking Forward

The publication of the RIGI decree marks a significant milestone in Argentina’s efforts to attract large-scale investments. By providing a clear and stable framework, the regime offers investors the confidence they need to commit to long-term projects. The 30-year stability period, combined with generous tax, customs, and foreign exchange benefits, makes RIGI an attractive option for investors in key sectors such as energy, technology, and infrastructure.

If successfully implemented, RIGI could be a game-changer for Argentina, driving economic growth, creating jobs, and positioning the country as a hub for large-scale international investment.

About the Author

[caption id="attachment_15880" align="aligncenter" width="269"] Author: Sergio Caveggia[/caption]

Sergio Caveggia is a tax partner currently in charge of Transaction Tax area in Argentina. He joined EY Argentina in 1994 and has developed expertise over 26 years in international taxation and merger and acquisition matters. Sergio is also focus on servicing clients in the Private Client Services (PCS) area. He is highly experienced in inbound and outbound investments, buy side, sell side and restructuring services within the Transaction Tax area.

Sergio has served in a variety of industries and has also been involved in many due diligence procedures performed in the past over 20 years. He has given lectures in national universities and is a frequent speaker in tax seminars. He has also written several articles dealing with Argentina tax issues.

He is a Certified Public Accountant who graduated from University of Belgrano in Argentina. He obtained his Tax Specialist’s Degree at the University of Belgrano and has a postgraduate certificate in Business and Management from Universidad Catolica Argentina (UCA). He is also member of the Professional Council of Economic Sciences of Buenos Aires and the Argentina Fiscal Association.


Pioneering Sustainability and Tech Integration in Europe

Europe’s got the pedal to the metal, and we can expect to see ground-breaking inventions coming our way...

Europe, a continent rich in history and tradition, is also a definite hub of innovation, leading the way in sustainability across industries. The EU’s commitment to a greener and more connected future is reflected in its dynamic innovation environment, which includes renewable energy and electric vehicles, as well as medical advances and digital transformations.

Germany: Industry 4.0

Dubbed the "engine of Europe", Germany is known for its engineering prowess. The country is at the vanguard of the Industry 4.0 movement, using the latest in artificial intelligence and robotics to overhaul its industrial sector.

Multinational Siemens is an excellent illustration of German inventiveness. The company is a pioneer in Industry 4.0 solutions, which assist manufacturers in optimising operations, increasing efficiency, and cutting costs. Siemens is defining the future of manufacturing with smart factories and “digital twins”, as well as predictive maintenance and supply chain optimisation.

Beyond industrial innovation, Germany has made tremendous advances in medicine. BioNTech received international attention for its crucial role in creating one of the first mRNA vaccines. This technique has the potential to transform vaccine development and disease treatments.

Sweden: Music and Batteries

Renowned for its minimalist design and devotion to sustainability, Sweden has also given birth to some of the world's most inventive businesses.

Spotify, the world's top music-streaming platform, transformed the leisure industry by allowing users to listen to millions of songs — on demand. The firm's personalised recommendations and user-friendly design have changed the way people discover and listen to music.

Another Swedish innovator is Northvolt, which is addressing sustainable battery production and creating one of Europe's largest battery factories. And yes, it will run solely on renewable energy. Northvolt batteries are designed to be more environmentally friendly and have a longer lifespan than typical lithium-ion batteries.

Estonia: The Digital Nation

This small Baltic country has emerged as a world leader in digital innovation. Estonia has adopted technology to improve government services, increase transparency, and empower individuals.

Estonia's e-residency programme enables anyone from anywhere in the world to establish a “digital presence” in the country — and benefit from its business-friendly climate.

Skype, the ubiquitous communications platform that allows for audio and video chats over the internet, was co-founded by Estonian entrepreneurs. Skype transformed communication during the pandemic, making it possible for people to connect with friends, family, and co-workers.

Another Estonian success story is TransferWise (now Wise), which revolutionised international money transfers with transparent costs and low rates. Wise's revolutionary approach has made it easier and less expensive for consumers and businesses to send and receive money across borders.

France: Ahead in the Cloud

Ah, les français. France, known for its art, culture, and food, is also a hotbed of invention in the fields of transport and technology. BlaBlaCar, the French ridesharing network, matches empty seats with passengers heading in the right direction. This ingenious idea lowers transit costs and promotes sustainability — fewer cars, see?

Cloud computing company OVHcloud provides a variety of services, such as web hosting, virtual private servers, and dedicated servers. It’s committed to data sovereignty, giving its customers complete control over their data while assuring them privacy and security. OVHcloud's solutions enable organisations of all sizes to embrace the cloud and accelerate their digital transformation.

UK: AI and Chips, Please

Britain, with its long history of scientific discovery and technical growth, retains a key role in the global innovation landscape. DeepMind, an AI start-up acquired by Google, has made huge strides by creating algorithms capable of mastering complex games such as Go and chess. DeepMind's technology has the potential to revolutionise a number of industries, including healthcare, banking, transport, and energy.

Another UK innovator is Graphcore, which develops next-generation AI chips to accelerate machine learning. Researchers and developers hope to push the boundaries of AI innovation with the company's intelligence processing units (IPUs), which outperform typical GPUs. Graphcore's technology is expected to play an important role in advanced AI applications such as self-driving cars, robots, and natural language processing.

Europe's dedication to sustainability has made it a global innovation leader. The scene is diverse and dynamic, and going places.

As the globe grapples with climate change, resource shortages, and an ageing population, Europe's emphasis on sustainability and technological integration provides hope. The continent creates economic possibilities and contributes to a greener, healthier, and more connected future for everyone.


Technology Giants and the Emerging Disruptors: Asia Pacific’s Powerhouse

The region is now regarded as the global epicentre of innovation.

The Asia Pacific region, home to both established tech giants and a new insurge of start-ups, is experiencing a technological revolution that is changing sectors, transforming cultures, and driving economic growth.

From e-commerce and mobile payments to AI and renewable energy, Asia Pacific is at the vanguard of fresh thought and new tech, propelling progress to the limit of what is possible. Some important actors and trends are shaping this dynamic environment.

China: The Technology Titan

China, the world's second-largest economy, has emerged as a tech powerhouse, with a thriving innovation ecosystem and a rapidly expanding digital economy. The country is home to some of the world's largest and most powerful businesses, including Alibaba and Tencent.

E-commerce giant Alibaba has transformed online shopping. Its platforms, which include Taobao and Tmall, bring together millions of Chinese customers and sellers, boosting trade and economic growth.

Tencent, a digital corporation, offers a range of products and services including WeChat, an app that combines messaging, social networking and a payments system. WeChat has become part of everyday life in China, changing the way people communicate, connect, and transact.

Beyond these established firms, China is experiencing a boom in the start-up arena. It’s a leader in AI, with businesses such as SenseTime and Megvii producing cutting-edge solutions for facial recognition, self-driving cars, and healthcare.

China is also leading the world in renewable energy, with large-scale investments in solar and wind-power installations.

India’s Digital Revolution

The world's most populous democracy is undergoing a digital revolution. With a huge and young population, rising smartphone penetration, and government programmes promoting digital inclusion, India is a hotbed of innovation.

Paytm, a digital payments platform, has allowed millions of consumers to make payments, move money, and access financial services via their mobile phones. Ola Cabs, a ride-hailing service, has rocked the Indian transport market.

India's start-up economy is also growing, with companies providing novel solutions for a variety of industries, including healthcare, education, and agriculture. The tech emphasis is also visible in the Indian Space Research Organisation (ISRO), which has attained major milestones, including the successful launch of the Mars Orbiter Mission.

South Korea: Innovator Supreme

South Korea is another pioneer in innovation, home to electronics behemoth Samsung, a global company that has continuously pushed the envelope, creating everything from smartphones and televisions to semiconductors and household appliances.

Coupang, an e-commerce firm, has revolutionised the online retail market by combining swift delivery with fine customer service. The company's logistical network and personalised recommendations have made it a popular choice among domestic consumers.

South Korea is also distinguished by its robust R&D capabilities and government support for tech development. The country is a leader in 5G technology, with telecom providers rapidly deploying these networks to enable new apps and services in virtual and augmented reality, as well as the Internet of Things (IoT).

Singapore: The Smart Nation

This city-state is noteworthy for its efficiency and forward-thinking policies, establishing itself as a "smart nation". The government is spending big to improve citizens' lives and boost national competitiveness.

Grab, a Singapore-based super app, provides services including ride-hailing, food delivery, payments, and more. Its success demonstrates the region's growing hunger for digital services — and its potential.

