MS Risk Blog

The Controversy over Calais’s Migrant Camp

8 July, 2016

Over 3000 migrants currently live in a make-shift camp near the French town of Calais. That camp and others across northern France have long been a source of tension between the French and UK Governments. Since the Sangatte Protocol came into effect in 1993, France and the UK have conducted Eurotunnel immigration checks at the point of origin instead of at the destination. In 2000, the immigration agreement was expanded to Belgium, allowing checkpoints to be established for the Eurostar and specific English Channel ferry crossings. In recent years, the United Kingdom has invested heavily in the northern France checkpoints due to migrants hiding in commercial trucks crossing the border and attempting to walk through the Eurotunnel. In 2014, the UK Government announced £12m over three years for increased security at Calais. This was followed by a further UK-France agreement in August 2015 to create a command-and-control centre and deploy hundreds more police officers.

The United Kingdom’s referendum on EU membership has placed new strains on the series of agreements with France. Before the vote, in May 2016, France’s Economy Minister Emmanuel Macron had warned that a victory for the leave campaign would threaten the immigration agreements between the 2 countries. This statement was later contradicted by French Foreign Minister Jean-Marc Ayraul. After the referendum occurred, he promised that there would be no sudden reversal of the current policy. However, many local politicians in northern France, specifically Calais Mayor Natacha Bouchart, have argued that the current approach is no longer sustainable. There appears to be a growing movement of people along France’s north coast who believe the migrant camps should be officially moved to the UK. In a significant recent development, French presidential candidate Alain Juppé has been campaigning on an end to the treaty. Xavier Bertrand, president of the Hauts-de-France region, had argued that such a position could gain considerable support from centrist and centre-right voters.

It is unlikely that any change to the UK-France border agreements will happen in the short-term. France’s governing Socialist Party remains committed to the policy. But over the longer term, France’s 2017 Presidential elections are a reminder that this controversy is far from over.

Peruvian president-elect, who takes up office this month is likely to face an uphill battle to enact his political agenda, with a bitterly divided parliament

At the end of July, the 77 year old president-elect Pedro Pablo Kuczynski (head of the centre-right Peruvians for Change Party) will be sworn into office in Peru’s capital, Lima. The country is still recovering from the political polarisation that marked the presidential election and the new government face an uphill challenge as they take power with a marginal representation in Congress and strong opposition from both fellow right-wing parties and the left-wing opposition.

The political polarisation during the bitterly fought campaign was partly fuelled by Keiko Fujimori’s presence, who was leading in the polls and won the first round vote. Keiko is a controversial political presence in Peru, both loved and hated and inextricably linked to the legacy of her father, former-president Alberto Fujimori, who left office in the 1990s and was sentence to prison charged with corruption and human rights abuses during his time in office.

In this context, the eventual election of the uncharismatic, fiscally conservative technocrat Kuczynski, was at heart an anti-Fujimori vote. Members of the left and right wing formed a rare united front to back the president-elect in the second round vote and block Fujimori from becoming president. However, the extremely tight race saw the president-elect win by minuscule margins with the final count declaring his presidency with 40,000 additional votes.

The effects of such a tight margin? Kaczynski is likely to face constant blockages from all sides as he tries to enact his campaign pledges and develop a strong political agenda.

A challenging agenda ahead

Kuczynski’s government will face significant battles in Congress where Fujimori’s Party (Fuerza Popular) hold the majority of the 130 parliamentary seats. However, opposition from fellow-right wing Fuerza Popular is not the only challenge. Leader of the left-wing Frente Amplio, Verónika Mendoza, only supported the president-elect in the second round vote to keep Fujimori from office and has already declared that she will not form a government with the president’s party. Amid the current political uncertainty as to how the minority government will rule, there has been much media speculation around the Executive Committee in Congress and Fujimori’s future position.

The challenges for Kuczynski will be apparent from day 1, as the president attempts to focus on his two key campaign topics: the economy and citizen security. He will focus on increasing economic investment in the country, particularly in the controversial extractives sector and has campaigned to decrease regulation to lessen the burden for investors, though arguably also lessening the guarantees for those protecting environmental, social and cultural rights.

His vision of citizen security focuses on increasing the number of police and their capacity to fight organised crime by giving them more power. This, in a region that is experiencing the effects of the militarisation of police in the fight against organised crime and the subsequent abuses of power, has been viewed as problematic by many, while his supporters highlight the need for a Mano Dura (heavy hand) to protect citizens.

Throughout the election campaign, the role of narco-trafficking was bizarrely rarely mentioned considering Peru is facing an uptick in coca production. Moreover, with rising domestic consumption South America is now a key target for widespread narco-trafficking operations. However, it is likely that the president-elect will incorporate this into his “citizen security” plan, to enhance confidence in the police and develop intelligence capabilities to destroy crops and trafficking operations, particularly in key commercial hotspots.

Security Programmes – more snooping?

