Teneo logo

June 22, 2020

WEEKLY POLITICAL COMPASS

BY Teneo Macro, Luis Cornago

Share on twitter
Share on whatsapp
Share on facebook
Share on linkedin
Share on email
Share on reddit

Listen to our reports with a personalized podcasts through your Amazon Alexa or Apple devices audio translated into several languages

( 7 mins)

China has revealed its draft of a controversial national security law for Hong Kong. South Korea might be at the beginning of a second pandemic wave. In Germany, several local outbreaks have been identified over the past weeks. Voting will begin in Russia on proposed changes to the constitution. In Brazil, the number of confirmed Covid-19 cases and deaths continue increasing. Meanwhile, two Indian ministers will meet Chinese officials in Moscow after the recent border tensions, the current Polish president is set to win the first round of the presidential election, the expropriation of an agro-export company is still debated in Argentina, and the deterioration of public finances is increasingly being scrutinized in South Africa.

WEEKLY POLITICAL COMPASS 1

he Covid-19 pandemic might have consequences for the way citizens across the world see the role of China in the coming years. For instance, recent polls have shown that 52% of Italians view China as a friendly country – the rate increased by 42% compared with the previous year. Similarly, the map above shows that around 70% of Greeks and Italians have a positive view on China’s response to Covid-19. Skepticism about China’s actions during the pandemic is still relatively high in the US, Germany and the Nordics, whereas in most emerging markets, people seem to praise it. The longer-lasting effects on how citizens across the world view China are still unclear, however.

WHAT TO WATCH

China/Hong Kong

China’s National People’s Congress Standing Committee (NPSC) has completed an initial draft of a controversial national security law for Hong Kong. The draft authorizes the mainland government to establish a national security office in Hong Kong, which will supervise the local government’s policing of national security. The new office is also empowered to exercise jurisdiction over national security criminal cases in “specific circumstances,” according to an official summary of the draft, while Hong Kong courts will continue to preside over other national security cases. Hong Kong’s chief executive will be empowered to handpick which judges hear such cases. The NPCSC is likely to approve a final version of the law at its next regularly scheduled meeting in August, though it is possible that final approval will not come until October.

South Korea

Although new cases fell below 20 for the first time in weeks on 22 June, authorities warned that the greater Seoul region is in the midst of a second wave. A series of new clusters have emerged, resulting in an average of nearly 18 cases daily per month, substantially higher than during the peak of Korea’s Covid-19 outbreak. There has also been a sharp increase in imported cases. In response, the government is tightening regulations for facilities designated as high risk and increasing border controls. Authorities have warned a return to stricter social distancing could be unavoidable if the wave continues.

Germany

There is concern about a rise in the so-called R value of pandemic reproduction. The RKI public health institute estimated R at 2.88 on Sunday, a significant jump over the crucial threshold of 1. So far, however, there seems to be relatively good visibility about specific local outbreaks that can be assumed to be behind the spike. The outbreaks in a Westphalian meat production plant, in an apartment bloc in Gottingen and in a church in Frankfurt, have attracted a great deal of nation-wide scrutiny. As discussed in the past, the key thing will be the administrative and political ability to keep outbreaks local by detecting them early, testing accurately, and then quarantining or even locking down local communities fully or partially.

Russia

Victory Day celebrations on 24 June will pave the way for a week-long vote on amendments to the country’s constitution between 25 June and 1 July. The majority of voters are expected to approve the changes, although the vote is not legally binding. The proposed amendments, among other things, allow President Vladimir Putin to run for two more six-year terms in office after this current term expires in spring 2024.

Brazil

Brazil has reached 1mn confirmed cases and more than 50,000 deaths from Covid-19. This week, discussions on the renewal of the so-called corona voucher will continue. In addition, the ongoing investigations against the president (undue interference in the Federal Police), the presidency (fake news) and his supporters (financing of anti-democratic protests) will continue to exert much pressure on the government. The arrest on 18 June of a long sought former aide to the president’s son, Senator Flavio Bolsonaro, who is key in an investigation against him for an alleged employee corruption scheme, will dominate the media and set the tone of all politics this week.

ON THE HORIZON

ASIA

India

India’s Minister of External Affairs, Subrahmanyam Jaishankar, will attend the scheduled trilateral Russia-India-China meeting in Moscow on 23 June while Defense Minister Rajnath Singh will attend the Victory Day rally in Moscow on 24 June. This will be the first face to face meeting of two Indian leaders with their Chinese counterparts after the India-China border tensions that resulted in the killing of at least 20 Indian troops and an unknown number of Chinese soldiers last week.

EUROPE

Italy

The government is expected to issue a decree aimed at reducing administrative burdens and streamlining the regulatory framework in various sectors, including infrastructure. Past similar efforts have generally amounted to window-dressing and failed to make any meaningful differences for businesses.