Another Singaporean business, Sea Ltd, is a gaming and e-commerce giant featuring platforms such as Garena and Shopee that attract millions of users throughout South East Asia.

Singapore's innovation ecosystem puts special emphasis on sustainability and smart solutions. It’s experimenting with ways to tackle urban issues such as traffic congestion, energy efficiency, and waste management.

The Asia Pacific area is fuelled by a mix of tech titans, start-ups, government assistance programmes, and a growing appetite for digital services. From China's IT growth to India's digital revolution, South Korea's technological strength, and Singapore's smart projects, the region is on the move.

As the region continues to invest in education, R&D, and infrastructure, we can expect more ground-breaking inventions in coming years. These breakthroughs could have far-reaching implications for the global economy. The Asia Pacific’s road to a more connected, sustainable, and affluent future demonstrates vitality, resilience, and unwavering pursuit of progress.


Diversifying Economies via Tech Hubs: Middle East on the Ascent

The region, long linked with abundant energy resources, is undergoing a tremendous shift…

Recognising the need to diversify their economies and ensure a sustainable future, Middle Eastern governments are investing in technology and innovation.

From thriving tech clusters and game-changing companies to ambitious government projects and visionary entrepreneurs, the region is experiencing a surge that is transforming its environment — and opening up new frontiers.

UAE: Global Innovation Hub

The United Arab Emirates, renowned for futuristic skylines and ambitious projects, is taking to the innovation stage.

The country has created a welcoming climate for start-ups and entrepreneurs with incentives, investment, and world-class infrastructure. Dubai, in particular, has become a hub for tech talent and investment.

Careem, a ride-hailing service developed there, has become a household name throughout the Middle East. The success story reflects the region's entrepreneurial culture — and increasing demand for digital services.

Kitopi, another Dubai-based firm, is transforming the food business with its “Cloud kitchen” model. Kitopi helps restaurants to optimise their operations and improve their delivery service via data analytics, contributing to the region's food and beverage sector.

Israel: The Startup Nation

Israel, sometimes referred to as the "Startup Nation", has built a reputation for its vibrant innovation ecosystem. The country has a high proportion of startups relative to its population, fuelled by an entrepreneurial culture, excellent R&D capabilities, and generous government backing.

Mobileye, an Israeli startup that specialises in self-driving technology, has become a global leader in its industry. The company's advanced driver-assistance systems (ADAS) are employed by major manufacturers worldwide, helping to produce safer and more efficient vehicles.

Wix, another Israeli success story, allows individuals and organisations to create websites without requiring any technical experience. The company's user-friendly platform and extensive template library have democratised web design, making it accessible to all.

Saudi Arabia: Vision 2030

The Middle East's largest economy is embarking on an ambitious overhaul under its Vision 2030 initiative. This strategy seeks to diversify the economy beyond crude oil, aiming for a knowledge-based culture with technology and innovation at its core. The government is making significant investments in infrastructure, education, and entrepreneurship.

Noon, a Saudi e-commerce platform, is rapidly expanding its regional footprint with a diverse selection of products and services. Its growth mirrors the rise of online shopping in the Middle East, as well as the potential for internet-based commerce to generate economic growth.

Lucid Motors, a US-based EV manufacturer financed by Saudi Arabia's Public Investment Fund, is also making an impact. Its luxury electric cars are setting new standards for performance and sustainability, accelerating the global shift to greener transportation.

The Middle East is undergoing a tremendous shift, propelled by an increasing emphasis on technology and innovation. Countries in the region are actively diversifying their economies, establishing vibrant technology clusters, and encouraging an entrepreneurial spirit. The Middle East is emerging as a dynamic force in the global innovation environment, with the UAE's global ambitions, Israel's startup prowess, and Saudi Arabia's Vision 2030 and tech aspirations.

As the area continues to invest in education, research and development, and infrastructure, we may expect a surge of ground-breaking inventions that will not only revolutionise the Middle East but also contribute to global technological and knowledge advancements. The Middle East's march to a more diverse and sustainable future demonstrates its resilience, adaptability, and persistent pursuit of growth.


Latin America's Wave of Innovation: Fintech Revolution and Social Impact

 The region famed for its diverse cultures and rich history now has new ideas for its economies and societies.

Latin America offers ideal proving ground for tech innovations, with a growing middle class, rising smartphone use, and an expanding hunger for digital services.

Fintech, in particular, is transforming the financial environment by bridging financial inclusion gaps and empowering individuals and enterprises. Beyond this, creative solutions are emerging in e-commerce, delivery services, and social impact activities.

Brazil: Fintech Giant

Latin America's largest economy is leading the fintech field. The country's large unbanked population, along with a favourable regulatory environment, has provided fertile ground.

Nubank, a digital bank, has upended traditional banking business with an app featuring no-fee accounts and personalised financial services.

Its quick growth and success have cemented its place as a symbol of the Latin American boom. iFood, another Brazilian success story, is the top food-delivery platform. iFood's revolutionary logistics network has livened-up the sector, making it more convenient and accessible.

Brazil's innovation ecosystem is notable for its expertise in agtech, with companies developing solutions for precision agriculture, crop monitoring and supply chain management. The country is also a leader in renewable energy, with hydroelectric power accounting for a large chunk of generation, and an increasing emphasis on solar and wind energy.

Argentina and E-commerce

Recognised for its dynamic culture and entrepreneurial drive, Argentina is going strong in e-commerce and finance. The country's economic woes have sparked a surge of ingenuity and resourcefulness, resulting in some novel solutions.

MercadoLibre, an e-commerce platform, is the largest online marketplace in Latin America, connecting millions of shoppers and merchants. The platform offers a range of items and services, including electronics, fashion, real estate, and automobiles.

Ualá, a fintech firm, offers a mobile-first financial platform for services including prepaid cards, personal loans, and investments. The company's mission is to promote financial inclusion and empower individuals.

Argentina is also known for its prowess in software development and IT services. With a large and highly qualified workforce, and an increasing number of tech enterprises that export their services, this country is on the move.

Colombia: Apps and ID Verification

Colombia has a booming economy, and is seeing an increase in innovation in delivery services and identity verification.

Rappi, a delivery app, has become a household name in Latin America, providing on-demand food, grocery, and pharmaceutical delivery. The platform and its network of delivery partners have made it a popular choice. Truora, another Colombian pioneer, offers ID verification tools to help organisations avoid fraud and expedite customer onboarding. The company uses biometrics and machine learning to reliably authenticate identities.

Colombia's innovation ecosystem is notable for its emphasis on social impact and sustainability. It is home to various social companies and non-profits that use technology to address poverty, inequality, and environmental damage.

Fintech improvements, e-commerce expansion, social impact initiatives, and government assistance have all contributed to Latin America's upswing. The region is experiencing a tsunami of innovation that is reshaping economies and communities.

Latin America continues to invest in education, infrastructure, and entrepreneurship. This will not only address local difficulties, but help to advance tech knowledge worldwide. This is a region on the march to a more inclusive, sustainable, and wealthy future.


Otaviano Canuto: The US Elections Will Have Global Economic Impact

On Tuesday, US voters will decide who will control the White House, the Senate, and the House of Representatives. Kamala Harris, Donald Trump, and their respective parties differ significantly on key economic policies that will affect not only the U.S. but the global economy. Here, we examine the candidates’ positions on trade, tax, energy, and immigration.

In trade, while President Joe Biden’s administration has not championed free trade—maintaining Trump’s tariffs on Chinese imports and recently increasing tariffs selectively—a potential Trump administration would likely be even more protectionist than one led by Harris. Trump has already floated proposals like a 60 percent tariff on all Chinese imports and a universal 10 percent tariff on all imports. While the Biden administration has pursued a ‘de-risking’ approach to reduce reliance on the Chinese economy, citing national security concerns, Trump’s stance suggests a full ‘decoupling’ from China.

Like many mercantilist policies, there is an underestimation of the negative impacts on both countries involved and on third parties. For example, Trump’s tariffs on Chinese imports led to a reduction in US manufacturing jobs, as found by Federal Reserve economists in 2019. Moreover, US agricultural producers lost market share to Brazilian competitors in China. For countries like Mexico, Vietnam, and Malaysia that benefited as intermediaries during the previous US-China trade war, a full decoupling would likely disrupt these trade links.

[caption id="attachment_27250" align="aligncenter" width="900"] Figure 1[/caption]

Trump likens trade wars to boxing matches, where rising costs for American consumers due to tariffs are simply part of the toll. Harris, by contrast, has described Trump’s tariff proposals as a tax on US consumers, suggesting that she would be more cautious in adopting additional protectionist measures.

