Americas: PDVSA’s woes continue
Sectors:  hydrocarbon
Key Risks: non-payment; foreign exchange shortage; political instability; civil unrest

US federal prosecutors are preparing to charge several individuals and confiscate their property over the alleged looting of Venezuelan state oil company PDVSA. Those investigated are alleged to have taken bribes from third parties to award inflated contracts through PDVSA, leading to US$11bln being siphoned out of the country. The investigation comes amid a worsening financial position for PDVSA, despite the company’s repayment of a US$1bln 2016 bond on 28 October. The repayment came only days after PDVSA announced the completion of a US$2.8bln bond swap that exchanged bonds maturing 2017 for new notes maturing in 2020. The swap prompted S&P to downgrade PDVSA to ‘selective default’. Together with low oil prices, dwindling foreign exchange reserves, a heavy debt repayment schedule, and mounting political instability amid attempts to secure a recall referendum on President Nicolas Maduro, there remains a high risk of default over the short to medium term.

Asia-Pacific: South Korean presidential scandal escalates
Sectors: government
Key Risks: civil unrest

South Korean President Park Geun-Hye accepted the resignations of several top aides on 30 October, a day after prosecutors attempted to search the presidential offices of the aides. Various senior advisors and aides’ offices outside the presidential building were also searched. Thousands also protested on 29 October in central Seoul to demand Park’s resignation, sparked by revelations that one of Park’s close friends – who does not hold a government post and whose relationship with Park’s father was the source of significant controversy between 1961-1979 – was reviewing and editing her documents. With Park set to step down when her term ends next year, she will likely to take all measures to avoid resigning. Nevertheless the investigation into the presidency is remarkable given the prosecutor’s office has long been seen as closely linked to, and controlled, by the president. The scandal is also likely to further negatively impact the popularity of Park’s Saenuri Party.

Eurasia: Latest launch of Rogun Dam construction to heighten Uzbekistan-Tajikistan tensions
Sectors: hydropower; energy; agriculture
Key Risks: non-payment; forced cancellation; political violence

Tajikistan’s President Emomali Rahmon formally launched construction of the Rogun Dam on 29 July. The dam is to be built by Italian construction firm Salini Impregilo on a US$3.9bln contract agreed on 1 July. If completed as planned, it would be by far the largest ever foreign development project in the country, and it has received the tacit backing of the World Bank. Nevertheless, claims energy generation will begin in 2018 are optimistic. It should be noted the project is not only extremely risky due to Tajikistan’s weak economy and inadequate levels of foreign exchange reserves but also because of Uzbekistan’s potential response. Tashkent imposed freight and energy blockades after construction was previously attempted in 2003. Although Uzbekistan has sought to lower tensions since President Islam Karimov’s death on 2 September, it could return to imposing blockades or other measures to halt Rogun’s construction. A standoff over the situation has the potential to lead to military conflict.

Europe: Rajoy back as prime minister but doubts remain government will last
Sectors: all
Key Risks: political instability

Prime Minister Mariano Rajoy was re-elected prime minister of Spain on 29 October, ten months after elections were first held in December 2015 and four months since they were re-run in June, with a nearly identical-result. Rajoy leads a minority government with the support of the centrist Ciudadanos party. The two parties hold 134 and 32 seats respectively in the 350-seat chamber, and Rajoy’s approval also required a majority of Socialist deputies to abstain. The abstention caused a major rift within the Socialists, who ousted their leader over his refusal to do so last month. Rajoy’s government nevertheless faces major challenges, particularly amid future budgetary votes as the Socialists have vowed to vote down measures they do not support. There remains a high risk early elections will be called over the next year. However, the move may temporarily placate markets, which are already positively disposed to Spain as growth has continued to increase over the past year despite the political crisis.

MENA: February 20 movement mobilises public anger
Sectors: all
Key Risks: civil unrest; political violence

There will be small protests in cities across Morocco in the coming week after large nationwide protests erupted in dozens of cities and large towns in response to the death of a fish seller on 28 October with chants critical of the ‘Makhzen’, the country’s ruling elite. Mouhcine Fikri, a fish seller in al-Hoceima, was killed when attempting to retrieve his stock from a waste collection vehicle where it had been confiscated by police. Several thousand people attended Fikri’s funeral, and the civil society movement February 20 successfully organised protests in response including in Rabat and Casablanca. In several protests there were chants critical of the ‘Makhzen’, the country’s ruling elite. King Muhammad VI promised those responsible would be held accountable. Such widespread protests are rare in Morocco, and will only bring a
brief period of instability.

Sub-Saharan Africa: A new constitution for Cote d’Ivoire?
Sectors: all
Key Risks: sporadic post-result violence; creeping authoritarianism

Counting is underway in Cote d’Ivoire following a referendum on a new constitution on 30 October. The proposed constitution modifies a controversial nationality clause that was partly responsible for periods of protracted unrest in the country, including the civil war in 2002 and post-electoral violence in 2010. The country has since recovered from bouts of political instability, and is expected to be the continent’s fastest growing economy in 2016. The proposed constitution also creates the role of a vice president and a senate, attempting to embed political stability to attract foreign investment. However, opposition parties called for a boycott, arguing that the reforms were designed to entrench President Ouattara’s political coalition, while human rights groups have criticised the rushed process of the drafting. Violence erupted at over 100 polling stations by what appeared to be organised groups of young men. Despite low voter turnout, the new constitution is expected to pass.