Weekly Political Compass 7.31.23

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Welcome to this edition of the Weekly Political Compass from Teneo’s political risk advisory team!

This week, we are taking a closer look at a looming court ruling in Thailand. Meanwhile, mainland China's military is conducting exercises in the South China Sea, Saudi Arabia might host a meeting on Ukraine, Argentina has reached a staff-level agreement with the IMF, and tensions are escalating between ECOWAS and the military officers behind the coup d’état in Niger. Our graph of the week zooms in on the politicization of climate action.

Thailand’s constitutional court will decide on 3 August whether to consider the challenge to parliament’s denial of the renomination of Move Forward Party leader Pita Limjaroenrat for the prime minister position. Our Southeast Asia expert Bob-Herrera-Lim examines the outlook.

What might the court decide?

The court’s decision could include a suspension of any parliamentary selection of the next prime minister. However, should the court not act, then the vote for PM could take place on 4 August.

In case a vote can take place, what is the outlook?

It appears that the possibility of a For Thais (PT) politician winning the vote, and of Move Forward being excluded from the next government, is increasing.

ASIA PACIFIC

Mainland China/Taiwan/Vietnam/Japan

Mainland China's military is conducting exercises in the South China Sea from 29 July to 2 August near disputed islands, reefs and shoals also claimed by Vietnam and Taiwan, according to an official announcement. On 29 July, China's defense ministry also criticized an annual Japanese defense paper for "deliberately exaggerating" the military threat and blamed air and naval exercises by unnamed countries (presumably the US and Japan) in the South and East China Seas for raising tensions.

EUROPE

Ukraine/Russia/Saudi Arabia

According to preliminary reports, Saudi Arabia might in early August host a meeting organized by Ukrainian authorities to discuss Kyiv’s ten-point peace formula. The event is expected to be attended by senior officials from around 30 countries, including Ukraine’s key Western allies as well as emerging powers such as Brazil, India and South Africa. Coming on the footsteps of a similar gathering in Copenhagen on 24 June, the meeting is an attempt by Ukraine to promote its approach to conflict resolution with Russia within a broader international setting. According to Ukrainian President Volodymyr Zelensky’s office, a summit-level meeting on the subject matter might be organized later in 2023. However, at this point, neither the political nor the military situation appear ripe for Moscow and Kyiv to return to the negotiating table.

LATIN AMERICA

Argentina

A staff-level agreement with the International Monetary Fund (IMF) may finally have been reached on 28 July but other funds will be needed to meet USD 3.4bn in payment obligations falling due this week. The Economy Ministry is expected to use a combination of yuan from the swap line with China and a USD 1bn loan from the CAF regional development bank to make the payments. The refinancing deal agreed to last week should deliver a further USD 7.5bn in late August once the IMF Executive Board has approved the agreement; this should enable Argentina to meet its obligations in the September-December period, though it is not clear whether the Chinese swap line requires immediate repayment. The new IMF agreement leaves the 1.9% primary fiscal deficit target unchanged, which will oblige the government to continue fiscal consolidation measures during the election campaign.

Brazil

Congress is back from midyear recess on Tuesday, 1st August. President Lula is expected to announce new cabinet appointments in a mini reshuffle aimed at improving relations with Congress. At the House, initial focus will be on the fiscal framework, which returned from the Senate with amendments. The Senate will start deliberations on the tax reform, approved in the House in the last days before the recess, which could take months and generate significant changes in the text. Finally, it is expected that the Central Bank will lower the interbank rate by 0.5 percentage points on 2 August (to 13.25%), thus attenuating related bickering from the government.

MIDDLE EAST AND AFRICA

West Africa

Tensions between the Economic Community of West African States (ECOWAS) and the military officers behind the 26 July Nigerien coup d’état are escalating. This follows the West African political and economic bloc’s seven-day ultimatum to the putschist to reinstate President Mohammed Bazoum as the legitimate head of state and government of the landlocked West African country. Fears are growing that ECOWAS may deploy troops to the country if the military junta does not acquiesce to a return to civilian rule.