In the realm of taxation, Trump and Harris have distinct positions. While the 2017 corporate income tax cuts are permanent, individual and estate tax cuts are set to expire at the end of 2025. Trump aims to make these cuts permanent, while Harris seeks to increase taxes on individuals earning more than $400,000. Harris’s campaign has also endorsed Biden’s proposals to raise taxes on the wealthy. Congress’s composition post-election will be crucial in determining the success of these tax plans, as both candidates propose to fund their policies through tax increases: on corporations and the wealthy in Harris’s case, and through import tariffs in Trump’s. However, it’s widely doubted that tariff revenue could offset lost tax income, particularly as fiscal deficits and interest costs grow.

[caption id="attachment_27251" align="aligncenter" width="900"] Figure 2[/caption]

Energy policy is another area where the two candidates diverge significantly, with implications for the ongoing battle between fossil fuels and renewables. Regardless of the election outcome, US electricity demand is expected to rise, driven in part by the energy-intensive needs of data centres and AI applications. Republicans, led by Trump, support fossil fuels and have pledged to ‘drill and drill.’ Democrats, on the other hand, are committed to scaling up solar, wind, and geothermal projects, with election results likely to influence the pace of the US energy transition and its impact on global energy markets.

Notably, the prices of industrial metals are fluctuating in response to changing electoral probabilities, as measured by voter polls. Meeting growing energy demands with renewable sources would require more extensive upgrades to the power grid, involving greater use of metals like copper and aluminium, than would fossil fuel-based solutions.

[caption id="attachment_27252" align="aligncenter" width="900"] Figure 3[/caption]

The outcome of the election is also expected to have a marked effect on US immigration policy. Trump and Harris represent sharply different approaches. Trump has proposed ending birthright citizenship for children of undocumented immigrants and hinted at the forced deportation of illegal immigrants—measures that legal experts argue would be difficult to implement. If Trump wins, expect immigration to decrease, as it did during his first term from 2016 to 2020.

In contrast, Harris supports policies that provide pathways to citizenship for undocumented immigrants, especially for children. While both candidates advocate for some level of restriction on illegal immigration, Trump’s approach is likely to be more aggressive. Immigration has played an important role in the US labour market; without recent immigration levels, the US would not have outperformed many advanced economies over the past two years. According to the Federal Reserve Bank of Dallas, increased labour supply and demand from immigrants boosted GDP growth. The rise in the foreign-born population has played a key role in the US economy, as illustrated in a recent report.

For the rest of the world, the differences between the candidates’ trade, tax, energy, and immigration policies carry significant implications. The world is closely monitoring the US electoral process, recognising its potential to influence global economic stability. Those who advocate for a transition to renewable energy and view trade as a positive-sum game may have already chosen their preferred outcome.

[caption id="attachment_27253" align="aligncenter" width="900"] Figure 4[/caption]

Originally published at Policy Center for the New South.

About the Author

Otaviano Canuto, based in Washington, D.C, is a former vice president and a former executive director at the World Bank, a former executive director at the International Monetary Fund, and a former vice president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at the University of São Paulo and the University of Campinas, Brazil. Currently, he is a senior fellow at the Policy Center for the New South, a professorial lecturer of international affairs at the Elliott School of International Affairs - George Washington University, a nonresident senior fellow at Brookings Institution, a professor affiliate at UM6P, and principal at Center for Macroeconomics and Development. Otaviano has been a regular columnist for CFI.co for the past 13 years. X: @ocanuto


Milan Fintech Summit 2024 Underlines Italian Ambitions

When asked to name the fintech capitals of Europe, most people would opt for Paris, Berlin, Stockholm, or the Baltic cities of Vilnius and Tallinn. But another destination has ambitions to play in the fintech 'Champions League'—the Italian city of Milan.

[caption id="attachment_27258" align="aligncenter" width="900"] Milan: Unicredit tower, UnipolSai tower, the Bosco Verticale and BAM public park[/caption]

While tourists may know Milan for historic sites such as its Gothic Duomo and the Teatro alla Scala, the city has done an impressive job of reinventing itself as an innovation hub – spearheaded by the development of the Milan Innovation District (MIND). With advances in sustainability and urban development, there's no reason why this Northern Italian powerhouse shouldn't also set its sights on fintech.

To focus attention on this ambition, Milan has created a dedicated Fintech District which is home to over 300 fintech and techfin companies. It also hosts the Milan Fintech Summit (MFS), launched in 2020. With its fifth edition having just taken place at the Allianz MiCo, the summit aims to reinforce Milan's status as a critical hub for financial innovation in Europe and spotlight the burgeoning Italian fintech sector.

Here are some key themes to emerge from this year’s event:

The building blocks are in place – but Milan needs a breakout hit: With over 15000 financial companies and 2800 startups, Milan boasts a robust financial ecosystem. The city attracts 69% of investments in the Italian fintech sector, making it a natural focal point for growth. Italy has given birth to two financial unicorns (Satispay and Scalapay) in recent years, but Milan could do with another to truly attract attention. This is not an easy task – because exciting Italian startups often choose other cities as their bases. An example is London-based Desia, launched by a co-founder of Scalapay. One positive development, however, is that the Italian government and regulators are taking steps to support innovation, such as a sandbox managed by various institutions including Banca d’Italia, Italian financial regulator CONSOB, and the Italian Ministry of Economy and Finance. This sandbox allows fintech startups to test innovative models under regulatory supervision for up to 18 months.

Interaction between Milan fintechs and Italy’s regulators is critical: Picking up on the previous point, Milan's potential is enhanced by a progressive regulatory regime. At the MFS, Alessandra Perrazzelli of Banca d'Italia (which has a regulatory function) talked about the success of its Milan sandbox. Italy is also notable for its willingness to introduce specific legislation around equity crowdfunding. In addition, it takes an even-handed approach to regulation, with fintech players typically subject to the same rules as traditional institutions.

Could regulators do more to energise Italian fintech? There was a sense at the MFS that some sectors, like Virtual Asset Service Providers (VASPs), have faced increased regulatory scrutiny, which may impact innovation. Delegates were also waiting to see how the transition to new EU regulations like MiCAR which addresses markets in crypto assets, will be handled. This is likely to have a significant impact on fintech, requiring careful management.

Milan is nurturing national and international engagement: Fintech is not an area where cities can go it alone – they need investment, industry partnerships and an openness to global talent and ideas. The Milan Fintech Summit plays a key role in this and has taken the positive step of holding roadshow events in other regions, including Rome. There is an acknowledgement here that Milan's fintech ambitions are entwined with the wider ambitions of Italy's public and private sectors.

While the Italian fintech sector is growing, there is also recognition that it needs to continue showcasing its potential on the international stage. Milan is leading in this through

the MFS and the Fintech District and Open Banking platform Fabrick which has created an Open Finance ecosystem to encourage collaboration and sharing of ideas around financial services.

It's worth noting that 30% of the companies now based in Milan’s Fintech District are from markets such as France, Germany, Switzerland, the UK, and the US. One suggestion doing the rounds was that Milan should collaborate more with other challenger fintech hubs like Latvia or Malta.

Milan-based fintechs are working out how to harness AI safely: A survey conducted by the MFS revealed the sectors attracting the lion’s share of investment; with 50% eyeing techfin solutions and 25% targeting wealthtech and insuretech, respectively. Drilling down, the survey found that 50% of Italian fintech investors are interested in innovations in AI, machine learning, and fraud prevention.

A key impression from the MFS is that Italian fintechs are already benefiting from AI's capabilities in areas like risk assessment, predicting customer behaviour, identifying investment opportunities, and improving fraud detection. However, there was also a clear understanding of the risks involved, such as data privacy breaches, AI hallucinations, the potential for biases and security vulnerabilities. There was discussion around the need for regulatory compliance while implementing AI solutions.

Milan is committed to gender balance in fintech: Milan and Italy in general, supports diversity in fintech leadership. For example, recent data from Milan’s Fintech District revealed that 22 companies in its community have female leadership, including 15 women as CEOs. Among these are Clearbox AI, Tech Engines AI and Vidyasoft. Of course, there is still a long way to go – and how to achieve greater balance was a prominent theme at the 2024 MFS.

Suggestions for improving gender balance included implementing programmes to support underrepresented groups in the startup ecosystem. There were also calls for mentorship and education programmes and a shift towards diverse funding mechanisms. The aim would be to ensure VC and investment decisions are made by diverse teams - to reduce unconscious biases.

