Coming Soon in Our February 2021 Political Risk Reports

PRS’ coverage of the Americas this month includes updates on recent developments in Cuba and Honduras and fully revised reports on Argentina and Peru, which is gearing up for presidential and legislative elections in April. Hopes that the elections might usher in a period of welcome stability following the serial crises that led to the early ouster of two presidents since the 2016 elections seem likely to be disappointed. Polling data indicates that none of the candidates in the crowded field of presidential contenders is breaking away from the pack, with George Forsythe, a former soccer player who briefly served as mayor of La Victoria District in Lima before stepping down to prepare for a presidential bid, holding the lead with less than 15% support.

The report will analyze the risk implications of the most likely regime scenarios to result from the elections, including the probable election of a president who lacks the reliable support of a legislative majority. The analysis will include an examination of the policy priorities of the top contenders for the presidency and an assessment of what each might be able to accomplish with or without a majority in the Congress, and what that would mean for the climate for investment and trade over the next five years.

This month PRS includes several detailed risk reports on Western Europe, including Spain, where we look at how the COVID-19 crisis is affecting the economy and the domestic political scene as the Catalonia elections go ahead despite an attempt to have them delayed and will invariably provide another reminder of the drive for secession in the region. Our report looks into relations between Prime Minister Pedro Sánchez and his Deputy, Pablo Iglesias, as tensions grow between their two respective parties working together in coalition with the support of the Basque nationalists and other minority partners. We analyze how the proposed housing and transsexuality laws will impact on government cohesion as well as what the parliamentary vote on the use of the EU’s recovery funds implies for political stability and legislation this year. Our report also investigates particular aspects of the healthcare crisis as the case count and death toll mount, and what effect the EU’s problems securing vaccines will have on bringing the crisis to an end. With that in mind we also assess the economic cost to the Treasury from COVID-19 and its impact on policymaking, and we present alternative scenarios for economic growth, inflation, the balance of payments and other key macroeconomic indicators influencing investor returns in 2021, ultimately to assess whether recent positive market sentiment is justified.

As well as other reports on Germany and Sweden this month, our EU coverage also features in detail how the health crisis is affecting Greece with its already huge debt burden and excessive unemployment, and how it will impact on policymaking pursued by the majority center-right New Democracy government led by Prime Minister Kyriakos Misotakis, which had been hoping to build on three years of growth but is now back to square-one addressing another recession. Our report looks at the formidable economic and healthcare challenges facing the authorities with the all-important tourism industry still imperiled as the government temporarily ditches the strict policy conditionality required to receive loans to provide support to vulnerable groups. We analyze the prospect of protests emerging unpredictably in response to restrictions and unemployment (as has occurred in several European countries recently) as well as looking at what external help Greece will receive, and what the latest cabinet reshuffle implies for policymaking. Our detailed report also looks at ongoing tensions with Turkey as the two sides aim to resolve the interminable Cyprus problem and are at odds over offshore gas exploration rights in the eastern Mediterranean, particularly in the wake of the maritime agreement struck last August between Greece and Egypt nullifying an accord struck between Turkey and Libya.

Coverage of Eastern Europe will include a full report on Romania and an update on Azerbaijan, where President Ilham Aliyev’s already firm grip on power has been strengthened by a successful military campaign last fall that resulted in the country reclaiming territory that had been occupied by Armenia for more than a quarter-century and established Azerbaijan’s control over a substantial section of the disputed enclave of Nagorno-Karabakh. In the aftermath of the fighting, Aliyev is taking decisive steps to reinforce Azerbaijan’s historically close ties with Turkey, a strategy that is likely to cause discomfort in Washington, where officials have observed with concern the Turkish government’s retreat from liberal principles and the new government headed by Joe Biden is expected to adopt a foreign policy strategy that assigns greater priority to human rights and democracy.

The update will explore the risk implications of the shifting diplomatic landscape as it pertains to Baku’s relationship with western investors and the outlook for progress on economic diversification. PRS will also assess the danger of Azerbaijan becoming embroiled in regional power struggles between Iran and the Gulf monarchies and between Turkey and Russia in chronic trouble spots such as Syria and Libya.

Turning to the Middle East and North Africa, the roster for February includes an update on Syria and a fully revised report on Iran, where voters will go to the polls to elect a new president in June. The outcome of the contest, which is expected to include two-term former President Mahmoud Ahmadinejad among the contenders, figures to have a significant impact on the whether the recent change of government in Washington translates to a thaw in US-Iran relations.

The report will examine the broader political trajectory within Iran guided by the efforts of Ayatollah Ali Khamenei and his allies to cement the long-term dominance of the country’s conservative political elements ahead of the supreme leader’s inevitable departure from power. In the vein, PRS will discuss the risks to the investment climate and the stability of the Middle East, in general, arising from the almost certain election of a hard-line conservative as president this year, and what the means in terms of the prospects for repairing the damage to the economy caused by the previous US administration’s “maximum pressure” sanctions strategy and the COVID-19 pandemic.

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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