EU foreign ministers discuss pressing issues for Europe. Mining forum explores developments. Philippine President makes first state visit. Final presidential debate arrives. Brazilian Central Bank may lower interest rates. All in The Week Ahead.
EU foreign ministers discuss pressing issues for Europe
On Monday, the foreign ministers of the EU28 will meet in Luxembourg. The chief issues slated to be discussed include Syria, migration policy, and Tunisia. This will be followed on Thursday with a meeting of EU leaders in Brussels to discuss similar issues, along with Russia and trade. Each of these issues is complex, and is likely to create further headaches and friction among the member states.
On Syria, significant divisions have appeared between some of the more hawkish countries like France and dovish ones on next steps. This is particularly complicated by the increasingly acrimonious relations between Russia and the United States, with a potential shift in strategy with a new administration come January, making it unlikely a unified front will ever really emerge at least in the near-future.
On Russia, divisions have existed across the EU from economic and geopolitical perspectives, and are unlikely to be placed aside by these meetings. That being said, the recent allegations from the United States government that the Russian government was attempting to interfere with its elections are likely to chill any moves to ease sanctions or move for improved relations. Migration policy also remains a significant area of disagreement between Germany and several Scandinavian governments with a more accepting policy toward admitting refugees and several in Eastern Europe and elsewhere that strongly oppose mandatory quotas for EU member states to accept refugees.
Mining forum explores developments from Brazil to China
On Tuesday, the 24th World Mining Congress will be held in Rio de Janeiro. The Congress meets every three years and is associated with the United Nations and the Central Mining Institute. It is focused on increased cooperation and development of mining areas and spreading information about mining activities.
The mining industry has recently experienced significant contractions given falling commodity prices — copper prices, for example, have fallen by over 50% since 2011 — and this has made the industry less likely to invest in new, more efficient equipment. Nevertheless, some parts of the mining industry have expanded the use of data in mining operations, which could increase efficiency and drive down operating costs. However, these moves at efficiency in a period of low prices have also come up against certain government policies around the world. In Indonesia, for example, gold mining operations by foreign companies have been gradually reduced as new regulations, particularly regarding ownership thresholds for foreign entities, have restricted, at least in their view, their capacity to operate profitably.
Balancing the concerns of efficiency, price, and government policy is difficult in a good year, but when global growth in uncertain and events in the political sphere spread to the economic sphere — Brexit and the Colombian peace deal as two recent examples — this balance can be far more difficult to sustain.
Filipino President makes first state visit, likely to raise eyebrows
On Tuesday, President Rodrigo Duterte of the Philippines will join a group of Filipino business leaders on the president’s first state visit to China. This is likely to send jitters around the West as it adds further credence to the argument that President Duterte has decided to move his administration away from the country’s previous U.S.-focused foreign policy and more towards China.
This has been noted in both outward and in more subtle behaviors; outwardly, President Duterte has repeatedly criticized President Obama and used derogatory language to address the president of the United States, and has called the EU parliament hypocritical when it criticized President Duterte’s extrajudicial killings of alleged drug sellers and drug addicts. He has also scoffed at the United States and the EU potentially withdrawing aid to the Philippines due to his behavior. On the China front, President Duterte has repeatedly used China as some sort of threat against the United States, noting in a recent speech “for as long as I am [here], do not treat us like a doormat because you will be sorry for it. I will not speak with you. I can always go to China.” This kind of signaling, particularly the volatility such a shift entails, has spooked markets: direct foreign investment has declined, and many companies are in a holding position until they determine what path President Duterte’s administration is likely to pursue.
Final presidential debate brings combative and exhausting presidential election closer to the end
On Wednesday, former Secretary of State Hillary Clinton and Donald Trump will hold their third and final presidential debate, to be hosted by the University of Nevada, Las Vegas and moderated by Fox News’ Chris Wallace. With Donald Trump hemorrhaging support in fundraising, polling, and ground game operations, many believe he may go even lower in his attacks on Secretary Clinton and potentially her husband former President Bill Clinton. With polls showing him behind in more than enough states to deny him an Electoral College majority, though, it probably will not be enough to make his election bid successful.
However, should he perform at or above his already fairly low expectations bar, it could improve the likelihood of Senate and House Republicans of holding their seats. This strategy, however, carries its own perils: by divorcing one’s self from Donald Trump, one risks the ire of Donald Trump’s strongest supporters. By sticking with him, this opens them up to criticism by forcing them to own the negative remarks and actions undertaken by Trump. Democrats are increasingly coordinating that line of attack, marking a subtle shift in the Clinton campaign from essentially arguing that Donald Trump does not represent even regular Republicanism as a distinctly negative entity to now arguing that the Republican Party allowed his candidacy to rise.
Brazilian Central Bank may lower interest rates as inflation declines
Brazil’s Central Bank may slightly reduce interest rates from its current level of 14.25% as inflation continues to decline. From January to the present, Brazil’s average inflation rate has fallen from 10.7% to 8.5%, coming close to being within Brazil’s inflation range target. The Central Bank may also be calculating that the Chamber of Deputies’ recent passage of a constitutional amendment to limit government spending could provide a sense of security to foreign investors looking at stability in a country facing significant political instability, though it may hold off until the Senate approves the amendment.
As Brazil faces increasing competition from other regional players that have become more politically stable and investment friendly, like Argentina, along with traditional market stalwarts, like Chile and Peru, signs of political and economic stability in Brazil could be helpful in shoring up FDI and expansion plans, particularly given Brazil’s negative though slightly improving economic outlook.
The Week Ahead provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, The Week Ahead presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.
The Week Ahead is written by GRI Analyst Brian Daigle.