Final Thought

The Milan Fintech Summit 2024 provided an excellent platform for showcasing Italian fintech potential and positioning Italy as a key player in European fintech. However, while progress has been made in fostering innovation, there is still work to generate international investment and create fintech winners. As the sector continues to evolve, particularly with the rapid advancement of AI, finding a balance between innovation and regulation will be key to sustainable growth and success.

[caption id="attachment_26633" align="aligncenter" width="257"] Author: Alessandro Hatami, Managing Partner of Strategic Consultancy Pacemakers[/caption]


The AI Revolution in the Boardroom: AI Executives are Arriving Sooner Than You Think

The future of business leadership is no longer a distant prospect; it's unfolding at an unprecedented pace. Artificial intelligence (AI) is poised to revolutionize the boardroom, and the rise of AI executives is no longer a question of "if" but "when."

While AI is already transforming businesses, its influence is about to extend far beyond automating tasks and improving efficiency. We are on the verge of a new era where AI systems could assume executive roles, driving strategic decision-making and shaping the future of companies.

The Accelerating Pace of Change

The rapid advancements in AI technology, particularly the exponential growth in processing power, are compressing the timeline for this transition. What previously seemed like a decade-long process could now unfold within the next few years.

This accelerated pace underscores the urgency for boards to prepare for the rise of AI executives. The time to adapt is now, not in some distant future.

The Subtle Shift in Power Dynamics

The emergence of AI executives might not be a sudden takeover. Instead, it's likely to occur through a subtle shift in power dynamics. Human executives, increasingly reliant on AI-powered insights and recommendations, might gradually cede control to these systems.

The superior analytical capabilities of AI, its ability to process vast amounts of data and identify patterns invisible to humans, could make its recommendations increasingly compelling and difficult to ignore. This could lead to a scenario where AI systems become the de facto executives, shaping strategy and influencing key decisions, even without formal titles or explicit recognition.

The New Role of the Board

In this evolving landscape, the role of the board of directors will undergo a profound transformation. Boards will need to adapt from overseeing human executives to governing AI executives. This requires a new set of skills and understanding to ensure that AI systems operate ethically, align with the company's values, and serve the best interests of all stakeholders.

Key Challenges for Boards

Developing AI Literacy: Boards must urgently become AI-literate. This involves understanding the capabilities and limitations of AI, the ethical implications of its use, and the potential risks associated with AI decision-making.

Ensuring Accountability: Establishing clear lines of responsibility and accountability for AI-driven decisions is critical. Boards need to develop mechanisms for auditing and reviewing AI decision-making processes to ensure human oversight and prevent unintended consequences.

Maintaining Transparency: Promoting transparency in AI-driven decision-making is essential. Boards must ensure that companies disclose how AI is being used in their decision-making processes and that these processes are explainable, even to non-experts.

Upholding Ethical Standards: Boards play a crucial role in ensuring that AI executives operate ethically and align with human values. This involves developing ethical guidelines for AI and establishing mechanisms for addressing potential biases or unintended consequences.

A Call for Immediate Action

The rise of the AI executive is not a distant threat; it's an imminent reality. Boards that fail to adapt risk being caught unprepared, potentially ceding control of their companies to opaque and unaccountable AI systems.

The time for proactive action is now. Boards must:

Prioritize AI literacy and skill development.

Establish clear ethical guidelines and accountability mechanisms for AI.

Engage in open dialogue with stakeholders about the future of AI and its role in the company.

Embrace a culture of continuous learning and adaptation to keep pace with the rapid advancements in AI.

By taking decisive action today, boards can ensure they remain relevant and effective in the age of AI, guiding their companies towards a future where AI serves humanity and promotes our collective well-being.


Meet the Enigmatic Genius Who Changed Chess Forever

Few names in the classic game’s history shine as brightly as Bobby Fischer's.

From child prodigy to grandmaster, Bobby Fischer didn’t waste any time in his rise to the pinnacle of the chess world. He certainly burned brightly, but his brilliance was tempered by his enigmatic nature — and his eventual, spectacular unravelling.

During the height of the Cold War, his historic 1972 World Chess Championship match against Boris Spassky went beyond the confines of the sport; it was a symbolic clash between East and West. Fischer's triumph cemented his place in the chess firmament and enthralled the world.

The Child Prodigy

His rise to glory began at an extraordinarily early age. Born in Chicago in 1943, Fischer discovered his passion for chess at six and became obsessed with the game. He spent hours studying, analysing classic games, and competing against anyone willing to take him on.

Fischer’s unusual training methods, which focused on self-directed study and relentless practice over official coaching, produced astounding outcomes. He won the US Junior Chess Championship at 13, and a year later became an International Master. Known for his strong strategy, tactical skill, and unyielding drive, Fischer made seminal contributions to chess theory, particularly in opening preparation.

The Match of the Century

The 1972 World Chess Championship between Fischer and Spassky was more than just a contest between chess titans; it was a clash of philosophies amid Cold War tensions. Fischer’s quirky behaviour and unusual demands nearly delayed the event, but when it finally took place in Reykjavik, the world witnessed brilliance.

Challenger Fischer’s aggressive style initially overwhelmed Spassky. Despite forfeiting the second game, Fischer made an incredible comeback, marking a historic moment in chess by ending Soviet dominance. Millions tuned in to watch, captivated by the games and the drama.

Fischer vs. Grandmasters

Fischer’s playing style was a blend of aggression, resilience, and strategy, with a peak rating of 2785 in 1972, one of the highest ever. His mastery, tactical genius, and preparation made him a formidable opponent for any grandmaster.

While today's grandmasters benefit from technological advancements and extensive databases, Fischer’s unique style and work ethic suggest he would still be competitive in the modern era. His legacy remains intact as one of the true greats, even if the game has evolved.

The Money Machine

Fischer’s influence extended beyond the board, helping to transform chess from a niche activity to a financially viable sport. His role in the Professional Chess Association (PCA) set the stage for future professional organisations by recognising top players’ worth.

Fischer also commanded huge fees for exhibitions and his 1992 rematch with Spassky reportedly netted him millions. His book, My 60 Memorable Games, remains widely read, keeping his legacy alive as a chess “money machine.”

The Great Unravelling

Fischer’s 1972 victory marked the peak of his career, but also the start of his decline. Later, he withdrew from public life and espoused controversial views, becoming a pariah due to his anti-Semitic beliefs and conspiracy theories.

Legal issues further isolated him. His decision to play a rematch against Spassky in the then-Federal Republic of Yugoslavia led to an arrest warrant in the US, forcing him to live in exile. He died in 2008 at 64, his legacy as a chess prodigy overshadowed by his actions and beliefs.

Fischer’s story is a cautionary tale about the fragility of talent and the dangers that accompany ambition. While his legacy as a chess icon endures, his personal life serves as a reminder of the potential pitfalls of unchecked genius.


Forging Fitness, Dissolving Boundaries: Give CrossFit a Try Sometime Soon

Unlocking the transformative power of functional fitness can be fun as well as beneficial for wellbeing.

CrossFit has become an enthralling force for fitness fanatics with its blend of functional movements, high-intensity exercises, and a community spirit.

It can improve your physical and mental health, push you past perceived boundaries, and develop exceptional athleticism. CrossFit is a training regimen that consists of diverse movements executed at high intensity. It draws inspiration from weightlifting, gymnastics, and metabolic conditioning — a holistic approach that pushes your body in new ways.

CrossFit sessions, sometimes known as "WODs" (Workouts of the Day), are intended to be scalable and adaptable to all fitness levels, with benefits for all.

Increased Strength and Power

CrossFit focuses on functional activities like squats, deadlifts, and pull-ups, engaging multiple muscle groups at once. With gradually increasing intensity, you'll build strength, translating into better performance in everyday activities.

Cardiovascular Endurance

High-intensity workouts test the cardiovascular system, increasing aerobic capacity and endurance. Running, rowing, and skipping are great metabolic conditioning exercises that raise heart rate, improve cardiovascular health, and boost stamina.

Improved Flexibility and Mobility

The diverse activities in CrossFit improve flexibility and mobility. Dynamic stretches and gymnastic elements like handstands strengthen joints, enhance agility, and reduce the risk of injury.

Get in Shape

Intensive workouts burn calories and fat, helping to create a toned physique. Strength training combined with metabolic conditioning increases metabolism, burning calories even post-workout.

Better Coordination and Balance

CrossFit’s complex movements, requiring coordination and balance, enhance proprioception and motor skills. Learning Olympic lifts and gymnastic moves improves coordination, agility, and overall athleticism.

Increased Mental Toughness

Challenging workouts push you out of your comfort zone, building mental resilience. Overcoming physical obstacles and pushing through fatigue fosters mental strength, transferable to other life areas.

