Ones to Watch: 13 August 2018

Americas: UN-backed Commission asks to revoke Guatemala’s President immunity

Sectors: all
Key Risks: civil unrest; corruption fallout; political instability; armed clashes

In Guatemala, the Attorney General and the UN-backed Commission against Corruption and Impunity asked Congress on 10 August to revoke President Jimmy Morales’ immunity from prosecution, which would enable an investigation over an alleged US$1m illicit campaign financing during his 2016 election. It is the third such request, but the first under an attorney general appointed by Morales. The government controls two-thirds of Congress, which already voted twice in September 2017 to maintain presidential immunity, triggering a political crisis that lasted two months. The request is now being reviewed by the Supreme Court of Justice, which will need to approve it and then pass it to Congress. Despite the government’s 2017 reform on the Penal Code, which shifted the responsibility for electoral finances from the President to the accountant, there remains a risk of widespread unrest, including violence, with the potential to increase should the request be once again refused by Congress.

Asia-Pacific: Jokowi selects powerful religious leader as running mate for 2019 elections

Sectors: all
Key Risks: political stability

On 10 August President Joko ‘Jokowi’ Widodo, the opposition leader Prabowo Subianto and their respective running mates formally registered to contest in Indonesia’s next presidential election in April 2019. Jokowi’s running mate is Ma’ruf Amin, one of the country’s most influential religious figures. He currently chairs the Indonesian Ulema Council (MUI), Indonesia’s highest Muslim clerical body. Jokowi reportedly wanted to run with another religious figurehead, but the coalition appears to have pressured Jokowi to select Amin. The selection of a powerful religious leader as a running mate is pragmatic as Jokowi and his coalition have now pre-empted attacks on religious grounds following years of sectarian politics. However, the move may also prove a disappointment for those who had hoped to see Jokowi adopt progressive policies. Instead, Jokowi appears to be using identity politics to secure his re-election.

Eurasia: Additional US sanctions on Russia en route

Sectors:  all
Key Risks: sanctions

On 8 August, a Russian business daily leaked a bill recently previously announced by a bipartisan group of US Senators known as DASKAA. The bill puts forward a number of shockingly strident sanctions including a blanket ban on dealing Russian local and foreign currency sovereign debt issuances. The bill also would bar investment into all new crude oil projects in Russia, and prevents dealings with Russian banks, including VTB. Sources in Washington DC noted a heavy lobbying effort was already underway and while some version of the bill is likely to pass, it will likely be watered down somewhat. Also on 8 August, the Trump administration announced it would trigger sanctions under the 1991 Chemical and Biological Weapons Control and Welfare Act, which prescribes that the US bar the landing of Russian ships and flights and could lead it to downgrade diplomatic relations, though Trump can waive these.

Europe: Romania faces renewed political and economic risks 

Sectors: all
Key Risks: political violence; political instability; EU budget limits

Mass protests returned to Romania on 10-11 August, with more than a dozen injured in clashes between protesters and police outside the governing Social Democratic Party’s (PSD) Bucharest headquarters in central Bucharest. As many as 100,000 people took part in the 10 August protests, and 50,000 the following day, but there have previously been repeated rounds of such mass demonstrations against the ruling party, with protesters alleging it has enabled corruption. Also on 10 August, Romania’s Labour Minister proposed doubling pensions in the coming years – clear populist message aimed at shoring up the PSD’s base. Although Romania remains among the best economic performers in the Eurozone, its budget deficit grew slightly this year and the announcement raises concerns it will break through EU budget spending limits.

MENA: Lira falls to new low of 7.2 to the dollar

Sectors: All
Key Risks: Contract cancellation, political instability, sanctions

The lira fell to a new low of 7.2 to the dollar, before recovering partially. Turkey’s central bank tried to mitigate the fall in the currency by introducing emergency measures, including reducing banks’ lira reserve requirements, but with no signs this will dramatically increase rates, likely an indication that it lacks the independence to do so. President Erdogan has blamed outside forces for the fall in the lira – singling out President Donald Trump for the doubling of aluminium and steel tariffs to  50 per cent and 20 per cent respectively, as tensions increase between Washington and Ankara. President Erdogan has indicated that despite a currency crisis Turkey will not back down to the US over the Brunson dispute. Finance Minister Berat Albayrak promised measures to calm markets, though no details are yet available. He dismissed the possibility of capital controls. The collapse of the lira could create serious pressure on Turkey’s banking sector and for corporations in general, given their high exposure to foreign debt. There are signs of contagion to both other emerging markets and to the European banking sector.

Sub-Saharan Africa: Kabila to stand down as Katumbi barred from presidential vote

Sectors: all
Key Risks: political stability; political violence

The DRC’s election drama took yet another turn on 8 August when President Joseph Kabila announced he would not stand in December’s presidential vote, having delayed a vote on his succession since 2016. In a last-minute move before registration closed, the ruling PPRD unexpectedly nominated its secretary-general and former interior minister Emmanuel Ramazani Shadary as its presidential candidate. Although Kabila’s announcement was greeted with relief by the international community, Shadary’s nomination hardly heralds a democratic awakening for the DRC. A staunch ally of the Kabila family, Shadary is widely regarded as a pawn with no constituency of his own. Days earlier, Moise Katumbi, previously seen as the most promising candidate, was prevented from filing his candidacy. This narrows the list of Shadary’s serious contenders down to former vice-president and rebel leader Jean-Pierre Bemba, whom the International Criminal Court recently acquitted for war crimes, and Felix Thisekedi, son of Kabila’s long-time rival Etienne Thisekedi, both of whom are significantly more popular than Shadary.  Given Shadary’s lack of an obvious support base and small chance of winning a fair vote, his nomination reinforces fears the ruling party will revert to fraud to secure his victory.