August 31, 2021

Macro

WEEKLY POLITICAL COMPASS

BY Teneo Macro

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( 7 mins)

China is cracking down on labor abuses in the tech sector. Zambia’s new Finance Minister is expected to prioritize IMF talks. Meanwhile, a no- confidence motion against Thailand’s Prime Minister is likely to fail, and Ukraine’s President Volodymyr Zelensky will meet his US counterpart. Moreover, Brazil’s Senate and Supreme Court leaders will attempt to improve dialogue across branches of government, and South Africa’s Constitutional Court will rule on the postponement of the 2020 municipal elections.

CHART OF THE WEEK

WEEKLY POLITICAL COMPASS 1

The evacuation of thousands of people from Afghanistan has revived fears of a new refugee crisis in the EU, which could give a boost to far-right parties. Six years after the EU’s last major migration crisis, the bloc has not managed to rally around a common European migration policy; there is not yet a system to process and distribute asylum seekers across the EU in an orderly way. The deep divisions within European societies on migration and other non-economic issues that pit liberal cosmopolitans against nationalists and traditionalists explain partially why a political consensus is so difficult to achieve on this front. The graph above shows that, in most countries, a significant share of the population believes that their respective country would be stronger with more restrictive migration policies. In Turkey, for instance, 70% of respondents think this way. Any decision on the relocation of Afghan refugees from Pakistan and Iran – where 90% of the world’s Afghan refugees are hosted – to Western countries will be politically contentious.

WHAT TO WATCH

China

The so-called “996” work culture common in Chinese technology companies – 9am to 9pm, six days a week – is a violation of China’s labor law unless workers receive overtime pay, according to a joint statement by the Supreme People’s Court and the Ministry of Human Resources and Social Security. A crackdown on labor abuses appears to be the next item on the government’s broad “common prosperity” agenda, which has targeted various abuses in the tech sector.

Zambia

Freshly inaugurated President Hakainde Hichilema is in the process of appointing his cabinet. His nomination of Finance Minister Situmbeko Musokotwane – a respected economist, former finance minister, and deputy central bank governor – has redoubled expectations that Zambia will secure an IMF deal within months and begin to fix its debt crisis. Top army and police appointments over the weekend also seem designed to ensure a smooth transition of power following the opposition’s landmark electoral win.

Greece

A cabinet reshuffle announced on 31 August and aimed at turning the page after a difficult summer has become a source of embarrassment for ruling New Democracy after a newly appointed minister did not accept the post. The tourism minister and the public order ministers were both sacked, and a new civil protection ministry was created.

ON THE HORIZON

ASIA

Malaysia

The new cabinet of Prime Minister Ismail Sabri Yaakob was sworn in Monday, although most of the ministers from the previous government were retained. The opposition is promising some cooperation, but with the absence of fresh faces, the new government will have only limited goodwill. A serious misstep in the handling of the pandemic or the economy could result in public discontent quickly rising, increasing the pressure for new elections once public health conditions allow it.

Thailand

Parliamentary debates on a no-confidence motion against Prime Minister Prayuth Chan-ocha started today and will run for four days – the third of his term. It is unlikely to prosper but combined with the return of protesters to the streets could further chip away at his public image. While this will not immediately affect political stability, it could gradually raise the possibility of elections next year.

Japan

Prime Minister Yoshihide Suga is planning a shake-up of the ruling Liberal Democratic Party’s top officials and also considering a cabinet reshuffle in the coming days, ahead of upcoming elections. Beset by a surge in Covid-19 cases, Suga is trying to change the narrative around his unpopular government before the 29 September party leadership contest and the Lower House election due in October or November. Above all, he must ensure the support of major party figures like ex-Prime Minister Shinzo Abe and current Finance Minister Taro Aso, whose factional voting blocs will be crucial in the party poll.

EUROPE

Estonia

This week, parliament will elect a new president as incumbent Kersti Kaljulaid’s five-year term in office expires on 10 October. The only candidate is the former academic and current head of the country’s national museum Alar Karis (independent). He needs a two-thirds majority (68 out of 101) in parliament to be elected. After an unsuccessful first-round vote on 30 August – when Karis received 63 votes – the second and (if necessary) third rounds will be held this week. If unelected during the first three rounds, a 208-member electoral college would be convened to continue the election process at the end of September. Nominated by the ruling Reform and Centre parties, Karis holds moderately conservative views on social policy and pledges to continue the current Western-oriented foreign policy.

Ukraine

President Volodymyr Zelensky is scheduled to meet his US counterpart Joe Biden on 1 September. After the US-German compromise greenlighting the completion of the contentious Nord Stream 2 pipeline and the US withdrawal from Afghanistan, Zelensky will seek firm and practical reassurances from Washington in the fields of defense, energy, and the economy. Zelensky is also expected to reiterate Ukraine’s calls for a clear membership plan in NATO, which has been complicated by the continuing conflict in eastern Ukraine together with the relatively slow anti-corruption and judicial reforms.

LATIN AMERICA

Brazil

Senate Chairman Rodrigo Pacheco will meet Supreme Court (STF) president Luiz Fux to improve the dialogue across branches of government. High on their agenda will be the handling of the upcoming protests against the Supreme Court and Congress on 7 September, the Brazilian Independence Day. These protests are being encouraged by President Jair Bolsonaro, and there are concerns that they may turn violent. On the economic front, the government seeks a solution to the legally mandated payment of judicial claims by citizens and companies, amounting to BRL 89bn (USD 17bn) in 2022. The most likely solution is a payment of only BRL 39.9bn (USD 7.5bn) to be stipulated by a resolution from the National Justice Council (CNJ) instead of a constitutional amendment to be approved by Congress. This value would allow sufficient leeway in the budget to fund a new cash transfer program for the most vulnerable – a high priority for the government in the year leading up to the October 2022 presidential elections.

Venezuela

The National Electoral Council (CNE) has extended the deadline to register candidacies for the 21 November gubernatorial, mayoral, and municipal elections to tomorrow, 1 September. The extension should allow opposition parties to finalize candidacies ahead of their expected confirmation that they will be participating in the vote, ending an election boycott begun in 2018. In parallel, on 3 September, regime-opposition talks are set to resume in Mexico City. Opposition leader Juan Guaido’s call for presidential elections to be brought forward from 2024 is unlikely to advance, and it remains difficult to see President Nicolas Maduro accepting opposition demands for deep electoral reforms. However, Guaido is now floating the notion of a presidential recall referendum in 2022.

MIDDLE EAST AND AFRICA

South Africa

The Constitutional Court is expected to rule on the Electoral Commission (IEC)’s application to postpone the 2020 municipal elections. An inquiry had recommended that the polls be postponed from 27 October 2021 until February 2022 on account of the pandemic and restrictions on political gatherings.

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