Decreased Stress and Anxiety

Exercise, including CrossFit, has been shown to reduce stress and anxiety. CrossFit workouts stimulate endorphin release, promoting a sense of wellbeing and reducing stress.

Increased Confidence

Hitting new fitness milestones builds self-esteem. Seeing your physical transformation and overcoming challenges can boost confidence and provide a sense of accomplishment.

Improved Focus

Intense workouts demand concentration, promoting mental clarity. Engaging in challenging physical activities trains the mind to stay present, improving overall cognitive function.

Supportive Community

CrossFit fosters a strong sense of community. “Boxes” (CrossFit gyms) provide an inclusive and motivating environment for all fitness levels. The camaraderie and shared experiences offer a sense of belonging and drive.

Something for Everyone

The scalability of CrossFit means it's suitable for both beginners and advanced athletes. Workouts can be tailored to fit individual fitness levels or physical limitations, making it accessible to all.

Safety Considerations

Prioritising safety and technique is essential. Begin with a certified CrossFit coach to learn proper form. Listen to your body to avoid injury and respect your limits.

The Community

CrossFit's community extends beyond workouts. Many “boxes” host social events, tournaments, and challenges to build connections. The shared fitness journey and encouragement foster motivation and drive.

Success Stories

CrossFit has transformed lives, helping individuals lose weight, improve health, and overcome physical challenges. CrossFit is more than just exercise; it’s a lifestyle that can reshape your body, boost confidence, and expand your limits.

Whether you aim to enhance strength, endurance, flexibility, or mental resilience, CrossFit offers a comprehensive solution. Consult your doctor or healthcare provider before beginning, especially if you have underlying medical conditions. With the right coaching and commitment, CrossFit could lead you on a transformative path to a healthier, stronger, and more powerful you.


Telegram Lives: Pavel Durov in Trouble but Refuses to Back Down

Russian-born activist and proponent of individual freedom in hot water, but defiant.

Pavel Durov, founder of Telegram, is a man cloaked in both admiration and controversy. His creation has emerged as a haven for free speech and privacy — but its encrypted nature has drawn interest from law enforcement agencies around the world.

Durov's journey is one of invention, disobedience, and a never-ending battle against the establishment. Born in 1984 in Saint Petersburg, Russia, he was fascinated by technology from a young age. He excelled as a scholar, especially in languages and programming.

In 2006, he founded VKontakte (VK), Russia's counterpart to Facebook, which quickly became popular. But his open criticism of the government, and refusal to co-operate with censorship orders, put him in conflict with the authorities.

Origins of Telegram

Durov founded Telegram with his brother, Nikolai. The messaging service prioritises privacy and security for its users. End-to-end encryption and self-deleting messages made it an appealing platform for those who wanted connection without surveillance. Telegram's user base grew rapidly, attracting activists, journalists, and dissidents from around the world.

Clash with Authorities

Telegram's devotion to privacy came with obstacles. Governments and law enforcement agencies have requested access to user data, citing suspicions of criminal behaviour. Durov remained staunch about user privacy. This has garnered him both praise and condemnation; some hail him as a champion of digital rights, while others accuse him of facilitating illegal activities.

In recent years, Durov has faced criminal charges in different jurisdictions. In Russia, he was accused of promoting extremism and organising large-scale protests. In Iran, he was charged with disseminating propaganda against the regime. In the US, he was investigated for alleged money laundering and financing terrorism.

Durov has disputed all claims, calling them politically motivated efforts to silence him and damage Telegram. He has promised to fight the charges and defend his beliefs — at the risk of going to prison.

The Impact of Telegram

Despite all this, Telegram itself continues to grow. It has more over 500 million users and remains a popular medium for communication, information exchange, and advocacy. The app's decentralised design and open-source code make it difficult to shut down or censor, assuring its survival — for now, at least.

Durov sees a future in which people have complete control over their data and communications. He believes blockchain technology and cryptocurrency can play a critical role in realising this vision. Telegram established its own blockchain platform, TONNE, and its native currency, Gramme. But the project has been abandoned for regulatory issues.

A Controversial Figure

Pavel Durov has built a platform that empowers people and encourages free speech. His unyielding dedication to privacy has, however, ignited criticism and legal charges. Hero or monster? Whatever the case, there’s no disputing that Durov has had a lasting impact on the tech industry.

Telegram to the Future

The app’s future is subject to ongoing legal battles and regulatory investigation. Its decentralised structure and devoted user base make it a formidable force. As the world struggles to strike a balance between free speech, privacy, and security, Telegram is likely to remain at the centre of debate.

Durov has demonstrated the power of invention and the public’s interest in protecting individual liberties. He developed a platform that challenged the status quo, allowing people to connect freely and safely. Whatever the outcome of his legal challenges, his status as a digital rights pioneer is solid.

Deeper Dive into Durov

Durov's itinerant existence and self-imposed isolation have heightened his mystique. With a reclusive personality, he has a perfect profile for a Telegram user — and that is, indeed, how he generally communicates with all and sundry.

The entrepreneur's net worth is said to be in the billions, putting him in the wealthiest tier of the IT world. He has used his riches to sponsor a variety of charitable causes, including digital rights organisations and refugee relief.

His vision extends beyond Telegram. He is a supporter of decentralisation and believes that blockchain technology has the potential to revolutionise many industries.

Durov's detractors claim that Telegram's encryption allows criminals and terrorists to communicate incognito. They further argue that the site promotes disinformation and disseminates hate speech.

According to Durov's admirers, Telegram is an essential tool for free expression and privacy. They claim that the platform's benefits outweigh its hazards, and that any attempts to regulate it would jeopardise that balance.

The tale of Pavel Durov and Telegram is just one strand of a larger debate about the destiny of the internet.

The challenges and controversy are unlikely to go away any time soon. Durov's unwavering dedication to his ideals in the face of adversity make him a standard-bearer for individual liberties in the digital age.


Moody's Ratings: Leading in Transition Finance, and Embracing Digital Innovation

A new positioning based on boldness, clarity, and perceptiveness.

Moody’s Investors Service Transition to Moody's Ratings: The Brand Evolution

In an ever-evolving financial landscape, Moody’s Investors Service has embarked on a significant rebranding journey, transitioning to Moody's Ratings. This change is more than just a new name; it represents a strategic shift to better align with its mission and the value it provides to stakeholders. The rebranding effort is designed to reflect Moody's Ratings commitment to clarity, precision, and forward-thinking in the financial services industry in this era of exponential risk.

The decision to rebrand was driven by the need to unify Moody's Ratings identity and enhance its market presence. As Moody's Ratings, it aims to present a cohesive and modern image that resonates with customers and market participants. This transition also underscores Moody's Ratings dedication to providing credit ratings and insightful research to the global financial markets.

The new brand identity is built on the pillars of boldness, clarity, and perceptiveness. These values are at the core of everything Moody's Ratings does, from rigorous analytical processes to innovative tools. The new logo and visual identity are designed to be more dynamic and reflective of a forward-looking approach. This rebranding is not just a cosmetic change; it is a reaffirmation of Moody's Ratings commitment to excellence and its vision for the future.

With almost 30 years of experience in Latin America, Moody's Ratings is reaffirming its commitment to the region. With a new positioning, Moody’s Ratings reflects the evolution of its brand that encompasses a constant commitment to understanding customer needs in the countries and regions it operates in, for world-class service based on comprehensive assessments in an era of exponential risks.

Transition Finance and the Rise of Sustainable Debt Issuance

Transition finance is an emerging area of focus for Moody's Ratings, reflecting the growing importance of sustainable finance in addressing global environmental challenges. Transition finance refers to the financial mechanisms that support companies and industries in their journey towards more sustainable practices. This includes financing for projects that reduce carbon emissions, improve energy efficiency, and promote the use of renewable energy sources.

Moody's Ratings recognises the critical role that transition finance plays in achieving global climate goals. Recent reports highlight the increasing issuance of sustainable debt by companies in high-carbon sectors that are integral to the global economy but face significant challenges in reducing their carbon footprints. By providing transparent ratings for transition finance instruments, Moody's Ratings aims to support the development of innovative green technologies and promote sustainable economic growth.

Looking ahead, a continued rise in sustainable debt issuance is expected as more companies commit to ambitious climate targets. The development of emerging green technologies, such as carbon capture utilisation and storage (CCUS), low-carbon hydrogen, and biofuels, will be pivotal in this transition. Moody's Ratings is committed to staying at the forefront of this evolving landscape, providing insights and analysis on the complexities of transition finance.

Digital Finance: The Future of Financial Services

Digital finance is transforming the financial services industry, and Moody's Ratings is part of this revolution. The integration of digital technologies into financial services is creating new opportunities for innovation, efficiency, and customer engagement.

