Americas: Far-left Pedro Castillo to take office on 28 July amid high instability risks
Sectors: all; mining, oil
Key Risks: policy uncertainty; political stability; business risks; FoP
In Peru, on 28 July far-left Pedro Castillo will be sworn in as the country’s first hard left president in recent history amid heightened governability and political instability risks. The official results of the 6 June presidential runoff confirming Castillo’s victory were delayed by over six weeks due to conservative Keiko Fujimori’s persistent fraud allegations and requests to review ballots. Castillo‘s Peru Libre party only holds 37 out of the unicameral Congress’s 130 seats. The Congress’ leadership will be elected on 26 July and Castillo has backed Jose Enrique Jeri from the centre-right Somos Peru party to lead it, with only one Peru Libre lawmaker named as a candidate for one of the three congressional vice presidencies amid efforts to ensure governability. Legislative gridlock is still expected and, although it might temper Castillo’s reform drive, the latter will continue to heighten business risks.
Asia Pacific: China moves to counter US sanctions and business regulations
Key Risks: business risks; sanctions
In a move that will continue to worsen relations between the US and China, on 24 July Beijing imposed counter-sanctions on seven US citizens and entities in retaliation for Washington’s sanctions on Chinese officials over the tightening of control on Hong Kong. Emphasising a tit-for-tat response, Chinese sanctions were imposed two days before high level talks in Tianjin, mirroring the US move to impose sanctions two days before a March summit in Anchorage. The authorities also approved China Telecom’s application on 23 July to raise about US$8.4bln through a listing on the Shanghai Stock Exchange following its delisting from the New York Stock Exchange in January under a Trump administration executive order. Other Chinese companies are likely to follow amid increasing scrutiny of Chinese companies in the US, deteriorating bilateral ties and Beijing’s clampdown on Chinese companies seeking US IPOs.
Eurasia: Russia to support security in Uzbekistan and Tajikistan, enter strategic talks with the US
Key Risks: political violence; terrorism; policy uncertainty
The armed forces of Russia and Uzbekistan plan to commence joint exercises in the latter’s southern Surkhandarya region on 30 July as the situation in neighbouring Afghanistan remains volatile. Taliban militants’ gains in the north, including the seizure of a number of border posts, have raised concerns amongst Central Asian leaders. While the risk of conflict spillover onto Uzbekistani territory is low, the exercises, which Tajikistan’s military will subsequently join, underline Moscow’s commitment to Tashkent’s and Dushanbe’s security. Kremlin representatives will also be in Geneva on 28 July, when Deputy Foreign Minister Sergei Ryabkov is scheduled to meet his US counterpart Wendy Sherman for nuclear arms control talks. Discussions may yield ‘off-ramps’ to help prevent strained relations from escalating. However, further rapprochements in bilateral security, diplomatic and/ or economic relations are not expected.
Europe: Hungary’s spat with the EU continues as PM Orban looks to 2022 election contest
Key Risks: political instability; policy uncertainty; economic
The EU reportedly plans to seek a two-month delay in talks with Hungary on its share of the bloc-wide COVID-19 pandemic recovery plan due to ongoing disputes. Budapest was in talks to receive the first tranche of EUR7.2bln (US$8.47bln) in grants from the EU, but Brussels has indicated that further evaluation was needed following corruption allegations and recent legislation passed by Prime Minister Viktor Orban’s government perceived to discriminate against Hungary’s LGBT community. Budapest will seek to fund projects planned to be financed by the recovery fund from its own budget until the dispute is resolved. With the Spring 2022 election expected to be the toughest challenge the ruling Fidesz party has faced since returning to power in 2010, Orban is likely to further politicise the spat with Brussels to galvanise domestic support over the coming months.
MENA: Tunisia’s prime minister fired; Najib Miqati set to be Lebanon’s prime minister-designate
Key Risks: civil unrest; political risks; political instability
On 25 July Tunisian President Kais Sa’id fired Prime Minister Hisham Mechichi and parliament was decreed frozen for 30 days. The move followed violent protests fuelled by the government’s mismanagement of COVID-19 and its economic fallout. Sa’id, who has long engaged in a power struggle with Ennahda-backed Mechichi, will assume executive authority until a new premier is designated. Ennahda’s leader, Parliament Speaker Rashid Ghannouchi, denounced the move as a ‘coup’ as it consolidates power under Sa’id as the country endures an economic crisis exacerbated by COVID-19. On 26 July businessman and former prime minister Najib Miqati secured sufficient votes in parliamentary consultations to become Lebanon’s prime minister-designate. This follows Sa’ad al-Hariri’s resignation on 15 July after his failure to agree a cabinet with President Michel Aoun. Miqati will encounter the same obstacles as Hariri, with government formation an elusive objective amid widespread political and economic malaise.
Sub-Saharan Africa: Senate elections delayed in Somalia
Key Risks: civil unrest; political instability; political violence; terrorism
In Somalia, Senate elections due to start on 25 July were delayed as several states, including Puntland and Galmudug, failed to provide a list of candidates amid logistical issues. The length of the delay remains unclear, although local officials hope that voting will begin over the coming days. Long-awaited presidential elections are scheduled for 10 October but could face similar disruption. The country plunged into a political crisis in April after President Mohamed Abdullahi Mohamed ‘Farmajo’s’ term expired without organised elections. Farmajo later bypassed the Senate to approve a two-year term extension, a move which sparked clashes in the capital Mogadishu between factions of the country’s security forces. Although the violence has abated since an election agreement signed in May, the political landscape remains highly fragile and potential further delays to the vote risk reigniting unrest.