Americas: Controversial proposal to merge Mexico’s regulators postponed amid backlash
Key Risks: regulatory changes; contract frustration
In Mexico, Ricardo Monreal, the Senate leader of the ruling leftist Morena party, decided to delay a controversial proposal to merge three regulatory bodies – an initiative that was publicly backed by President Andres Manuel Lopez Obrador – following strong opposition backlash. Monreal had presented a plan to merge energy regulator CRE, antitrust watchdog Federal Economic Competition Commission (COFECE) and telecoms regulator IFT, citing the need to reduce public spending. The opposition raised concerns over a potential power grab. Despite the postponement, such concerns will persist and the proposal could be revived at short notice. Attempts to modify oversight bodies and regulatory frameworks in key sectors, including oil and electricity, will remain a risk throughout AMLO’s presidency.
Asia Pacific: Beijing under partial lockdown; Thailand eases COVID-19 restrictions
Key Risks: economic; business
In China, the government began to re-introduce lockdowns in neighbourhoods across Beijing as COVID-19 cases spiked. The outbreak had been largely brought under control until a fresh wave was detected in the capital last week, with more than 100 cases in the city directly linked to a wholesale food market. The recent outbreak has fueled concerns of a second wave of infections as surrounding provinces have also reported suspected cases connected to those in Beijing. Further lockdowns may be instituted at short notice. Meanwhile, Thailand has lifted nationwide curfews and has eased COVID-19 related restrictions. The government is also planning to reopen to foreign visitors by establishing travel bubbles with countries that have effectively contained the virus. Further lifting of restrictions is expected.
Eurasia: Armenia faces period of heightened political instability
Key Risks: political instability
On 12 June Armenia said it would seek alternative suppliers for a Soviet-era power plant currently supplied by Russia’s state-owned Rosatom. Yerevan has sought a more multi-vectored foreign policy since Nikol Pashinyan ousted the corrupt Republican Party government, closely linked to Moscow, in 2018 and won the subsequent elections. However, Moscow retains significant leverage and is protective of its foreign nuclear assets and may seek to destabilise Pashinyan’s government. In the past week Pashinyan also began investigating opposition Prosperous Armenia party leader Gagik Tsaruyan, an influential oligarch who Moscow has worked with repeatedly. Numerous security service officials were also sacked – the former Republican elite was broadly formed from the security services. These challenges are being exacerbated by the spread of COVID-19 across the country; Pashinyan himself has tested positive. There is a growing risk of political instability.
Europe: Six months to reach post-Brexit trade deal; lockdowns ending on continent
Key Risks: trade disruption
On 12 June the UK ‘formally announced’ it was rejecting any possible extension to the post-Brexit transition agreements in which it essentially remains under all EU rules beyond the end of the year, which Brussels said it accepted. While there remains a risk this could be reversed, this is highly unlikely and there is a serious risk that Britain will not be able to secure a new trade arrangement before year’s end, which could cause significant trade disruption even as the economy is expected to be recovering from COVID-19. France is returning to near-normal following the 15 June lifting of all domestic restrictions, and other EU member states continue to make efforts to resume travel and tourism. There is a risk new controls will be imposed at short notice if COVID-19 spreads again.
MENA: Central bank to support Lebanese lira; US-Iraq strategic dialogue continues
Key Risks: political instability; civil unrest; humanitarian crisis; terrorism
Lebanon’s central bank is expected to inject an unspecified amount into the economy to halt the slide of the lira, which is continuously hitting record lows. The lira has fallen to LBP7,000 to the US dollar on the black market in recent days. Money changers are banned from selling lira at less than LBP3,940 to the dollar. However, recent government initiatives to prevent the slide have not worked and resulted in ever increasing protests. Calls are mounting for new Prime Minister Hassan Diab to resign. Iraq entered its second week of ‘strategic dialogue’ with the US to calibrate bilateral ties and examine the prospect of withdrawing US troops. The talks come as rocket attacks towards US military assets increase, protests escalate and Baghdad runs out of oil revenues. Calls are increasing for new Prime Minister Mustafa al-Kadhimi to resign.
Sub-Saharan Africa: Burundi Constitutional Court rules president-elect Ndayishimiye be sworn in immediately
Key Risks: political instability
On 13 June Burundi’s Constitutional Court ruled that president-elect Evariste Ndayishimiye take office as soon as possible following former president Pierre Nkurunziza’s death on 8 June. The government turned to the court after Nkurunziza’s unexpected demise threatened to create a power vacuum. Ndayishimiye, of Nkurunziza’s CNDD-FDD, won the disputed 20 May presidential election with 69 per cent but was not expected to be sworn in until August. Although the constitution stipulates that the National Assembly leader be installed as interim president in the event of the president’s death in office, the CNDD-FDD’s cadres appeared split between supporters of Ndayishimiye and National Assembly leader Pascal Nyabenda, who was Nkurunziza’s first choice as successor. The court’s decision to break with constitutional procedure may avert a power struggle in the short-term. However, tensions within the CNDD-FDD could weaken Ndayishimiye’s government.