Moody's Ratings has been actively involved in analysing the impact of digital finance on the global economy. Recent reports explore how emerging technologies are reshaping supply chains, enhancing connectivity, and driving innovation in capital-intensive industries. For instance, the adoption of decentralised physical infrastructure networks (DePIN) is revolutionising the way industries address demands for enhanced connectivity and innovation. These networks leverage blockchain technology to create more efficient and resilient infrastructure solutions.

The rise of AI and machine learning is also transforming the financial services industry. AI-driven analytics and predictive modelling can enhance risk assessments and decision-making processes. Moody's Ratings is leveraging technologies such as Moody’s Research Assistant, a first-of-its-kind search and analytical tool powered by generative artificial intelligence (GenAI), to cover its latest rating actions, credit opinions, and research reports, providing real-time answers for users. The commitment to digital innovation is reflected in ongoing efforts to integrate advanced technologies into Moody's Ratings analytical frameworks and service offerings.

Looking to the future, digital finance will continue to play a pivotal role in shaping the financial services industry. Moody's Ratings is dedicated to staying ahead of the curve, providing analysis and insights to navigate this dynamic landscape. By embracing digital finance, Moody's Ratings is not only enhancing its capabilities but also helping customers make more informed and strategic decisions.

[caption id="attachment_26401" align="aligncenter" width="264"] By Marina Rosemberg Managing Director and Head of Relationship Management Latin America at Moody’s Ratings[/caption]


Asian Development Bank - Freezing the Impact: Tackling Glacial Melt with Resilient Solutions

Glacial melting threatens regional water security, ecosystems, and economies. Countries must prioritise low-carbon, climate-resilient development through sustainable solutions such as nature-based systems, renewable energy, and diversified financing to manage risks and sustain development.

Glaciers are essential to the climate, ecological balance, cultural heritage, and socio-economic development of the Asia Pacific region. Glaciers not only provide a continuous water source for rivers, unaffected by seasonal changes and rainfall variability, but also reflect excess heat back into space, keeping regional temperatures cooler. Their cold runoff regulates downstream water temperatures and local weather patterns. Additionally, glaciers form natural reservoirs known as glacial lakes, which further help regulate river systems.

[caption id="attachment_27303" align="aligncenter" width="900"] Tibet, China: Aerial view of fossil glacier[/caption]

In many parts of Asia, glaciers and glacial lakes are more than natural wonders; they hold cultural and religious significance, symbolising power and dignity. Many people in this region depend on glacial meltwater for drinking water, agriculture, and hydropower, underscoring the interconnectedness of water, food, and energy.

For instance, Himalayan glaciers feed major rivers like the Indus, Ganges, and Brahmaputra, vital for over 750 million people. In Central Asia, melting glaciers play a crucial role in irrigation, providing nearly half of the annual runoff during the farming season. The region is home to some of the world's largest and most significant glacier systems, primarily in the Himalayan, Karakoram, and Tien Shan mountain ranges. Covering approximately 100,000 square kilometres, these glaciers are retreating at an alarming rate of 50 metres per year—over twice the rate recorded before 2000—demonstrating the profound impacts of climate change.

Currently, there are about 30,000 glacial lakes across these glaciers, with a total water surface area of roughly 1,500 square kilometres. Rapid glacial melting has led to a 20 percent increase in the number of glacial lakes and a 36 percent increase in their surface area since 2015. Projections suggest that by 2100, the area of glacial lakes in the region could double, with their water volume potentially increasing more than tenfold. The accelerating melt and expansion of these lakes heighten the risk of glacial lake outburst floods, posing a serious concern for the region.
This rapid glacial melting threatens water supplies, ecosystems, and economies, especially in countries reliant on hydropower, river irrigation, and stable water resources. Economic impacts include increased flooding, reduced water availability, and risks to agriculture, energy production, and power supply chains, which could severely disrupt the water, food, and energy nexus.

The consequences are already evident: avalanches and glacial lake outburst floods have caused significant damage in Nepal and India, highlighting the dangers facing downstream communities and infrastructure. Furthermore, glacial melting accelerates river erosion and sediment accumulation, reshaping landscapes and threatening human settlements. Excessive sediment has altered river courses in Bangladesh’s deltaic plains, while biodiversity loss from glacier decline is disrupting local ecosystems. Failure to address these risks could lead to regional conflicts, underscoring the urgent need for action.

Collaborative Solutions for Resilience and Sustainability

To mitigate these risks, countries in the region should collaborate on data sharing, joint monitoring, and risk mapping to strengthen resilience against glacial melting. Long-term water scarcity can be alleviated by improving water storage, enhancing efficient irrigation practices, optimising renewable energy use, and adopting soil and water conservation techniques. Developing climate-resilient crops and diverse agricultural value chains will further help manage the economic impacts of climate change.

Nations need to assess the risks of glacial melting to effectively implement integrated river basin management and relocate infrastructure from high-risk areas. Engaging local communities and the private sector in adaptation strategies, linking glacial melt to water diplomacy, and exploring economic diversification options—such as hydropower revenue, regional water trade, and materials trading—are essential to maintaining development and promoting regional stability.

Financing for Resilient Infrastructure

Securing the necessary financing and investment requires countries to prioritise resilient infrastructure to manage risks from glacial melt and lake outbursts. This includes constructing lake drainage systems, building check dams to stabilise sediment in upper watersheds, creating spillways to divert excess water, and deploying real-time early warning systems.

Investing in risk-informed, climate-resilient, multipurpose infrastructure is critical, with a focus on nature-based solutions and protecting downstream investments through supportive upstream infrastructure. Adapting irrigation and hydropower operations to account for changing water flows and redesigning water management systems are also important considerations. Raising awareness and building local capacity for adaptation, including diversifying livelihoods, are vital for sustainable development and resilience.

Many countries in the region have not yet recognised glacier regions and river basins as regional public goods, which is essential for securing funding to safeguard socio-economic progress. Innovative financing mechanisms such as eco-compensation, environmental trading, carbon markets, and blended finance should be explored. Additionally, risk retention and transfer strategies, including disaster facilities and insurance, can enhance financial stability. The private sector’s role as a service provider, investor, and financing partner is equally crucial.

A Call for Regional Collaboration and Proactive Investment

The accelerating glacial melt in the Asia Pacific region is a stark reminder of the wide-reaching impacts of climate change, threatening not only local water supplies and ecosystems but also the stability of entire economies. The solution lies in regional collaboration, proactive investment in climate-resilient infrastructure, and innovative financial strategies. By working together to address these challenges on a larger scale, countries can build a sustainable future that balances economic growth with environmental protection.

[caption id="attachment_27302" align="aligncenter" width="300"] By Rabindra P Osti Principal Climate Change Specialist at ADB’s Climate Change and Sustainable Development Department[/caption]

The views expressed are those of the author and do not necessarily reflect the views of the Asian Development Bank, its management, its Board of Directors, or its members.


Is Islamic Finance Now Mainstream?

Combatting usury, ensuring ethical standards, and sweeping the world: a new financial cornerstone emerges.

Islamic finance has progressively gained traction in the global financial scene, transitioning from niche to mainstream alternative.

This rise has been driven by factors including the ethical attraction of Shariah-compliant goods, the rising integration of Muslim-majority economies into the global economy, and Islamic banking's financial resilience during the 2008 global financial crisis.

But some key questions remain: Has it truly joined the mainstream? What difficulties and opportunities lie ahead? The answers require a look at the history of Islamic finance, its position in the global market, and its prospects.

The Foundations

Islamic finance is based on Shariah, or Islamic, law. It establishes precise norms for economic and financial transactions. These are based on the prohibitions against riba (interest), gharar (excessive uncertainty), and a demand for risk-sharing. It aims to promote social justice by making financial transactions fair, transparent, and beneficial to all involved.

Some basic elements distinguish it from conventional finance. Interest is prohibited, because it is perceived as exploiting borrowers — particularly those in financial difficulty.

Islamic financial institutions (IFIs) instead make money through profit-and-loss-sharing agreements, trade-based lending, and lease contracts.

Gharar opposes excessive ambiguity or speculation. Contracts must be explicit and transparent, so that all parties understand the terms and conditions.

Asset-Backed Financing

Islamic financial products are often secured by tangible assets, such as real estate or commodities. This requirement is based on the notion that money should not be generated from nothing, but linked to actual economic activity.

Traditional financing frequently transfers risk to the borrower; Islamic finance emphasises risk-sharing between the lender and the entrepreneur. This balances incentives and promotes responsible investing.

