Americas: Former president Fernandez de Kirchner to run for Senate seat

Sectors: all
Key Risks: political stability; policy continuity

In Argentina, former president Cristina Fernandez de Kirchner formally launched her bid for a Senate seat in the upcoming 22 October mid-term legislative elections. Her decision to create a new political party, Citizen Unity, that will compete with Peronist factions could divide the opposition vote and benefit the ruling Cambiemos coalition. Fernandez de Kirchner will compete in Buenos Aires province, the country’s most important electoral district with 40 per cent of voters. Primary elections, which in Argentina are effectively a mock election, are scheduled for 13 August. Results will give an indication of Fernandez’s support. The October mid-term election will be widely seen as a referendum on President Mauricio Macri’s first two years in office. The vote will be crucial to determine if President Mauricio Macri’s reforms can deepen and consolidate over the coming years.

Asia-Pacific: Presidential election threatens fragile economic recovery

Sectors: mining; banking
Key Risks: political stability

On 26 June Mongolia will head to the polls to select a new president. Only weeks ago it seened almost certain that the candidate of the ruling Mongolian People’s Party (MPP) would be elected, but he is now polling very closely with Enkhbold Miyegomo of the Democratic Party. Miyegomo has presented the election as a referendum on the terms of Mongolia’s US$5.4bln IMF bailout package, which he argues has been overly austere. Of concern is that if no candidate secures a majority of votes there will be a runoff vote, but with the third strongest candidate even more firmly against IMF austerity, the vote could coalesce around Enkhbold. With the MPP dominating Mongolia’s parliament, it is unlikely Enkhbold could interrupt the government’s support for the IMF package, but it would nevertheless undermine investor confidence in the already fragile economy.

Eurasia: Yet another ceasefire attempt in Ukraine fails

Sectors: all
Key Risks: interstate conflict; insurgency; frustration of process; sanctions

A new ceasefire between Ukrainian and Russian-backed separatists forces was supposed to come into effect on 24 June, but failed to do so. Dozens of such attempts have failed since the Minsk II peace agreement was signed in February 2015. Ukraine warned that there could be major new provocations from Russian and separatist forces over the coming weeks, while Ukraine’s President Poroshenko also said that it was possible the US could finally approve granting defensive weapons to Kiev in the coming months. Major doubts remain over the latter statement. However, indications it could come to fruition could prompt Russia and its proxies to seek to escalate the conflict beforehand in order to consolidate the areas they control in Donetsk and Luhansk Oblasts.

Europe: DUP-Conservative Pact agreed but risks remain

Sectors: all
Key Risks: political instability

On 26 June Arlene Foster, head of Northern Ireland’s Democratic Unionist Party (DUP), returned to London and a greed a deal to prop up a Conservative minority government. Failure to secure an agreement ahead of votes on the Queen’s Speech on 28-29 June could have  prompt early elections, although this will remain a risk for the foreseeable future. 29 June is also the deadline for talks on restoring Northern Ireland’s government between the DUP and Sinn Fein. Further political turmoil is possible, particularly vis-a-vis Northern Ireland as Sinn Fein has stated a DUP-Conservative agreement would undermine the Good Friday Agreement. A collapse of the Northern Irish government would see direct rule return to Westminster. The DUP-Conservative pact does not require the former to support all of the government’s Brexit positions, which will further weaken Prime Minister Theresa May’s negotiation hand with Brussels.

MENA: Mosul offensive approaches its end

Sectors: all
Key Risks: terrorism; civil unrest; political violence;

On 25 June, joint operations command for Operation “ We are Coming, Ninawa” in Iraq confirmed only a few hundred square metres of the Old City equating to one per cent of the land remains under Islamic State (IS) control as units of the Counter Terrorism Service, Federal Police and Rapid Response force continue to make gains on multiple axes across the Old City. Iraqi army units successfully recaptured a medical compound in al-Shafa’ north of the Old City in which a number of IS fighters were holed up. Later, federal forces secured the al-Faruq neighbourhood in the Old City. IS has increased attacks against Iraqi Security Forces and civilians to the north and west of the city as a distractionary measure. The full recapture of Mosul is imminent, although IS will continue to pose a threat to security in Ninawa province.

Sub-Saharan Africa: Is Mozambique’s debt scandal near a resolution?

Sectors: all
Key Risks: delays to IMF assistance; prolonged bondholder negotiations; corruption scandals

Kroll, who conducted an IMF-requested audit into Mozambique’s previously hidden loans, is still trawling for answers. The firm found that US$500m of the total US$2.3bln in loans to three SOEs remains unaudited and unexplained. Lead arrangers Credit Suisse and VTB Capital were found to have been paid US$200m in arrangement fees, while shipbuilding contractor Privinvest was assessed to have lent equipment at highly inflated prices. Mozambique has already endured multiple debt defaults, with the IMF and key donors suspending assistance following the revelations of undisclosed expenditure. The audit highlights the accompanying corruption in a debt scandal, which spans international waters. Despite the information gaps, the IMF received the results of the audit positively, and a team will travel to Maputo from 10-19 July to discuss the next steps. Economic assistance is likely forthcoming, which together with the audit, should help break the impasse between bondholders and the government.