Venezuela’s Congress is inaugurated after surprise landslide victory. Puerto Rico defaults on minor debts. Tech innovators gather in Las Vegas. US releases latest unemployment figures. All in the Weekly Risk Outlook.
Venezuela’s new Congress is inaugurated
On Tuesday, the Venezuelan National Assembly is scheduled to be seated following the opposition Democratic Unity Roundtable’s (MUD) surprise landslide victory in the December 12 elections.
Despite the fact that the Maduro Administration, his United Socialist Party of Venezuela (PSUV), had vowed to respect the results of the election, the heavily politicized Supreme Court has moved to nullify the election results of at least 1 of the opposition members.
The Supreme Court has recently had 13 new additions by the current PSUV-controlled Assembly to weight the Court more strongly in favor of the PSUV. The Court’s decision would deprive the MUD of its 2/3 supermajority and has been roundly denounced by the opposition.
Additionally, the current PSUV speaker, Diosdado Cabello, has moved to create a parallel legislative body called a “National Communal Parliament” that may serve as a means to redirect power away from the MUD-controlled National Assembly and to the PSUV.
One of the major questions that remains is how the major institutions of the country, notably the army, will deal with the opposition members as they try to seat themselves in the legislature on Tuesday.
In the event that violence occurs between government supporters and the opposition, the position of the army in the conflict will be crucial in determining the country’s political and economic future. Both sides have invited members of the public to help them inaugurate the new members of the Assembly and represent the “Bolivarian” revolution in Caracas.
Puerto Rico defaults on some of its debts
On Monday, the U.S. state of Puerto Rico will default on $37 million in bond payments, following an announcement from Governor Padilla that the commonwealth had insufficient liquidity to cover the obligation.
Puerto Rico faces an overall debt bill of around $72 billion (higher than all US states except for California and New York), a significant sum given the cash-strapped nature of Puerto Rico’s fiscal situation.
The commonwealth faces a number of unique problems that have made repaying or even restructuring its debts very difficult. Although Puerto Ricans are by law US citizens, Puerto Rico lacks the ability to declare bankruptcy like other US states and cities. Additionally, the territory is obliged to maintain US minimum wage laws, making its economy less competitive than its Caribbean neighbors like the Dominican Republic.
Puerto Rico is expected to pay $328 million in general obligation debt, as required by its constitution, though such a claim may be difficult for investors to swallow when the country fails to make its Monday payment.
The one bright spot appears to be that legislation to help resolve the situation has been introduced in both houses of the U.S. Congress, and it seems likely that this minor default may be sufficient to accelerate the timeline for Congressional consideration.
US releases unemployment figures for December
On Friday, the Department of Labor will release U.S. unemployment statistics for the month of December. Current projections have estimated that the US economy gained around 200,000 jobs and unemployment remained unchanged at 5%.
Any figure that considerably exceed the 200,000 figure or drop the unemployment rate below 5% could provide further impetus for the Federal Reserve to raise interest rates again in 2016, though disappointing numbers could cause the Federal Reserve to move exceedingly cautiously.
The political and economic ramifications of significant unemployment developments could be significant both in the United States and abroad. Any signs of an increasingly strong economy will help strengthen the dollar, making exports from other countries more competitive but also making international debts held in US dollars increasingly expensive.
Domestically, unemployment rates below 5% could strengthen the Democratic Party’s chances of holding the White House in the November elections and regaining a Senate majority. On the flip side, a move in the opposite direction could bolster the Republican Party’s chances in both houses of Congress and the White House.
Technology show in Las Vegas draws innovators from around the world
On Wednesday, the U.S. Consumer Technology Association (CTA) will host the 48th annual Consumer Electronics Show in Las Vegas, Nevada. The 3-day show, one of the largest hubs for consumer electronics and technology in the world, has traditionally served as a major source for new and innovative technologies.
In previous conferences, the Xbox, Blue-ray, and VCR were introduced for the first time by their respective companies, and major innovations are likely to make their appearance in this conference as well.
Slated speakers include the CEOs of Intel, Netflix, GM, and IBM, and will also include government representatives, lobby groups, and investors looking for the most recent innovations and trends in the nearly $250 billion consumer electronics industry.
Although CES is not open to the public, the electronics items that emerge from the conference have generally made significant waves in the consumer electronics industry and will likely do so this year as well.
The GRI Weekly Risk Outlook (WRO) provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, the WRO presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.
The Weekly Risk Outlook was produced by GRI analyst Brian Daigle.