Americas: Voters in Peru support anti-corruption reforms in referendum
Sectors: all
Key Risks: political instability; civil unrest
Exit polls from the 9 December referendum show strong support for President Martin Vizcarra’s political and judicial reforms to target corruption and reshape the political system in Peru. Voters approved three out of four reforms, first announced in August following a series of corruption scandals involving high-ranking officials and politicians. Peruvians approved measures to change the system used to appoint judges, to tighten campaign financing laws and to ban the immediate re-election of lawmakers, while the proposal to create a bicameral congress was rejected. If the poll results are confirmed, it will be a political victory for Vizcarra over the conservative opposition Popular Force (FP) party, whose leader Keiko Fujimori is currently pending trial over allegations of accepting US$1.2m in bribes from Brazilian construction company Odebrecht. The effectiveness of the anti-graft reforms remains to be seen.
Asia-Pacific: Head of Japan Investment Corporation steps down over conflict with ministry
Sectors: all
Key Risks: investor confidence; business risk; business disruption
CEO Masaaki Tanaka, and eight other executives at Japan’s state-backed US$18bln investment fund Japan Investment Corporation (JIC) resigned on 10 December, reportedly due to a feud with the Ministry of Economy, Trade and Industry (METI) over salary control and investment decisions. The JIC was founded in September 2018 with the aim of developing next-generation industries through venture capital investments, seeking to close the economic gap between Japan, the US and China. METI initially proposed to pay the JIC executives remunerations exceeding US$880,000 should their investments be successful, however the offer was retracted due to public outcry. In addition to clashing over pay, METI and Tanaka also disagreed on the corporation’s plan to establish multilayered investment funds. JIC’s investment activities will remain suspended until new executives are instated, and the divide between METI and JIC will negatively affect investor activities.
Eurasia: Azerbaijan may see two key US oil majors depart; Armenian revolution ends in election
Sectors: all
Key Risks: credit risk; political stability
On 5 December both Chevron and ExxonMobil announced they are considering selling their stakes – 9.57 and 6.8 per cent, respectively – in the BP-operated Azerbaijan International Oil Company, a consortium that controls the Azeri-Chirag-Gunashli field, Azerbaijan’s largest. The reports raise concerns that the field’s estimated recoverable barrels of oil is declining more rapidly than previously expected. In Armenia, the government is set for one party dominance after the 9 December elections were convincingly won by the Civil Contract Party of Nikol Pashinyan, who came to power in May following a non-violent revolution, with more than 70 per cent of votes. Two smaller parties that have also supported Pashinyan will enter parliament with one-third of seats as mandated by the constitution, though they received only 14 per cent of the vote combined. The Republicans who dominated the government for years before the revolution failed to pass the 5 per cent threshold.
Europe: May cancels parliament’s vote on her Brexit deal, will return to Brussels
Sectors: all
Key Risks: political instability; trade frustration; currency volatility
British Prime Minister Theresa May announced she will delay the planned 11 December vote on the European Union Withdrawal Agreement just over 24 hours before the vote was due to be held. May said she would seek “further assurances” from the EU on the so-called backstop even though the EU said it would not reopen negotiations only hours before May’s speech. Nonetheless, some backstop adjustments could be agreed. Under present understanding, Britain would remain in the Customs Union without the right to leave if it fails to secure a new trade agreement with the EU by the end of 2020 when the transition period is due to end. It is highly unlikely that May will secure more than a few ‘assurances’, and the Agreement will likely still fail to command a parliamentary majority. Significant political uncertainty should be expected in the UK, which could affect trade given there are only three-and-a-half months until Britain formally leave the EU.
MENA: Force majeure declared after Libya’s NOC’s al-Sharara oil field seized by militia
Sectors: oil and gas
Key Risks: oil prices
Libya’s National Oil Company (NOC) declared force majeure on exports from the al-Sharara oil field, the country’s largest. The declaration voids NOC’s contractual liability or obligation in an exceptional circumstance. The declaration came after armed militia stormed the premises on 8 December when security guards, who had threatened such action over salary delays and working conditions, opened the gates allowing the militia access. NOC said the shutdown would result in a loss of 315,000 bpd at the al-Sharara field and 73,000 bpd at the al-Fil field. Production at the Zawiya refinery, fed by supply from al-Sharara, is also at risk. NOC has stated that it will not negotiate, but similar blockades are usually solved by quick payments. The militia demands, including investment in healthcare infrastructure among other things, cannot be met quickly, thus a payment looks increasingly necessary for production to resume.
Sub-Saharan Africa: DRC’s Kabila hints at third term in 2023
Sectors: all
Key Risks: political instability; civil unrest; political violence; internal conflict
The Democratic Republic of Congo’s outgoing President Joseph Kabila confirmed that he intends to play an active role in politics following the 23 December presidential vote, in which he will not stand for election, and hinted he may run for another term in 2023. Kabila’s initial refusal to give up power following the end of his mandate in 2016 had raised fears he would seek an unconstitutional third term. Instead, the ruling PPRD party unexpectedly nominated former interior minister Emmanuel Shadary as its presidential candidate in October. However, Shadary is a staunch Kabila loyalist and it is widely expected that Kabila would continue to pull the strings should he be elected. Kabila’s announcement is likely to further fuel anti-government sentiment, raising the risk of election-related unrest. Meanwhile, a worsening Ebola outbreak and violence raises uncertainty whether voting can take place in the eastern DRC.
