Americas: Security in Rio; unrest in Argentina; and Colombian truckers’ strike
In Brazil heightened security measures should be expected over the coming weeks as the 5-21 August Olympic Games taking place in Rio de Janeiro approach. Concerns over security in the lead up to and during the Games have recently increased. On 15 July the government met to review its security procedures following the 14 July terrorist attack in the French city of Nice. More checkpoints, barriers and some traffic restrictions could be added to the measures including the ongoing deployment of 85,000 security-force personnel. Although enhanced security operations and international intelligence sharing are expected to mitigate the risk of a large scale terrorist attack, the risk of a lone wolf or small cell attack will persist over the coming weeks.
In Argentina the incidence of high inflation and recent controversial utility hikes is expected to continue to fuel social unrest and labour strikes across the country at least over the coming weeks. On 14 July leftist groups and consumer protection organisations called on demonstrations which turned into the first ‘cacerolazo’ – a modality of protest in which people bang pans across neighbourhoods and from their houses – against President Mauricio Macri. On 18 July grain truckers began a nation-wide indefinite strike to protest against transporting fees to ports for export. The strike is not expected to immediately affect shipments from Argentina although associated protests and disruption at ports should be expected.
On 14 July Colombian President Juan Manuel Santos increased the number of security-force personnel deployed across Colombia to deal with an ongoing truckers’ strike to 50,000. The protests began in early June after the government allegedly failed to address concerns related to the higher cost of fuel, tolls and freight. Violent incidents and road blockades have been affecting several departments, where higher food prices and shortages have been observed. Demonstrations, associated violence and disruptive blockades are expected to continue at least until a meaningful agreement is reached.
Europe: Brexit continues to dominate European politics
The aftermath of Brexit continues to dominate European politics. On 13 July Theresa May officially became Britain’s new prime minister and she swiftly appointed a number of high-profile members of the ‘Brexit’ campaign to her government, including David Davis as Secretary of State for leaving the EU and Boris Johnson as Foreign Secretary. Yet the appointments have failed to answer a number of major outstanding questions, while May’s talks with Scotland’s First Minister Nicola Sturgeon also highlighted the uncertainty about how the UK will go about pursuing the process of leaving the EU. Indications are that Article 50 of the Lisbon Treaty, under which a country would leave the EU, will be triggered next year although even on this front there have been contradictory statements. Nevertheless, the pound has already recovered slightly from its post-Brexit lows, although it is still likely to fall further if the Bank of England lowers interests rates in the coming months as it is expected to do despite having not done so this past week.
Continental Europe has, however, also faced more immediately pressing security issues in the aftermath of the 14 July attack in Nice and an axe attack by an Afghan refugee near Wiesbaden, Germany, four days later that has also been linked to Islamist extremism. The risk of further such attacks will remain elevated for the foreseeable future.
Former Soviet Union: Political instability in Armenia; heightened risk of escalation in Ukraine
Although overshadowed by events in neighbouring Turkey, Armenia has been rocked by domestic political instability calling for the overthrow of the government since 17 July when armed gunmen seized the district police headquarters in Erebuni, a district of the capital Yerevan. As of the time of publication the situation remains ongoing and the government has largely been struck by inertia rather than taking an active response. The group, which has ties to extreme nationalists and some members of the opposition, has called on protesters to take to the streets and demanded the government resign. Protests have been relatively calm although they have also been met with mass arrests by the security forces. The gunmen continue to hold hostages, all members of the local security forces, and there remains a high risk of further violent incidents and civil unrest. The situation also threatens to become inflamed by the fact that the group has called for a resumption of conflict with Azerbaijan over the Armenian-controlled Nagorno-Karabakh territory.
Meanwhile, Ukraine also faces a heightened risk of a new escalation in the conflict with Russian-backed separatists in the Donbass. Fighting has escalated along the lines of contact once again in recent days and tensions have been inflamed by separatists’ efforts to organize their own local elections in opposition to the Minsk peace agreements.
MENA: Risk of violence increases regionally
On Friday 15 July, a small portion of Turkey’s military including members of the army, navy and air force senior leadership, attempted to overthrow the government. The immediate consequence of the weekend’s events will be the bringing forward of anticipated changes led by Erdogan and his party, such as an overhaul of the judiciary, and a reshuffle of the military that had not yet been announced. However, reshuffles in the judicial system, local governance structures and military will be more widespread and fast-tracked that was originally planned. In the medium term this will have the same impact as a similar purge of the military several years ago: undermining local and national security infrastructure that weakens security and makes the country less safe. Given the security situation Turkey finds itself in, with two separate terrorist groups attacking on multiple fronts, this is a situation the country can ill-afford.
The political climate will take a sharp turn to the right, emboldening government supporters, although the main parliamentary opposition parties are unlikely to let Erdogan and the AKP get away with everything over the next several months in the name of preserving democracy. Events may ease the path of the new constitution, although there will be some push-back if the government seeks to push through reforms such as the return of the death penalty. There will be a spike in violence in Istanbul and Ankara, and buildings and assets perceived as anti-Turkish will be at risk of targeting by pro-government protesters.
The risk of instability in Iraq is likely to increase over the weekend, as prominent cleric Muqtada al-Sadr announced he would organise more protests in Baghdad from 22 July over ongoing concerns of corruption. The resignation of six cabinet members, including the oil and interior ministers, could lead to return of chaos in the parliament as different factions vie to control the appointments of the replacement cabinet.
Sub Saharan Africa: International pressures weigh on largest African economies
The IMF revised down its 2016 growth forecast for Nigeria. The economy is now expected to contract by 1.8 per cent in 2016, for the first time in over 20 years, a significant downgrade from April’s 2.3 per cent estimate. The Nigerian economy has been affected by foreign exchange shortages as a result of low oil prices and militant attacks constraining oil exports, low power generation, and weak investor confidence. Following the removal of the currency peg in June, the naira weakened against the dollar by almost 30 per cent, and inflation in Nigeria reached 16.5 per cent in June. Liquidity remains thin, although this is expected to ease over the coming year.
Kenya may abandon 10 years of trade deal negotiation with the EU as part of the regional East African Community (EAC) bloc and go it alone, to avoid having duties of 30 per cent applied to its exports. An Economic Partnership Agreement (EPA) between Kenya, Uganda, Tanzania, Rwanda and Burundi and the EU is on hold after the Tanzanian government stated concerns over Brexit. The negotiated EPA would give members of the EAC immediate duty- and quota-free access to the EU for exports, and was due to be signed this week. If the deal is not signed by October, Kenya (as the only member of the EAC not classified as a “least developed country”) could lose preferential access. Kenyan fresh-produce exports generate the bulk of foreign exchange earnings in the economy, and it is unlikely that government officials will defer negotiations with the EU, via the EPA or otherwise.
Faced with historically high borrowing costs, Ghanaian companies are turning to the stock market to raise record amounts of capital to reduce debt. However, the stock index is in a bear market – characterised by falling share prices, negative sentiment, and selling of shares – having fallen to a three-year low as the plunge in oil prices and power shortages constrain economic growth. While this has encouraged investment and injected liquidity into the market, it is a raw deal for sellers. With high interest rates, this trend looks set to continue, marking the highest yearly issuance since the Ghana stock exchange began operating in 1990.