The Week Ahead

The Week Ahead

Democratic Convention nominates Hillary Clinton. Philippine President delivers first State of the Nation. Peru government transitions. Spanish parties struggle to form government. Commerce Department releases economic data. All in The Week Ahead.

Democratic Convention will nominate Hillary Clinton as Democrats unify for November

Starting Monday, the U.S. Democratic Party will convene in Philadelphia to nominate former Secretary of State Hillary Clinton to be president of the United States. In contrast to the just-concluded Republican convention where every living former Republican president and candidate — with the exception of Bob Dole — failed to attend, both President Obama and former President Bill Clinton, as well as Vice President Biden, and First Lady Michelle Obama will be speaking at the convention. In addition, at least a dozen senators and governors are scheduled to speak from Monday to Thursday.

This will represent the Democratic Party, and Hillary Clinton’s, biggest opportunity to present their vision to the American public. Additionally, the convention will likely have two other consequences: first, it will provide the Democratic Party the opportunity to present a clear contrast to the chaotic Republican convention last week, both in terms of vision and coordination, and second, it will provide Democratic Party members the opportunity to present themselves on a national stage.

Historically, political party conventions have helped to boost the political careers of elected officials by providing a national stage to deliver a message. Ronald Reagan’s national political career was effectively started in the 1964 Republican presidential convention where his speech, “A Time for Choosing” electrified the Republican audience. Likewise, President Obama’s own national political career effectively began when his keynote speech to the 2004 Democratic convention. Several speakers are viewed as rising stars in their own right, and likely to guide the Democratic Party in the years ahead: New Jersey Senator Cory Booker, California Congressman Xavier Becerra, Los Angeles mayor Eric Garcetti, and New York Senator Kirsten Gillibrand are being watched with particularly close attention.

Philippine President delivers first State of the Nation as U.S. and Philippine officials meet

On Monday, Philippine President Rodrigo Duterte will hold the State of the Nation address in Quezon City. According to a spokeswoman, the President’s message is likely to “reflect the personality of the tough-talking” former Davao City mayor. In previous speeches he has reiterated his intent to crack down on the Philippine drug trade and drug lords. Although the focus is expected to be on economics, it is likely that regional political elites and allies will look to the “tough-talking” points of his message to see how far he is likely to go in his effort to reduce crime.

President Duterte and his new administration have already apparently learned a thing or two on Chinese diplomacy following the Hague’s ruling in the Philippines’ favor on the South China Sea dispute. His lack of foreign policy experience and unpredictable behavior has led many diplomats to wonder what exactly he will do on both domestic policy and foreign policy so his speech will be watched for any sign of his agenda moving forward.  He is also likely to use this speech to make a “man of the people” appeal; the President has requested more conservative clothes, in contrast to previous SONAs that were marked by gala-like attire from members of the government.


Peru government transitions as congress and executive face a new divided government

On Thursday, Pedro Pablo Kuczynski, often PPK for short, will be inaugurated as President of Peru. The center-right PPK will likely be hamstrung in most of his domestic policy goals by Keiko Fujimori’s Fuerza Popular Party, which secured 73 of the country’s 130 congressional seats. However, PPK will likely have more leeway to act in foreign policy, where his criticism of Venezuela drew attention and is likely to be an additional thorn in the side of the Venezuelan government. Although Peru was not previously known as a particularly steadfast ally, the election of PPK, similar to the election of Mauricio Macri in Argentina, is likely to erode whatever tacit or open support the Maduro administration is able to receive in South America.

In terms of domestic policy, PPK has vowed to continue at least some of the infrastructure policies advanced by his predecessor President Humala, though again, he will have to work with the Fuerza Popular to advance many new policies. From a good governance perspective, PPK’s Cabinet announcement consisted of a number of relative technocrats to lead the 18 government ministries of the Peruvian executive.


King speaks with Spanish parties to form government

On Thursday, King Felipe VI of Spain will meet with the leaders of the major political parties to forge some form of parliamentary majority government, following last month’s elections that, while increasing the number of seats for the center-right People Party (PP), nevertheless failed to create a parliamentary majority. With Prime Minister Rajoy’s 137 seats and Ciudadanos (Citizens Party) at 32, the two center right parties are still 7 seats short of a parliamentary majority in the 350-seat chamber.  However, even if the Citizens and PP were able to coalesce — given the reduced seat total of the Spanish Socialist Workers’ Party (PSOE), the Citizens are more likely to work with the PP — it will be difficult to find those remaining 7 seats. Podemos and the PSOE are unlikely to join a government with Rajoy at its head without major concessions that the Prime Minister would not be inclined to give.

Looking at the smaller regional parties, the Republican Left of Catalonia (ERC) and the Democratic Convergence of Catalonia (CDC)  — both Catalan nationalist groups, with the former on the left and the latter on the center right — could possibly provide a bare majority in the legislature, though this would likely also require significant Catalan concessions.

One of the biggest sticking points for all parties is the leadership of PM Rajoy. Ciudadanos, which had long positioned itself as an anti-corruption party, believes that new leadership would be important for their entrance into any government. It is uncertain what, if anything, has changed demonstrably in this environment, although Rajoy has indicated he opposes additional elections. Barring a significant shift among one of the political parties, such as the resignation of Rajoy or the formation of a grand anti-PP coalition, etc., it doesn’t appear likely that these talks will yield any decisive outcome, only further political gridlock for the EU’s 5th largest economy.


Commerce Department to release economic data, analysts expect growth

On Friday, the U.S. Department of Commerce will release U.S. economic data for the second quarter of 2016. Economists have projected that the U.S. economy grew in the 2nd quarter, and in all likelihood exceeded the weak growth of Q1. However, the significance of this development may be limited because it fails to fully account for the economic reaction to the Brexit vote. Despite not including the Brexit vote, strong growth data could bolster U.S. consumer confidence heading into the 2016 presidential election in November. This would likely benefit former secretary of state Hillary Clinton’s bid — positive consumer sentiments on the U.S. economy have typically helped the incumbent political party — as well as assure world markets that practically the only major developed economy with noticeable growth will continue to grow. Anything short of growth in Q2 would roil global financial markets, as the one source of consistent financial stability, US treasury bonds, would take a hit, as well as disrupt the presidential race.


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.

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