Coming Soon in Our August 2019 Political Risk Reports

PRS’ coverage of the Americas this month includes updates on Chile and Colombia, and a revised report on Argentina, which will hold presidential and legislative elections in October.  The report will examine the results of primary elections scheduled for August 11 that could have a significant impact on investor perceptions ahead of a presidential contest that figures to be a closely fought affair between the incumbent, Mauricio Macri, and Albeto Fernández, an ally of Macri’s leftist predecessor, Cristina Fernández.  The election is shaping up as a battle between liberal orthodoxy and nationalist populism, and a victory for the latter would have worrisome implications in terms of the next government’s commitment to honoring the terms of an IMF bailout package secured by Macri’s administration last year.

The report will assess the electoral strengths and weaknesses of the two main political alliances, among them a recent partnership struck between the leftist Frente de Todos and centrist power-broker Sergio Massa.  The bulk of the analysis will center on a discussion of the likely policy programs that investors could expect from a government headed by either bloc, how effectively either might implement its preferred policies, and the impact on the climate for business, the political environment, and the performance of the economy over the next five years.

Our extensive coverage of Western Europe this month includes reports on Austria, Luxembourg, France, and Spain, where apart from political and economic risks specific to each country we also weigh up the effects of declining business confidence across the region spurred by global trade risks, including the prospect of a no-deal Brexit that results in two-way tariffs on goods. In our coverage of Spain we also look into the fallout of the inconclusive general election in April and the recent failed attempts to secure parliamentary backing for a coalition government led by Pedro Sánchez and his Spanish Socialist Workers’ Party (PSOE). Our report looks in detail at the next steps, including which parties are likely to enter government, and the possibility of repeat elections and what that may mean for the fiscal budget and structural reforms. We look at how Spain is faring in key sectors this year, including tourism, and in terms of inward foreign direct investment flows and whether protectionism is having any effect. With that in mind we also discuss key macro-fiscal indicators and present renewed forecasts for 2019 and 2020 to ascertain whether Spain’s successful emergence from its financial crisis will continue unimpeded.

Looking at Eastern Europe, PRS will issue an update on Russia, where authorities’ stepped-up campaign of harassment against government opponents indicates that President Vladimir Putin has no intention of rethinking a foreign policy strategy that has added to domestic economic hardship that contributes to periodic outbursts of discontent.  A change of government in Kiev creates the potential for breaking the impasse over the separatist conflict in eastern Ukraine, but the political inexperience of the new Ukrainian leader carries a risk of miscalculation that contributes to an escalation of hostilities, with negative implications for investors doing business in either country.   Otherwise, the update will assess the prospects for any substantive moves to expand investment opportunities or otherwise improve the climate for business, and discuss the near-term outlook for the economy.

Coverage of the Middle East and North Africa includes an update on Kuwait, which recently achieved emerging-market status, despite chronic political turf battles that have impeded the royally appointed government’s efforts to liberalize and diversify an oil-dependent economy.  The update will discuss what the latest sparring between elected lawmakers and the government says about the relative balance of power between the rival institutions and the prospects for overcoming the political impediments to implementing a program of structural reforms.

In Asia, along with a report on Vietnam this month, we look at investor risk in China, where trade negotiators have recently agreed to meet with US counterparts in Shanghai to restart the process of eliminating zero-sum game tariffs. While our report will focus in detail on the talks, and whether investors can expect any breakthrough given the onset of US presidential elections in 2020 (which might see Trump replaced), we also look into other aspects of the policy-making and economic risk profile affecting Chinese assets and renminbi. In that light we identify how authorities are likely to respond to protectionism by developing new investment regulations and changes to the Belt and Road Initiative, influencing new strategic regional partnerships as well as an upgraded alliance with Russia, and a new investment treaty with the EU by 2020.

Our report looks into other specific political risks and their implications, including attitudes among the Politburo elite towards the crisis in Hong Kong, responses to international unease over the mass incarceration of the Uighur minority ethnic group, pressure still being put on Taiwan, and the crackdown on corruption which is being increasingly utilized to express dissatisfaction over missed policy targets. Our report rounds out with a valuable assessment of high frequency indicators of economic growth, inflation and external balances as well as how stimulus policies are likely to impact on China’s fiscal metrics and future economic performance.

Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. This commentary represents a sneak peek from our upcoming political risk reports. For more information please contact us at (315) 431-0511 and sales@prsgroup.com, or explore a subscription to PRS Online and/or ICRG Online today to receive political risk updates.

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