MS Risk Blog

Latin American Consequences of the US Presidential Elections

The US presidential elections are already swinging the pendulum for Latin America in significant ways. The fear that the US will now revert to protectionism lead to a major sell off across different asset classes. The Mexican Peso tumbled to 20-years lows and has hardly recovered as of yet, pulling down the entire region. After an initial quick fall the Dollar bounced hard and is currently trading at multi-month highs. This has exacerbated the devaluation of Latin American currencies, which are traded against the Dollar.

Apart from the financial fallout, geopolitical consequences of Trump’s future policies have appeared as well. Now that Trump has confirmed he will not support the Trans-Pacific Partnership, potential members like Chili, Peru, Mexico and Colombia will likely beef up their bilateral economic relations in order to compensate for TPP. Peru already stated to foresee bilateral negotiations with Australia and New Zealand. Argentina, very open to free trade, will receive $4.1 billion in investments from Canada. This is about half the amount expected from US companies through 2019. A more protectionist approach by Trump could bring that amount down and leave the door open for Canadian companies to fill the gap. Withdrawal from NAFTA could exacerbate this and will constitute extra incentive for Latin American countries to strengthen bilateral relations with other geopolitical powers. Peru, which has strong historic ties with China, already trades more with China than with the US, a development that could potentially spill over to increased security and military cooperation. President Kuczynski’s pull to China is very clear: “We hope to tap into new markets in China, especially for agriculture. We are also interested in cooperation on science and technology. Furthermore, cultural exchanges and cooperation in archaeology and climate change are also very important for us.” It remains the question whether the US will look on from the sidelines if Russia and China increase their influence in Latin America.

Interregional relations are likely to strengthen as well, given Trump’s veiled threats to Central American countries on the topic of immigration. Whether the US will build a wall or will significantly increase deportations of immigrants, Honduras, Guatemala and El Salvador have said to form a bloc with Mexico to deal with the US under Trump leadership. However, with regards to Mexico, it is likely that organized-crime competition will increase, as a result of traffic restrictions and stricter border controls. In this scenario, conflict over control over the remaining open crossings would lead to increased violence. Violence in border cities like Ciudad Juarez and Tijuana is already on the rise. The second security consequence for Mexico stems from the influx of deportees, who would have few employment opportunities in Mexico. They could provide a ready pool of labour for criminal organizations. Central American cooperation is said to increase collaboration on jobs, investments and migration.

It remains to be seen as to which direction the pendulum will eventually swing, however, for the moment significant financial, economic and security consequences are already visible in Latin America.

Fillon & Juppe to go Head-to-Head for French Conservative Presidential Ticket

On Sunday 20 November, the French conservative party held its first-round voting to select its candidate for next year’s presidential election.   Francois Fillon will now head into a five-day runoff campaign for the presidential ticket. He is favoured over his opponent, Alain Juppe, after the first-round vote resulted in the ouster of ex-president Nicolas Sarkozy from the race.

Fillon is up against another former prime minister, Alain Juppe, in a second round of the primaries, which will be held on 27 November. Juppe now has a week to turn around his momentum-sapped campaign and win over the supporters of the other candidates. However this may be a difficult task for Juppe, as Fillon was only six points short of the 50-percent threshold needed in the first round, and has Sarkozy on his side. Sounding downcast late on Sunday, Juppe told his supporters that he would “carry on fighting” and billed himself as the best option to defeat far-right party leader Marine Le Pen, whom polls predict will make it to the second round of the presidential election.

Any French voter can take part in the run-off election next Sunday. Furthermore the views of pollsters and commentators have been much confounded in popular votes worldwide this year, including Brexit in the UK and the US presidential election, not least Sunday’s vote in which Fillon did far better than expected.

What is at stake is an almost certain place in the second round of next May’s presidential election. It is likely that the conservative challenger will face National Front party leader Marine Le Pen. Market analysts have said that the outcome of Sunday’s vote opens up new uncertainty about the result of next year’s presidential election and may increase what is still a remote risk that far-right leader Marine Le Pen can win it. A BVA poll in September indicated that Fillon would beat Le Pen by a margin of 61 percent of votes to 39 percent however recent opinion polls scenarios have not pitted him against her – in what is further evidence of how unexpected his top spot on Sunday was. More recent polls have consistently shown that Juppe would easily beat Le Pen. Polls have also indicated that Fillon is much less popular than Juppe amidst left-wing voters, which could make it harder for him to get their vote versus Le Pen.

Whatever the out come will be of Sunday’s election, next year’s presidential and legislative elections are already shaping up to be another battle of strengths between mainstream parties and rising popularist forces. The ruling Socialist party and its allies will hold their own primaries in January 2017. French President Francois Hollande, whose popularity ratings are abysmal, has yet to announce whether he will stand again, however polls have already indicated that it is unlikely that he would win in the primaries.

Colombian Government and FARC to Sign New Peace Deal

President Juan Manuel Santos disclosed on 22 November that a new peace accord between the Colombian government and Marxist Revolutionary Armed Forces of Colombia (FARC) rebels will be signed on Thursday 24 November, effectively bringing a formal end to the 52-year civil war ever closer.

The revised document will be signed in Bogota between FARC leader Rodrigo Londono and President Santos, who won the Nobel Peace Prize last month for his efforts to end the conflict with the insurgent group.   During a televised address on Tuesday, President Santos stated, “We have the unique opportunity to close this painful chapter in our history that has bereaved and afflicted millions of Colombians for half a century.