The new president has yet to outline his plan to increase prison capacity but has criticised Fujimori’s claims to build prisons above 4000 metres, claiming such measures were insufficient to address the roots of the problem around violent crime.

Kuczynski has voiced his support for former-Colombian president Álvaro Uribe’s security strategies during his time in office. Uribe focused on regionalising security and intelligence capabilities to oversee activities across the country. Peru’s president-elect has outlined his plans to develop relations with local villagers and regional authorities to create security watch dogs to “police” at a local level. What is not clear is whether these types of security programmes will necessitate special presidential powers to effectively allow more snooping. Such special powers are likely to be contested by other groups in parliament who will see this as a breach of citizen rights.

The president-elect’s security programmes include reforms to the National Intelligence Directorate, who are responsible for developing strategic information and running the National Intelligence System, overseeing military and police intelligence. This underlines that there will be transfer of inception communication with the national police forces who are responsible for fighting organised crime. In the same way it’s thought that the Financial Intelligence Unit will increase its powers and open investigations against those people and companies involved in crime and corruption.

What does this mean? The new president is likely to push for increased “snooping” to keep organised criminals at bay, whether this is an effective method or not is highly disputed. Whatever the outcome, he is unlikely to pass such special guarantees without a fight in parliament. For investors, due diligence into local partners will be critical to ensure that companies are compliant with local, state, federal and international regulations.

Who investigates who?

Another polemical discussion taking place is over which party will oversee the Fiscal Commission, responsible for carrying out anti-corruption and fraud investigations against members of parliament and government. This body recently required notoriety following its investigation into the role of drug-trafficking within Peruvian political elites. Members of Fujimora’s Fuerza Popular claim that they should lead the Commission as they have the majority in parliament. However, considering their party is currently under investigation on the grounds of illicit financing for Fujimori’s election campaign in 2011, many members of parliament are suspect about their independence to lead such a body.

Eyes on the road ahead

The political balancing act that Peru is now facing means that in the medium and long term the president elect will have to try and create a cross-party consensus on key issues to develop his political agenda. While at their heart the PPK and the Fuerza Popular, both conservative parties, have relatively similar policy angles when it comes to security and the economy, there are likely to be constant tensions between the majority Fujimoristas and the governing party. This will threaten Kuczynski’s ability to consolidate his political project and will seriously hamper his ability to follow through on his election promises.

While he has not finalised his government, it looks like the new president will bring together a group of experts and technocrats, highlighting that he will pick from those who were not part of his campaign. What is still unknown is whether the Peruvian Congress will pass the rights for the president to carry out reforms in the security and economic sector in the short term.

While investors might greet his plans to cut the red tape and deregulate some key industries to increase competition and investment, he is likely to face significant opposition from some quarters on environmental and social grounds. Investors looking at Peru, particularly in the extractives sector, should pay close attention to the president’s first three months in office to gage how he is likely to move ahead on this campaign pledge. Peru has faced significant challenges in its extractives sector and investors must be aware of the propensity for social activism if they do not develop cohesive operating plans with the local community.

Finally investors should be aware of the links between political elites at both a local, state and federal level and narcotrafficking activities and companies are advised to carry out due diligence to ensure they are aware of the risks within future operating environments.

Growing Concerns as IS Seen Making Inroads into Kenya

Recent arrests have indicated that the so-called Islamic State (IS) group’s presence in East Africa is growing, with officials indicated that they are recruiting young Kenyans for jihad abroad and raising fears that some of them will return to threaten the country, which has already been affected by Somali-based al-Qaeda aligned al-Shabaab.

Kenyan intelligence agencies estimate that around one hundred men and women may have gone to join IS in Libya and Syria. This has triggered concerns that some may chose to come back in order to stage attacks on Kenyan and foreign targets in a country that has already been the victim of regular, deadly terrorism. According to Rashid Abid, a senior analyst at the International Crisis Group think tank, which is based in the Kenyan capital Nairobi, “there is now a real threat that Kenya faces from IS and the danger will continue to increase.”

The first al-Qaeda attack in Kenya was the 1998 US embassy bombing and the most recent large attack was a university massacre in Garissa in 2015. The IS threat however is new and as yet ill defined. In March, four men appeared in court accused of seeking to travel to Libya in order to join IS. Then in early May, Kenyan police announced the arrest of a medical student, his wife and her friend. All three have been accused of recruiting for IS and plotting an anthrax attack. At the time, two other medical students were said to be on the run. Kenyan police chief Joseph Boinnet described a countrywide “terror network” linked to IS and led by Mohamed Abdi Ali, a medical intern at a regional hospital, “planning large-scale attacks” including one to “unleash a biological attack…using anthrax.” Three weeks later, police announced the arrest of two more members of “the ISIS (another acronym for IS) network that is seeking to establish itself in Kenya in order to conduct terror attacks against innocent Kenyans.” Police indicated that they had found “materials terrorists typically use in the making of IEDs” – homemade bombs – as well as “bows and poisoned arrows.”

