The Week Ahead

The Week Ahead
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South Korean president’s trial likely to conclude as Samsung imbroglio heats up. Bosnia seeks revision of 2007 UN court ruling absolving Serbia of genocide. Campaigning begins in Turkey for presidential power referendum. Brazil and Argentina move to improve trade ties with Mexico as the United States appears to pull away. All in The Week Ahead.

South Korean president’s trial likely to conclude as Samsung imbroglio heats up

South Korean President Park Geun-Hye’s impeachment trial is likely to end this Friday with closing arguments. A ruling is expected in early March. In order for President Park to be removed permanently, 6 of the 9 Constitutional Court judges will need to vote in favor (and with one judge retiring last month, it’ll have to be 6 of 8 judges). If the court votes to convict, she will be removed immediately and South Koreans will head to the polls 2 months later for a presidential by-election. If not, she will resume her presidential position.

President Park was impeached last December in a corruption scandal that has engulfed South Korean politics. A close friend of the President’s, Choi So0n-Sil, allegedly received millions of US dollars in bribes from South Korea’s top companies (the family-run chaebol such as Samsung, Hyundai, SK Group, GS Group, and POSCO, among others), in return for political favors. Choi is also currently on trial.

In an additional legal development, last Thursday the vice chairman and heir-apparent of Samsung, Lee Jae-yong, was arrested in the widening corruption scandal. Samsung Electronics (the crown jewel of the Samsung Group) alone makes up one-fifth of South Korea’s exports. Many remain more skeptical regarding the success of the prosecution of Mr. Lee than for President Park — the Korean judiciary has historically maintained a lighter touch on many of the major business communities than on its political players. A court had dismissed a request last month to arrest Lee due to a lack of evidence, though the prosecution now argues it has further evidence that Lee gave bribes worth more than $30 million to President Park and a close associate for government favors. The prosecution has a highly condensed timeline to offer its case to secure an indictment before the court (20 days), so the court should be scrutinized heavily in the next 2 weeks for any major developments. Any major movement forward with the case would likely send shockwaves through the Korean business community.


Bosnia seeks revision of 2007 UN court ruling absolving Serbia of genocide

Last week, the Bosnian government announced that this week it would seek a review of the UN’s ruling of the Serbian role in the Bosnian civil war, just ahead of the 10-year deadline to file appeal. This ruling has already prompted substantial criticism and fears of future division in the Balkans; Bosnian Serbs announced they would boycott the Bosnian parliament’s vote to request a new UN resolution of this issue, and Serbia’s prime minister and foreign minister have both criticized the move. Serbia’s prime minister, Aleksandar Vucic, however, has been somewhat conciliatory in his public moves, noting that his goal is “to continue to talk with Bosnian officials, wishing to assure a lasting peace in the Balkans,” even while criticizing the request. Both the Serbian and Croat co-presidents of Bosnia indicated their opposition to proceeding with the request, but the Muslim Bosnian leader Bakir Izetbegovic indicated he would continue with the request regardless.

This request could create severe divisions in the Balkans again, and a ruling in the Bosnians’ favor could open Serbia up to billions of dollars in fines and judgments, which could further derail efforts by the Serbian government to integrate with the European Union. It is uncertain how the UN is likely to rule on this issue, though the request was issued in part due to new evidence presented in the Hague war trial of Bosnian Serb army chief Ratko Mladic for war crimes, crimes against humanity, and two counts of genocide.


Campaigning begins in Turkey for presidential power referendum

Although the referendum will be held in April, campaigning has already begun in support of a constitutional referendum to expand the power of the presidency to an executive form to issue decrees, declare emergency rule, and appoint ministers.

President Erdogan has indicated his support by arguing that fragile parliamentary coalitions prevent the stability of the Turkish government, and that it would increase the powers of the Kurdistan Workers Party (though he was unclear on exactly how the latter would occur). The campaigning is in such earnest that major political leaders have travelled abroad to try to convince Turkish ex-patriots to support the referendum. Last week, Prime Minister Binali Tildirim travelled to Oberhausen in Germany, playing up nationalist impulses (“the era when some could give lessons to Turkey is over. Turkey is not a country that will be intimidated”) to try to gain support from some of the 1.4 million registered Turkish voters in Germany.

The ability of the president to release emergency decrees could dramatically increase the power of the executive, which has led to concerns from civil society that opposition to the administration could be further stifled (particularly after tens of thousands of teachers, civil servants, and members of the press were either dismissed or arrested following the failed coup).


Brazil and Argentina move to improve trade ties with Mexico as the United States appears to pull away

This week, the Brazilian Minister of Foreign Trade will visit Mexico to discuss improving trilateral trade ties between Mexico, Brazil and Argentina. The three countries are the largest economies in the Americas outside the United States and Canada, and Brazil and Argentina in particularly have been fairly protectionist in their trade practices. However, political forces may be aligning to bring down some of the trade restrictive disparities in the Americas: the elevation of center-right President Michel Temer in Brazil, center-right president Mauricio Macri in Argentina, and the United States’ government’s increasingly hostile attitude towards Mexico (and the possibility of the revocation of NAFTA or a unilateral increase in tariffs by the U.S. government) may turn these governments toward one another.

There are a lot of areas the three can improve upon to actually expand the low export and import market share for the three countries: tariffs in auto parts and other advanced manufacturing products, regulatory constraints and duplicative paperwork, and the inability of the three nations to join certain multilateral trade regimes (none of them, for example, are members of the Information Technology Agreement, which removes tariffs for advanced technology trade). Although a major development is not likely with this week’s meeting, the beginning of conversations between the three countries could ultimately be very fruitful in the medium term, given the substantial trade barriers that remain between the three countries.

 

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.

This edition of The Week Ahead was written by GRI Analyst Brian Daigle.

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