Over the last four years, the Colombian government and the FARC have been in talks in Havana, Cuba in a bid to agree on a peace deal to end a conflict that has killed more than 220,000 and displaced millions in the Andean country. In a bid to build support, after the original draft was rejected in a 2 October referendum amidst objections that it was too favourable to the rebels, the government published the revised version last week. The expanded and highly technical 310-page document appears to make only small modifications to the original text, such as clarifying private property rights and detailing more fully how th rebels would be confined in rural areas for crimes committed during the war.

President Santos and London had signed the original deal two months ago in a ceremony before world leaders and United Nations Secretary General Ban Ki-moon. This time however it has been decided that the revised accord will be ratified in Congress instead of holding an other referendum – a move that will likely anger members of the opposition, particularly former President Alvaro Uribe who spearheaded the push to reject the original accord. The former Colombian leader wants deeper changes to the new version and he has already criticized it as just a slight altered version of the original. Furthermore, he wants rebel leaders to be banned from holding public office and for them to be jailed for crimes. In his televised address, President Santos stated that “this new accord possibly wont satisfy everybody, but that’s what happens in peace accords. There are always critical voices; it is understandable and respectable,” warning that another plebiscite could divide the nation and put in danger the bilateral ceasefire.

The FARC, which began as a rebellion fighting rural poverty, has battled a dozen governments as well as right-wing paramilitary groups. An end to the war with the FARC is however unlikely to end violence in the country as the lucrative cocaine business has given rise to dangerous criminal gangs and traffickers that operate throughout the country.

Boko Haram Significantly Decreases Attacks in Cameroon

Analysts reported on 16 November that Nigerian-based militant group Boko Haram has significantly scaled back attacks in Cameroon in recent months, suggesting that a regional security force is gaining ground against the militants.

According to the International Crisis Group (ICG), the Islamist movement, which controlled an area in northeastern Nigeria last year and raided Cameroon and other neighbours, including Niger, in a bid to expand its “caliphate,” has since suffered a number of defeats. One of the report’s authors, Hans de Maria Heungoup, disclosed that “we’ve seen a dizzying downwards spiral in the number of attacks suicide bombings.” Two years ago, attacks were happening on an almost daily basis, however since September that number has fallen to between six and eight a month. The study indicated that “(Boko Haram) has suffered heavy losses and seen its conventional capacities reduced,” partly thanks to last year’ formation of a 10,000-strong regional force with troops from Benin, Cameroon, Chad, Niger and Nigeria. According to the report, up to 1,000 fighters with heavy weaponry and armoured vehicles joined strikes in Cameroon’s Far North region in 2014 – 2015, however attacks have now focused on the northernmost tip of the region, where fighters have continued to control part of the fishing industry of Lake Chad.

The ICG also noted that recruitment in Cameroon has also faltered, warning however that forced enlistment remains a risk. Citing interviews with the locals, the study disclosed that up to 4,000 Cameroonians are though to have joined the group and some were given sign-on bonuses of up to US $2,000 and a motorbike, adding that those who proved their loyalty by killed their parents often enjoyed quick promotion. Analysts have disclosed that the faction around the Lake Chad Basin represents the stronger branch of the group, which is loyal to the so-called Islamic State (IS) group and which is led by Abu Musab al-Barnawi, while another faction, which is led by Abubakar Shekau, is based further south in Nigeria’s Sambisa forest.

Terrorism-Related Deaths Decreased in 2015

A report released on 16 November indicated that deaths from terrorism in Organization for Economic Cooperation and Development (OECD) countries decreased last year by 650 percent despite a marked fall globally as Nigerian-based Boko Haram militants and the so-called Islamic State (IS) Group suffered military defeats at home but carried out more attacks abroad.

The Global Terrorism Index (GTI) has reported that worldwide, there were 29,376 deaths that were caused by terrorism in 2015. This figure represents a decline of 10 percent, adding that this is the first decrease in four years. GTI disclosed that his decline was due to action against IS in Iraq and Boko Haram in Nigeria, which cut the numbers killed there by a third. IS was the deadliest group in 2015, overtaking Boko Haram. Last year, IS carried out attacks in 252 cities that led to 6,141 deaths. The index however has noted that Boko Haram’s move into neighbouring countries – Cameroon, Chad and Niger – saw the number of fatalities in the se countries increase by 157 percent.

The report however notes that the groups have spread their actions to neighbouring states and regions, where they have caused a huge increase in fatalities amongst OECD members, most of which are wealthy countries, such as the United States and European countries. According to GTI, of the 34 OECD member countries, 21 had witnesses at least one attack with most deaths occurred in Turkey and France. Last year’s terror incidents included coordinated attacks carried out by IS gunmen and suicide bombers at the Bataclan music venue, a soccer stadium and several cafes in Paris in November, which killed 130 people. The index also noted that Denmark, France, Germany, Sweden and Turkey all suffered their worst death tolls from terrorism in a single year since 2000, adding that in total twenty-three countries registered their highest ever number of terrorism deaths. Iraq, Afghanistan, Nigeria, Pakistan and Syria, which accounted for 72 percent of all deaths, were the top five ranked countries in the GTI. The United States ranked 36^th, with France coming in 29^th, Russia in 30^th and the United Kingdom in 34^th.

According to Steve Killelea, executive chairman at the Institute for Economics and Peace (IEP) think-tank, “while on the one hand the reduction in deaths is positive, the continued intensification of terrorism in some countries and its spread to new ones is a cause for serious concern and underscores the fluid nature of modern terrorist activity,” adding that “the attacks in the heartland of western democracies underscore the need for fast-paced and tailored responses to the evolution of these organizations.”