Poland

President Andrzej Duda (supported by the ruling Law and Justice party) will win the first round of the presidential election on June 28. The incumbent, however, is unlikely to gain an absolute majority of votes to secure a first-round victory, which points to a highly competitive runoff on 12 July. Duda remains a favorite, but the opposition Civic Platform’s (PO) candidate Rafal Trzaskowski has momentum. Various developments in the coming weeks – including Duda’s meeting on 24 June with the US President Donald Trump over the potential relocation of US troops to Poland – could tilt the outlook to either side.

Serbia

As expected, the Aleksandar Vucic-For Our Children coalition led by the ruling Serbian Progressive Party (SNS) won its fourth consecutive term in office by a landslide in the 21 June general election. None of the main opposition parties won seats in parliament, which will lead to the further concentration of political power in the hands of the SNS and its leader Aleksandar Vucic. Policy continuity is expected in most areas.

LATIN AMERICA

Argentina

President Alberto Fernandez is meeting with the Buenos Aires provincial governor Axel Kicillof and the Buenos Aires city mayor Horacio Rodriguez Larreta on 22 June to discuss a possible tightening of the Covid-19 lockdown after the current measures expire on 28 June. The urban area that straddles both districts (also known as the Buenos Aires Metropolitan Area, or AMBA) accounts for 90% of Covid-19 cases in the country. Separately, the extension of debt talks to late-July means that Fernandez’s focus will return to the troubled agro-export company Vicentin. Over recent days, Fernandez has backed away from an outright expropriation of the company, at least for the moment, though the company’s future remains deeply uncertain.

MIDDLE EAST AND AFRICA

South Africa

Finance Minister Tito Mboweni is due to present the adjustment budget on 24 June. With the South African Reserve Bank now projecting a deep GDP contraction of 7%, South Africa’s budget deficit is expected to more than double from the Treasury’s February forecast of 6.8% of GDP and the already-bleak debt outlook will deteriorate further. Credit ratings agencies will scrutinize just how bad the fiscal deterioration will be and how April’s ZAR 500bn stimulus package will be financed, including external support from lenders like the IMF. Also under scrutiny will be whether Mboweni sends any convincing signals regarding long-overdue structural reforms, particularly at state-owned enterprises, and efforts to boost South Africa’s anemic growth rate.

WEEKLY POLITICAL COMPASS

( 8 mins) Voters in Japan will go to the polls. Turkey is heading for a major confrontation with its allies. A Senate report requests the indictment of Brazil’s president. The UK chancellor will present his autumn budget.

Read More »

WEEKLY POLITICAL COMPASS

( 7 mins) China has tested a new missile. Turkey’s currency is set for more volatility. Chile is on high alert. Meanwhile, a civilian-military standoff continues in Pakistan, formal coalition talks will begin in Germany, a constitutional amendment

Read More »

MACRO: Policy responses to Covid-19

( < 1 mins) Below is our updated bi-weekly summary table on the health and economic policies that selected governments are implementing around the world. Please do not hesitate to contact us if you want to discuss any of

Read More »

WEEKLY POLITICAL COMPASS

( 7 mins) The US and China held virtual trade-related talks. Tensions are rising in the relationship between the UK and the EU. Japan’s new PM will dissolve the Diet. Argentina’s finance minister will attend the annual IMF

Read More »

WEEKLY POLITICAL COMPASS

( 7 mins) The US trade representative will outline Washington’s approach to China trade. Fumio Kishida is Japan’s 100th prime minister. Exploratory coalition talks could officially begin in Germany. Meanwhile, candidate registration will end in the Philippines, lower

Read More »

MACRO: Policy responses to Covid-19

( < 1 mins) Below is our weekly summary table on the health and economic policies that selected governments around the world are implementing to counter the fallout from Covid-19. The updated table includes information about each country’s vaccination

Read More »

WEEKLY POLITICAL COMPASS

( 5 mins) Exploratory talks about a “traffic light” coalition are likely ahead in Germany. Huawei’s chief financial officer has returned to Canada. Meanwhile, Japan’s ruling party will hold its leadership election, Turkey’s parliament will return from its

Read More »

MACRO: Policy responses to Covid-19

( < 1 mins) Below is our weekly summary table on the health and economic policies that selected governments around the world are implementing to counter the fallout from Covid-19. The updated table includes information about each country’s vaccination

Read More »

WEEKLY POLITICAL COMPASS

( 6 mins) Russian President Vladimir Putin’s party won the State Duma elections. Voters will go to the polls in Germany. Turkey’s central bank could start easing monetary policy. Meanwhile, China is defending its recent crackdown on tech

Read More »