Our coverage of the Americas features a new report on Peru, where the rightist FP won a majority of legislative seats at elections held in April, but the party’s presidential candidate, Keiko Fujimori, was narrowly defeated by Pedro Pablo Kuczynski, a former prime minister who advocates a liberal policy agenda, at a run-off election held in early June. Kuczynski has pledged to counter the negative economic impact of a slump in prices for mineral exports with a pro-growth strategy that includes a reduction in the sales tax and incentives for businesses to reinvest profits. Unfortunately, the new president’s PPK won just 18 seats in the 130-member Congress, and Fujimori has already ruled out any formal agreement with the incoming administration. The report will examine where there might be room for cooperation between the government and the FP, as well as those policy areas where the FP’s legislative majority is likely to pose an insurmountable obstacle. The report will also discuss what divided government portends for investment-related risk, including the prospects for overcoming strong local resistance to mining that has forced the suspension of major projects, and for medium-term economic performance.
PRS will also publish an update on Venezuela, where both economic and political conditions continue to worsen, as the opposition majority in the Congress pushes to legally remove President Nicolás Maduro from office against a backdrop of rising crime, triple-digit inflation, and severe shortages of even basic necessities. The analysis will examine the potential for the twin economic and political crises to trigger the suspension of democratic rule, and will focus especially on the danger of a sovereign default, and what the Maduro government’s efforts to avoid such an outcome could mean for foreign investors.
Turning to the Middle East and North Africa, PRS is preparing a revised report on Israel, where Prime Minister Binyamin Netanyahu has managed to bolster his shaky Likud-led government by persuading the ultranationalist Yisrael Beiteinu to join the coalition. The renewed partnership between the one-time electoral partners has reinforced the rightward lean of the government, which bodes ill for any chance of substantive progress toward a peace deal with the Palestinians. However, it has not prevented a rapprochement with Turkey, a development that has positive—but hardly game-changing—implications for international efforts to restore some semblance of order in Syria and to prevent more generalized instability in the region. In addition to offering a reassessment of the current government’s chances of surviving for a full term (and beyond), the report will also examine what, if any, impact the coalition reshuffle might have on the economic policy strategy over the five-year forecast period.
Coverage of Western Europe includes a consideration of impact that will be felt by Switzerland in the aftermath of the British vote to withdraw from the EU. PRS will examine the repercussion of Brexit for the Swiss banking industry, the likely impact on the economy, including the Swiss franc, and what it will mean for Swiss-EU relations. On the last point, the report will examine how the evident threats to the unity of the EU might influence the course of negotiations over immigration restrictions approved by Swiss voters in a binding referendum held in 2014. In terms of domestic political matters, our report will look at the challenges for the broad coalition government, in which the right-wing Swiss People’s Party has secured a more influential role, but will continue to encounter obstacles to implementing its agenda.
China heads-up our in-depth political risk reporting this month, six months on from a second major spate of financial volatility that sent out a chilling reminder of the questions lingering over Beijing’s financial sector liberalization path and its ability to stage-manage a soft landing for the economy. We look at what has happened since, focusing on the prevailing economic trends, and the short-to-medium term challenges facing the authorities, including the risks still swirling in the real estate market, the effectiveness of government policy to address the debt problems still posing a background concern and how China will react to the market turbulence caused by Europe’s troubles. Our report moreover looks at the increasingly tense relationship playing out between China and its regional neighbors over claims to sovereignty in the South China Sea, and how this issue will develop with the US also acutely involved.
Our Asia coverage will also include a detailed look at the implications of the recent elections in the Philippines which produced an overwhelming victory for the controversial Davao City mayor, Rodrigo Duterte, whose presidency will undoubtedly prove to be one of marked contrast to that of his predecessor, Benigno Aquino. On the one hand, Duterte is already raising huge concern among human rights groups, not only for his support for the death penalty, but also for his promotion of street justice for drug dealers, a stance that made Davao City notorious for its extra-judicial killings during his tenure as mayor. On the other hand, Duterte has also made a start on establishing peace in the troubled region of Mindanao, and is also offering considerable encouragement to the business community by signaling that his economic policy agenda will include enactment of constitutional changes that remove limits on foreign investment and land ownership. The report examines how the new government’s sometimes contradictory approach to addressing the many challenges will affect the country’s reputation among foreign investors, and rounds out with forecasts for the major macro-variables through 2017.