While some experts have dismissed the suggestion of an imminent large-scale attack in Kenya, they have noted that the threat of IS radicalization, recruitment and return in the East African nation is genuine, with one foreign law enforcement official, who has examined the anthrax allegation, disclosing that “we cant see either the intent to carry out such an attack nor any real planning of it…But there is something in it: there is IS here, mainly involved in recruitment and facilitation.”   Other officials also note that the recent arrests show that radicalization continues to be an issue affecting the entire country. While officials note that recruitment into Somali-based al-Shabaab remains the primary danger, there are increasing credible reports that other groups, such as IS, are gaining ground.

For now, Kenyan authorities have struggled to manage the return of their nationals from Somalia, where hundreds of Kenyans make up the bulk of al-Shabaab’s foreign fighters. In the future, experts have noted that that they will also likely have to deal with returning IS extremists as well as self-radicalized “lone wolf” attackers who have been inspired by the group’s ideology and online propaganda.

Rio de Janeiro Declares Financial Emergency Ahead of Olympics

06The governor of Rio de Janeiro has declared a state of financial emergency ahead of the Olympics, which are set to begin in August, stating that emergency measures are needed in order to avoid “a total collapse in public security, health, education, transport and environmental management.”

The acting governor, Francisco Dornelles, has classified the situation in the Official Gazette as a “financial calamity” that could prevent “the fulfilment of the obligations as a result of the Olympic and Paralympic Games Rio 2016.” This however is in part a political tactics as by declaring a state of financial emergency, the government is able to borrow funds without approval from the state legislature. The interim president, Michel Temer, has reportedly already agreed to disburse federal funds to cover Rio’s shortfall and to ensure that the Olympics go ahead as planned.

The impact however remains to be seen. Most of the Olympic projects are funded by private companies or Rio City, which is in a stronger financial position, as opposed to Rio state. With the exception of the velodrome, the main sporting venues are either already completed or are on schedule for completion. However Rio State is responsible for the MetroRio extension, which is already very late and which is now due for completion just days before the start of the Games, when it will be needed to alleviate the usually dire traffic to Bara de Tijuca, the site of the athletes village and Olympic park. Rio State was also supposed to clean up the sewage and other pollution in Guanabara Bay, which will stage the yachting events. However officials have stated that this is now impossible due to a lack of funds, which effectively means that Olympic sailors may have to dodge plastic bags, human excrement and other waste. Also of great concern for the 500,000 visitors who are expected for th Games is the cut in the public security budget, which has added to the problems faced by the favela “pacification” programme and contributed to a resurgence in violent crime. I also comes amidst warnings that terrorists could target the event.

City Mayor Eduardo Paes however has insisted that the state of emergency would in no way impede Rio’s ability to meet its Olympic commitments and stage an “exceptional Games.” He stressed that the bulk of the bill for the event was being paid by the municipality and not the state, adding, “the city of Rio is in good shape financially…Even in a time of crisis, we keep pushing. We inaugurate things almost every week.”

The plea for additional funds, which comes 49 days before the official start of the games, is an embarrassment for the host of South America’s first Games and adds to a long list of issues, which include the impeachment of the president, the deepest recession in decades, the biggest corruption scandal in memory, the Zika virus epidemic and a wave of strikes and occupations of government buildings.

Analysts have reported that Brazil’s economy this year is expected to shrink by about 4%. This is due to weak commodity prices, low demand from China, political paralysis and the Lava Jato (Car Wash) corruption investigation, which forced the suspension of many construction contracts and which led to the arrest of dozens of senior executives. Rio de Janeiro has particularly been hard hit because it is the headquarters of the state-run oil company Petrobas, which is at the centre of the investigation.   Faced by falling tax revenues, the state government has slashed health, police and education budgets. Teachers and doctors have faced lengthy delays in receiving their salaries, which has prompted strikes and occupations of schools and hospitals.

EU Extends Sanctions on Russia over 2014 Crimea Annexation

The European Union (EU) has extended for another year the sanctions, which it imposed on Russia over its annexation of Crimea in March 2014.

In mid-June, the 28 EU member states renewed a ban on economic ties with Crimean businesses, which include a block on EU tourism and investment in the Black Sea peninsula. Other EU sanctions target top Russian officials over the Ukraine insurgency.

The annexation, which occurred after pro-Russian forces seized Ukrainian bases in Crimea and then held a referendum, drew international condemnation. While Crimea has a Russian-speaking majority, the referendum was organized by the new authorities and was deemed illegal by the West. After the Crimea annexation, pro-Russian insurgents seized power in the Donetsk and Luhansk regions of eastern Ukraine in April 2014. The EU, United States and some other countries then ratcheted up their sanctions against Russia.

After the break-up of the Soviet Union in 1991, Russia retained control of the important Black Sea naval base in Sevastopol. However Ukraine had control of the rest of Crimea until the 2014 crisis.