Shariah encourages ethical and socially responsible investing while avoiding potentially damaging industries such as alcohol, gambling, and arms.

These principles underpin a range of financial goods and services, including Sukuk (Islamic bonds), Takaful (Islamic insurance), and investment funds. Each has contributed to the expansion and diversification of the sector.

The Rise of Islamic Finance

Modern Islamic finance dates back to 1963, when the Mit Ghamr Savings Bank was established in Egypt. This pioneering institution functioned on a profit-sharing basis, laying the groundwork for global expansion.

Significant financial organisations were established in the 1970s, notably the Islamic Development Bank (IDB) in 1975, which was instrumental in spreading Islamic banking among Organisation of Islamic Co-operation (OIC) member countries. Oil-rich Gulf states began to set up Islamic banks and financial institutions to align their financial systems with their religious principles.

The Expansion Phase

The 1980s and 1990s were a period of growth, as Muslim-majority countries in South East Asia began to use the system. Malaysia, in particular, emerged as a global powerhouse for Islamic finance, with diverse products and a sophisticated regulatory framework.

In the 2000s, Islamic finance gained traction outside of the Muslim world, as non-Muslim-majority countries such as the UK and Luxembourg recognised its potential. The issuing of Sukuk by sovereign and corporate entities demonstrated a growing embrace of the concepts.

Resilience in Crisis

One of the most significant turning moments was the 2008 global financial crisis. Conventional banks were significantly impacted by the collapse of the subprime mortgage market and the resulting credit crisis.

Islamic institutions displayed greater resilience, partly due to the prohibition on interest-based transactions and excessive speculation. This protected Islamic financial institutions from some of the risky products that triggered the crisis.

The relative stability of Islamic banks drew the attention of investors and politicians around the world, sparking renewed interest.

Into the Global Market

The global Islamic finance industry is now valued at almost $4tn. Over the last decade, the industry has grown at a compound annual growth rate (CAGR) of over 10 percent, often exceeding the expansion of traditional finance.

Islamic finance has grown significantly in various key markets, including Gulf Co-operation Council (GCC) countries such as Saudi Arabia, the UAE and Qatar.

These countries have been issuing Sukuk to fund infrastructure projects and diversify their economies. In South East Asia, Malaysia remains a global leader, with a well-established regulatory framework, a robust Sukuk market, and a thriving Islamic banking industry.
Indonesia, the world's most populous Muslim-majority country, has seen a tremendous expansion thanks to government initiatives and increased demand.

There has been rapid growth in Pakistan and Bangladesh, where Islamic finance is seen as a way to increase financial inclusion.

In Sub-Saharan Africa, Nigeria and Sudan have shown an interest in expanding the sector. Nigeria released its first sovereign Sukuk in 2013, signalling a willingness to developing the finance system.

In Western markets, Islamic finance has made advances in the UK, with London establishing itself as the leading centre. In 2014, the UK government issued its first sovereign Sukuk, and many Islamic banks now operate there. Luxembourg and Germany have investigated prospects in Islamic finance.

Adoption and Challenges

The question of whether Islamic finance has become mainstream remains difficult. While it has achieved global visibility and acceptability, a number of hurdles could prevent its full integration.

One of the most significant issues is the lack of standardised legislation across jurisdictions. This lack could result in inconsistencies and disrupt cross-border transactions.

Because Shariah-compliant instruments are not universally available, Islamic financial organisations frequently struggle to manage liquidity. Traditional banks have access to a diverse range of interest-bearing securities, but Islamic banks must manage with a smaller set of tools, such as Sukuk.

Ensuring Shariah compliance is crucial to the integrity of the system, and interpretations of its principles vary. This has resulted in a lack of consistency in the implementation of the banking rules, which can cause confusion.

While Islamic finance has made great strides, there is still a lack of comprehension in non-Muslim nations. Educating consumers and investors on the benefits and principles of Islamic finance is critical to its continued success.

Competition with Convention

Islamic finance frequently coexists with conventional finance in dual-banking systems. This may present issues in terms of pricing and product innovation. Conventional banks may provide comparable products that are not Shariah-compliant, but are marketed to appeal to the same ethical concerns.

The Islamic finance business is concentrated in areas prone to geopolitical instability, such as the Middle East and North Africa. Political upheaval, economic sanctions and other issues may have an impact on its progress in these locations.

Fintech Integration

The broader financial system is being transformed by technology breakthroughs and the rise of fintech. Its incorporation into Islamic finance brings opportunities and obstacles. Digital banking provides a chance for Islamic banks to broaden their reach, especially among younger, tech-savvy clientele. Digital platforms can help improve financial inclusion by offering Shariah-compliant banking services to neglected communities.

Blockchain and smart contracts have the potential to transform Islamic finance by increasing transparency, lowering transaction costs, and ensuring compliance. Blockchain can be used to verify the legitimacy of Islamic financial products, guaranteeing that they are backed by tangible assets.

Crowdfunding and peer-to-peer (P2P) lending platforms provide alternative financing possibilities consistent with Islamic values. These platforms can help entrepreneurs get access to cash without relying on traditional institutions.

While fintech has great promise for innovation, it also poses regulatory obstacles. Ensuring that fintech solutions adhere to both Shariah principles and local rules necessitates thorough scrutiny and collaboration among regulators and industry players.

The future of Islamic finance seems optimistic, with three major factors expected to drive continuing growth. And expansion into new markets, particularly in Africa and Central Asia, is expected. Countries with large Muslim populations and undeveloped financial systems provide opportunities for Islamic finance to provide financial inclusion and economic growth.

The principles of Islamic finance are in line with the growing global emphasis on sustainability and ethical investing. Islamic financing has the potential to play a critical role in projects involving renewable energy, infrastructure, and social impact. The development of green Sukuk and other Shariah-compliant sustainable finance instruments is expected to pick up in the future years.

As Islamic finance expands, there is room for more integration with global financial markets. This might include more Sukuk cross-listings on foreign exchanges, more engagement of Islamic financial institutions in global trade financing, and enhanced collaboration between Islamic and conventional financial institutions.

The rise of Islamic fintech is projected to spur innovation and increase access to Shariah-compliant financial services. The creation of new digital platforms, blockchain-based solutions, and alternative financing models will all play important roles.

Challenges to Overcome

While the future is bright, the Islamic finance industry must address a number of problems. Improving the standardisation of Shariah-compliant goods and regulatory frameworks is vital for worldwide expansion. Industry players must collaborate to create norms and procedures to expedite cross-border transactions and boost investor trust.

The expansion of Islamic finance necessitates a trained workforce. Addressing any talent gaps via education and training initiatives will be the way ahead. More efforts are needed to raise awareness and educate the public about the benefits of Islamic financing.

This involves clearing up misconceptions and promoting Islamic finance as an ethical and viable alternative to traditional finance. It must adjust to new regulatory regimes, managing new regulations governing fintech, sustainable finance, and global financial stability.

Islamic finance has come a long way. Its ethical basis, durability during financial crises, and alignment with contemporary themes have all contributed to its growing popularity. While it is more widely recognised and used, it still confronts obstacles that must be addressed before it can be considered mainstream.

Islamic finance's future will be determined by its capacity to innovate, enter new markets, and integrate with the larger financial system — while adhering to its essential values. As it expands, it can serve as a viable alternative and a model for ethical and sustainable financial practices.

The question of whether Islamic finance has become mainstream is about more than just market size or geographic reach. It's also about whether Islamic finance can continue to provide a unique value proposition that appeals to a broad spectrum of investors, consumers, and governments. If it can meet its challenges, it has the potential to become another cornerstone of the global financial system.


From Barter to Blockchain: Banking Through the Ages

From trading seashells to investing in crypto, our relationship with money and financial institutions has seen some serious changes…

For millennia, money in its various forms has been the lifeblood of human civilisation. From barter systems to sophisticated digital networks, the history of banking is our history, too. Money is intrinsically linked to humanity, for better or worse.

It's a colourful tale, full of ingenuity, adaptability, booms and busts, greed, trust, and treachery. As societies change, so do their financial systems, adapting to new demands and aspirations.

Banking has a long and convoluted past that spans continents and epochs. It started with modest acts of exchange in ancient marketplaces and evolved into the sophisticated global financial networks of the 2020s.

Mesopotamia: The Cradle of Banking

The first cities arose in Mesopotamia, between the Tigris and Euphrates rivers. Temples served as both religious and economic centres, storing grain, animals, and precious metals. Clay tablets acted as primitive “currency,” and early moneylenders provided loans, organised transactions, and even practiced basic forms of insurance.

