2018 Global Risk Forecast – The Americas

In 2018, seven Latin American countries will hold elections, both presidential and legislative: Cuba, Costa Rica, Colombia, Paraguay, Mexico, Brazil, and Venezuela. In addition, the United States’ congressional elections could have far-reaching political consequences for the current administration.

americas world map

Mexico holds presidential elections in July, and José Antonio Meade will run as the ruling PRI party candidate against the anti-establishment left-wing candidate Andrés Manuel López Obrador, known as Amlo. Amlo is currently the frontrunner and has gained popularity by speaking out against U.S. President Donald J. Trump’s aggressive rhetoric towards Mexico regarding a possible border wall. The PRI party has been dogged by a series of corruption scandals and a low approval rating for current president Enrique Peña Nieto.

If Amlo is elected, there is a risk that he will reverse regulations that encourage private investment. He has already pledged to hold a referendum on the opening of the energy industry under Peña Nieto. This presents a risk to foreign companies, such as Italy-based Eni S.p.A. and Spain-based Repsol S.A., which have already purchased oilfields and exploration blocks.

If Amlo is elected, there is a risk that he will reverse regulations that encourage private investment

 

Brazil’s presidential and legislative elections in October 2018 will be dominated by a series of seemingly never ending high profile corruption scandals, a rising violent crime rate, and increasing public debt. Former President Inácio Lula da Silva, of the leftist Partido dos Trabalhadores, is running for re-election and leading in the polls despite having been convicted of corruption; a crime which could bar him from taking office if he loses his appeal. If he wins the appeal, Lula will face current President Michel Temer of the right-of-centre PMDB party, and Jair Bolsonaro, a right-wing former army officer. The next president will be tasked with implementing unpopular pension and tax law changes in order to keep Brazil’s public debt from rising as the country struggles to recover from recession. As corruption investigations target many in the political establishment, including President Temer, candidates from smaller political parties could take centre stage and follow the global anti-establishment trend.

Also read: Global implications of the Odebrecht corruption scandal

The U.S. will hold midterm congressional elections in November 2018. Following three high-profile electoral victories for the party in 2017, there is renewed hope amongst centre-left Democrats they could gain control of both chambers of Congress. Victories in gubernatorial elections in New Jersey and Virginia, and Doug Jones’ recent success in the Alabama senatorial special election, have suggested a political backlash against Trump and his highly polarising personal style and policies.

If Democrats win a majority in the House of Representatives and in the Senate, the respective lower and upper chambers of the U.S. Congress, the chances of a successful move to impeach President Trump would materially increase. Articles of impeachment would likely focus on Trump’s alleged obstruction of justice when he dismissed the former director of the Federal Bureau of Investigation while investigating Russian influence in the 2016 presidential election.

If Democrats win a majority in the House of Representatives and in the Senate… the chances of a successful move to impeach President Trump would materially increase

 

However, a Democratic victory in the mid-terms is not guaranteed. In the House, Democrats will need to win 24 seats that are currently held by Republicans; in the Senate they will need to gain two seats from Republican incumbents, while defending ten seats in states that voted for Trump during the 2016 presidential election. It appears unlikely that Trump will change his policy decisions in the face of a Democratic potential win. His decisions to date point to the fact that his priorities lie in fulfilling campaign pledges, such as recognising Jerusalem as Israel’s capital, rather than reaching out to a broader electoral caucus.

Last but certainly not least is Venezuela, which is scheduled to hold presidential elections in December 2018. Following mayoral elections on 10 December 2017, Maduro threatened to ban opposition parties from participating in the presidential election. The threat was prompted by the opposition’s decision to boycott the mayoral election, in which the ruling PSUV party won 305 out of 335 municipalities.

Opposition parties have demanded assurances that the presidential election will be on schedule and monitored, but it is plausible that President Maduro could postpone them to August 2019, when the constituent assembly’s two-year term will end. Maduro created the constituent assembly in August 2017 to draft a new constitution amidst widespread protests. If free and fair elections are held under the eye of international monitors, which is an unlikely scenario, Maduro will surely lose. Should Maduro win the election, this would indicate election-rigging, as he is widely unpopular. If elections are not held in December 2018, dissent will likely grow. Either scenario will likely increase the risk of mass protests, which will prompt Maduro to use security forces to carry out a crackdown on dissent, further exposing the ruling party to the risk of regime change.

Also read: Venezuela on the edge

The much-anticipated free trade agreement (FTA) between the European Union and Mercosur, a trading bloc made up of Argentina, Brazil, Paraguay, and Uruguay, was not established by its December 2017 goal. Trade talks will move into 2018 and both sides hope to establish the key points of the deal by February, with agriculture remaining the main bone of contention. An FTA between the two trading blocs would offer a political boost to ruling parties in the member countries, with leaders hoping to wrap up talks up before Paraguay’s April election and Brazil’s October election.

Also read: Ticking clock: Mercosur and the E.U. race towards a trade deal

As regional leadership changes amidst elections, so does Latin America’s relationship with its northern neighbour, the United States. U.S. leadership and support for democracy in Latin America is waning as President Donald J. Trump establishes warmer ties with authoritarian leaders such as Russia’s President Vladimir Putin and Philippines’ President Rodrigo Duterte. The lack of U.S. leadership in the region is fuelled by staff shortages in the U.S. Department of State due to a partial hiring freeze; many senior diplomatic positions remain unfilled throughout the region. America’s lacklustre reaction to apparent election fraud in Honduras’ recent presidential election provides a benchmark for future administrations in Latin America. The cost of anti-democratic steps such as those seen in Honduras is low at the moment, and leaders throughout the region are likely to take note.

Read the full 2018 Global Risk Forecast here

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