Coming Soon in Our August 2020 Political Risk Reports

PRS’ coverage of the Americas this month includes a fully revised report on Argentina, where officials recently announced the achievement of an agreement with creditors to restructure some $65 billion of sovereign debt, enabling the country to avoid being shut out of international debt markets after defaulting for the third time in less than two decades in May. President Alberto Fernández’s Perónist government will now turn its attention to negotiations with the IMF to replace the massive bailout agreement concluded with its predecessor. Officials are hoping to convince the IMF to allow Argentina to delay payments falling due in 2021–2023 without demanding harsh austerity measures in exchange.

The report will examine how the government’s success or failure on that front will affect both economic and political stability going forward. The debt crisis has played out against the backdrop of the COVID-19 pandemic, which has actually provided political cover for Fernández.  The president’s rising popularity has enabled him to bolster his authority vis-à-vis Vice President Cristina Fernández de Kirchner, a two-time former president and the leader of the dominant left-wing faction of the Perónists, but an abysmal economic outlook points to a high potential for strains within the governing alliance ahead of mid-term elections that fall due next year, the implications of which will be explored in detail.

Our extensive coverage of Western Europe this month, which also includes timely reports on Spain, Sweden, and Switzerland, leads with a detailed analysis of the political risk outlook in Germany as the country moves closer to the next federal elections to be held in 2021, with Angela Merkel’s succession still dominating following Annagret Kramp-Karrenbauer’s resignation and the indefinite postponement of the party leadership election. Our report looks at how the governing coalition comprising Merkel’s center-right Christian Democratic Union (CDU) – plus its Bavarian sister party the Christian Social Union (CSU) – and center-left Social Democratic Party (SPD) is managing the economic and social effects of the COVID-19 crisis as public protests take place by libertarians opposing restrictions to stop the virus from spreading, claiming the threat is exaggerated, as a weakened economy and rising unemployment increase resentment. We look at what this means for Merkel and the Union’s poll ratings which had improved in response to the way the crisis was handled, by protecting lives and swiftly embracing emergency government spending despite a history of fiscal orthodoxy underwritten by a constitutional debt brake. We look at how the crisis is affecting both coalition harmony and opposition rivalry, looking at how the liberals, greens and far-right are all faring over the summer. Our report goes on to investigate what the remaining months of Merkel’s reign will mean for key foreign policy issues affecting investors, including relations with China and the US, and Germany’s role in the EU in the context of the Europe-wide coronavirus emergency support measures and the potential for a no-deal Brexit when the UK’s transition period concludes at the end of December.

Coverage of Eastern Europe will include an update on Romania, where the center-left PSD has consented to the formation of a minority center-right government headed by PNL leader Ludovic Orban, citing the emergency created by the COVID-19 pandemic. The Social Democrats have pledged to constrain the minority government’s room for maneuver, limiting its ability to do much beyond what is required to deal with the health crisis and the associated economic difficulties until elections fall due later this year.

The update will discuss the effectiveness of the government’s response to the pandemic and how that might impact the election result, and assess the implications of a victory for either the PNL or the PSD on the policy course going forward. One focus of the electoral analysis will be an examination of the prospects for a social-liberal, pro-EU alliance that pairs the anti-corruption USR with former Prime Minister Dacian Ciolos’ PLUS, which at the moment appears to be poised to emerge from the elections as a potential king-maker.

We’ll also look at the rather tense situation in Belarus following what certainly appears to be another flawed election and consequent continuing social turmoil, which includes detentions and acts of police brutality.  The role of the international community will be key here in terms of whether President Lukashenko’s regime continues in its present configuration, and whether past uprisings in the region can be any guide for the future.

Turning to the Middle East and North Africa, the roster for August includes a revised report on Syria and an update on Iran, where Ayatollah Ali Khamenei and his allies are moving aggressively to ensure the long-term dominance of the country’s conservative political elements as part of the supreme leader’s preparations for the eventual transfer of power to a successor.  The update will examine how the installation of a former IRGC commander as speaker of the Majlis could affect the direction of policy, and what the likely election of a hard-liner to the presidency next year will mean for the investment climate in Iran and the stability of the Middle East in general. The analysis will also include a discussion of the economic outlook against the backdrop of the global pandemic and the damage caused by US sanctions.

Finally, our coverage of sub-Saharan Africa this month looks ahead to the presidential and parliamentary elections to be held in October in Côte d’Ivoire as we analyze what it might bring for investors already perturbed by potentially long-lasting risks stemming from the fallout of the coronavirus crisis. The fractious political scene is heating up again following the recent sudden death from a suspected heart complaint of the 61-years old Prime Minister, Amadou Gon Coulibaly, the ruling party’s candidate to replace the incumbent, Alassane Ouattara, who has presided in office for the past decade. In a sign of the tensions building in government, two of Ouattara’s key cabinet colleagues have resigned – Foreign Minister Marcel Amon Tanoh, in March, and Vice President Daniel Kablan Duncan, soon after Coulibaly’s death in July, seemingly for being overlooked for the presidential nomination. This raises the possibility of Ouattara rescinding his decision not to contest for a controversial third consecutive term should he not consider any other trustworthy candidate. Our report looks into the constitutional questions that arise from any moves to do so and the relative merits of each of Ouattara’s main challengers, all of whom are experienced and renowned power-brokers on the domestic political scene. We also explain what it will all mean for social stability in a country with a history of civil unrest, against the backdrop of a weakened economy, and whether economic progress and Côte d’Ivoire’s hard-earned investor credentials are at risk. In that light we also look at the government’s handling of the crisis and how it will affect key macro-fiscal indicators, despite a re-basing of GDP earlier in the year that has otherwise improved risk ratios by substantially increasing the size of the economy.

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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