The Code of Hammurabi, one of the first legal codes, regulated interest rates and debt obligations, highlighting the growing importance of financial transactions.

Banking on the Nile

The Egyptians pioneered their own financial systems along the banks of the Nile. Temples acted as central banks, recording deposits and withdrawals. Metal rings and ingots became standardised currency, facilitating both local and international trade.

Greece, Rome, Coins, and Credit

Ancient Greece saw the rise of coinage and the establishment of private banks, or trapezitai, which took deposits, made loans, and provided currency exchange services.

The Roman Empire advanced banking further, with argentarii (bankers) managing government finances, collecting taxes, and funding military campaigns. Roman banking practices laid a foundation for modern financial systems.

Mediaeval Banking: A New Era

The fall of Rome led to economic upheaval, but as Europe recovered, trade flourished, particularly through the Italian city-states like Florence and Venice. These hubs introduced innovations such as double-entry bookkeeping and bills of exchange, setting the stage for modern banking.

The powerful Medici family epitomised this era, funding trade and commerce while influencing politics and art.

The Industrial Revolution: Banking Takes Off

During the Industrial Revolution, banks evolved to meet the growing need for capital. Joint-stock banks and stock markets mobilised resources on a massive scale. Central banks like the Bank of England emerged to stabilise currencies and regulate money supply.

Technological advancements such as the telegraph and adding machines revolutionised banking operations, paving the way for global financial systems.

The Digital Age: Banking at the Speed of Light

The 2000s ushered in a wave of technological breakthroughs, from online banking to mobile payments. Digital wallets such as Apple Pay and Google Pay transformed how we manage money.

Fintech: The Disruptor

Financial technology, or fintech, has introduced faster, cheaper, and more accessible financial services. Peer-to-peer lending platforms, robo-advisors, and blockchain technology are disrupting traditional banking systems.

Cryptocurrencies and Blockchain

The advent of Bitcoin and blockchain technology has revolutionised the concept of currency. Decentralised networks offer secure, transparent transactions, challenging the dominance of traditional financial institutions.

The Future of Banking

The future is digital. Banks are adopting AI-powered financial advisors and exploring quantum computing for advanced risk management. As the industry evolves, trust, innovation, and adaptability will remain at its core.

Banking has travelled a long road, from barter to blockchain. With technology driving change at an unprecedented pace, the future of banking is bright — and faster than ever before.


Africa Leapfrogging Challenges with its Mobile Solutions Boom

From fintech payment systems to drone-delivery of medical services, the continent is on a roll.

Africa is embracing innovation continent-wide to address its particular set of issues and challenges.

From infrastructure constraints and financial inclusion gaps to healthcare accessibility and educational impediments, Africa is using technology, particularly mobile solutions, to break free from outdated paradigms and chart a course for a more affluent and inclusive future.

Kenya: Cradle of Mobile Money

Kenya, often called "Silicon Savannah", is a hub of innovation. It is best known for its pioneering role in mobile money, led by M-Pesa. Founded in 2007, M-Pesa has transformed domestic financial activities by enabling seamless mobile payments.

This ground-breaking innovation has increased financial inclusion and spurred the development of other mobile-based services, including microloans, insurance, and e-commerce.

Kenya is also home to Andela, a start-up that connects talented software developers with global corporations. Andela addresses the digital skills gap, offering young Kenyans career opportunities in technology.

Nigeria: Fintech Powerhouse

Nigeria, Africa's most populous country, is experiencing a fintech revolution. With a large unbanked population and rising demand for digital services, Nigeria provides an ideal environment for creative solutions.

Paystack, a payment-processing start-up, enables businesses to accept online payments safely and seamlessly. Its user-friendly platform and robust infrastructure have made it a popular choice across Africa.

Similarly, Flutterwave offers a payment platform that supports cards, mobile money, and bank transfers. Flutterwave facilitates cross-border trade, enabling businesses to expand their reach throughout the continent.

South Africa’s Agricultural Drones

With modern infrastructure and a diverse economy, South Africa is a hotbed of innovation. Aerobotics uses AI-powered drones to collect crop data, helping farmers optimise irrigation, fertilisation, and pest management. These innovations boost yields, reduce costs, and improve sustainability.

Jumo, another South African innovator, uses mobile technology to provide financial services to underserved communities. Jumo leverages data analytics to assess creditworthiness and offer loans, insurance, and financial products to individuals and businesses outside traditional banking services.

Jumo’s approach promotes financial inclusion and economic progress.

Rwanda: More Drones, Better Healthcare

Rwanda is making significant strides in healthcare innovation. Zipline, a US-based startup, collaborates with the Rwandan government to provide medical drone-delivery services to remote areas, saving lives and improving healthcare accessibility.

Additionally, Babyl, a UK-based telemedicine start-up, is revolutionising healthcare in Rwanda. Babyl’s mobile app enables users to consult doctors and specialists remotely, offering convenient and cost-effective healthcare solutions, especially in rural areas with limited facilities.

Africa’s innovation landscape is defined by inventiveness and agility. The continent is embracing technology, particularly mobile solutions, to meet its unique challenges and advance beyond traditional approaches. Africa is showcasing its potential as a global leader in innovation.

As the continent continues to invest in education, infrastructure, and entrepreneurship, we can expect more ground-breaking innovations that will improve lives and inspire the world.


Cornelius Vanderbilt: The ‘Commodore’ Who Steamed Straight Ahead to Glory

In the annals of American corporate history, Cornelius Vanderbilt was a true legend: a self-made billionaire who rose from humble beginnings to become one of the wealthiest and most influential figures of the 19th Century.

Known as "the Commodore" for his groundbreaking success in the shipping industry, Vanderbilt employed unwavering drive to build a transport empire that connected the United States via steamships and railroads. His relentless focus on efficiency and innovation transformed the transportation industry, fuelled America’s economic growth, and solidified his status as an industrial giant.

From Ferries to Fortunes

Cornelius Vanderbilt was born in 1794 on Staten Island, New York. At just 16 years old, he borrowed $100 from his mother to purchase a small sailboat, ferrying passengers and goods between Staten Island and Manhattan. This modest start set the stage for an extraordinary career.

Vanderbilt’s work ethic and business instincts were unmatched. He worked long hours, often sleeping on his boat to save money, and quickly established himself as a savvy entrepreneur. By expanding his fleet and acquiring new routes, Vanderbilt laid the foundation for his transport empire.

His competitive spirit and aggressive tactics defined his early success. Vanderbilt frequently undercut rivals, delivered superior service, and dominated markets with ruthless efficiency — traits that would characterise his entire career.

Steamship King

In the 1820s, Vanderbilt saw the potential of steamships, a revolutionary technology faster and more reliable than wind power. He invested heavily, building a fleet of steamships that operated along the Hudson River, Long Island Sound, and the Atlantic coast.

Known for their speed, comfort, and affordability, Vanderbilt’s steamships gained widespread popularity. Despite intense competition and challenges like price wars and corruption in industry regulations, Vanderbilt’s determination and business acumen earned him the title of "King of Steamships".

Forging a Railroad Empire

As railroads emerged as the dominant mode of transportation in the mid-19th Century, Vanderbilt shifted focus. Recognising the potential of rail to connect the vast United States, he began acquiring failing railroads, merging them into a unified network, and investing in infrastructure and technology.

Vanderbilt’s vision helped to create a truly national transportation system. His railroads connected key cities, spurred economic growth, and reshaped commerce. Known for his hands-on management style, Vanderbilt frequently travelled on his trains, ensuring operations ran efficiently and effectively.

He implemented cost-cutting measures, standardised equipment, and introduced stringent accounting practices, making his railroads known for their dependability, punctuality, and affordability. His influence transformed rail into a backbone of America’s economic development.

Legacy and Controversies

Cornelius Vanderbilt’s contributions to America were monumental. His transport empire united the nation, facilitated trade, and stimulated economic growth. By making travel more accessible, Vanderbilt reshaped how people lived and worked, creating a truly national market for goods and ideas.

However, Vanderbilt’s legacy is not without controversy. His harsh business tactics, monopolistic practices, and disregard for labour rights earned him the label of "robber baron", a term used to describe industrialists who amassed wealth through exploitative means.

Despite these criticisms, Vanderbilt is also recognised as a visionary who revolutionised industries and helped shape modern America. His legacy is one of ambition, innovation, and relentless progress. He demonstrated that with determination, hard work, and risk-taking, it’s possible to achieve greatness — but not without controversy.

Cornelius Vanderbilt changed the trajectory of a nation. His accomplishments, flaws, and influence are legendary, marking him as one of the most complex and compelling figures in American history.