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Opinion

A new world order: The empire strikes back

Over the past year, <i>Euromoney</i> has written often of the generational shifts in the economic and financial balance of power between the old world and the new. Many of the world’s biggest banks are pinning their hopes for growth on such shifts, and express nothing but excitement at their prospect.

Concerns, when raised, have largely focused on China’s insatiable appetite for commodity and energy related plays, but that hasn’t worried advisers pocketing year-defining fees in the process.

Banks are talking up their capabilities in growth markets. Take the example of Angel Cano, the president of BBVA, interviewed this month (see Best Managed Companies in Latin America 2011: The price of success, Euromoney, March 2011). He explains how the easy conversations today with shareholders are about the bank’s businesses in countries such as Mexico and Argentina. The tougher task is to explain what is happening in BBVA’s Spanish business, which he goes out of his way to stress represents just 33% of the group’s total revenues.

It’s easy to get carried away with the thought that the old world is dead, long live the new. Developed world business dominates all banking, and will continue to do so for some time.

At the same time, we’re beginning to see business flows that would have been inconceivable even five years ago. And none is more surprising, and for some more worrying, than the subject of one of our features this month (Angola’s elite looks to clean up in Portugal, Euromoney, March 2011).

For a number of years, bankers and businessmen in Portugal have pinpointed their former colony of Angola as a source of profit. They feel they missed out on the opportunity in the biggest part of their former empire, Brazil. Angola is nowhere near as big, but it is rich in natural resources and potential. Many Portuguese banks have long-standing operations there, and big plans to build them. For example, half of Banco BPI’s consolidated earnings in 2010 came from Angola.

Then came the financial crisis, and Portugal’s economy, and its banks, find themselves in difficulty. And, they find, that the boot is on the other foot.

Fuelled by windfall oil profits, Angola’s elite is increasingly looking to hoover up Portuguese assets at distressed prices. Leading the way are the likes of Isabel dos Santos, eldest daughter of an Angolan president who has led his country for 32 years.

At this of all times, with the political upheaval and revolution in the northern part of the continent, doing business with the scions of long-standing autocratic African rulers is bound to prompt concern.

The Portuguese, upstanding members of the EU, may be happy to do business in Angola but they don’t want their former subjects taking what they fear will be dominant stakes in core industries such as banks, energy and telecoms.

It smacks of double standards, but the concerns are real. In the latest scores published by Euromoney Country Risk, Angola ranks well outside the top 100 countries in the world. At 116th, it is sandwiched between Pakistan and Malawi in the rankings. In terms of political risk, it ranks 156th, 11 places below Afghanistan. Angola is ranked as one of the 12 most corrupt countries in the world, according to Transparency International.

People who have dealt with these new Angolan power-brokers describe them as consummate professionals.

And with the Portugal fighting hard to stave of sovereign default, and banks and businesses finding funding hard to come by, many welcome any source of investment, even if it does hit home as an embarrassing symbol of the country’s diminished status.

Angola’s designs on Portugal are all part of the bigger picture of a new world order. The empires are striking back. And as the developed world struggles with these new realities and their attempts to get their vast debt levels into some kind of order, they’d do well to remember an old saying that used to apply as they offered their own investment to their poorer cousins.

Beggars can’t be choosers.

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