Peru: Consequences of Infamous Christmas Pardon Of Former President Fujimori

Few political developments in Latin America’s democratic life have been as unexpected and controversial as Peru’s former president, Alberto Fujimori, receiving a presidential pardon. Having served less than half his sentence – 25 years for serious human rights violations that include killings, kidnapping, and torture, in addition to corruption and bribery – Fujimori’s infamous Christmas pardon has placed Peru’s rule of law and presidential legitimacy under intense scrutiny.

In a region where corruption is rampant and impunity the rule, Fujimori’s imprisonment was viewed as a milestone, an example of justice for the people. As a result of the rising political stability and consistent investment growth, Peru continues to enjoy prosperity and endure difficult times in the region.

The Politics of a pardon

To understand the consequences of Fujimori’s pardon, it is crucial to reflect on how the pardon came to pass. Pedro Pablo Kuczynski (PPK)’s ascent to power was a by-product of Peruvians’ deep anti-Fujimorista sentiment: the rejection of the dictatorial leadership and corruption during the 90s. It was not the recognition of PPK as fitting for the presidency, but rather the will to keep anyone with the Fujimori surname out of government at all costs.

Fuerza Popular (FP), Keiko Fujimori’s party, amassed significant popular support by the time of the 2016 elections from people who revered her father Alberto for his victory over the radical left Maoist Shining Path movement.

Hence, this polarization lays the framework for PPK’s presidential developments since the 2016 election. The antagonising endeavours from then-majority congress party FP – such as censoring ministers, blocking reforms, and attempts to vacate him – made many experts regard PPK more as an elected hostage than an executive leader.

In parallel, the bullying attitudes from FP created a feeling of sympathy among non-Fujimorista societal sectors who believed that in defending the president, they were defending the essence of democracy vis-à-vis an obstructionist opposition who wanted to forcefully seize power. For example, the private sector sympathised with the president’s finance background and the press was in large part repressed during Fujimori’s time.

PPK managed to avoid impeachment, from charges for alleged ties with Odebrecht, by a mere ten votes from Fujimorista legislators who abstained, led by Alberto Fujimori’s youngest son Kenji. Three days later,  Alberto Fujimori was issued a pardon despite many assurances from the administration that pardons were not negotiated. The was no definite proof of imminent death and it was an evidently rushed procedure.

This is not to say that a humanitarian pardon was not feasible, but rather the medical evidence was at best dubious making it invalid. The pardon could have been part of a bigger, appropriately executed reconciliation strategy.

Nevertheless, the executive’s decision to effectively trade PPK’s position in power for Fujimori’s pardon was far from the right one. 80% of Peruvians believe the pardon was negotiated, further exacerbated by revelations on just how far back these agreements went.

Governing the ungovernable

Unlike the pardon, the results have been predictable: social turmoil, massdemonstrations across the country, and political instability. In other words, a polarised country where one half celebrates the vindication of the leader that gave them peace sans terror, whilst the other half vehemently rejects the president who deceived them and pardoned a dictator.

To make matters worse, the Inter-American Court of Human Rights is a few weeks away from giving its verdict (after several human rights pressure-groups raised their voice,) andpredictions are grim.

How does the government recover from such a detrimental loss of legitimacy? The president would have been better off being impeached, going out of office with the aura of a martyr, or a victim of Keiko Fujimori’s dictatorial thirst for power than the puppet-esque figure he is viewed as today.

With PPK’s recent struggle to form a new cabinet, amidst all the post-pardon resignations, new impeachment requests, and his failure to appease the public, he’s likely counting down his days in power.

As originally appears https://globalriskinsights.com/2018/03/ppk-and-the-fujimori-pardon/

WTO Condemns Brazil Industrial Policy: Brazilian Government Discusses New Subsidies Rules

According to the WTO, Brazil’s industrial programs are inconsistent with the international agreements signed by the country, in addition to providing prohibited subsidies.

Brazil’s industrial policy in check

The European Union’s (DS472) and Japan’s (DS497) disputes against Brazil’s industrial policy benefits are close to a conclusion. After almost four years since the beginning of the processes, the World Trade Organization (WTO) Dispute Settlement Body released the Panel’s report of the cases this past August, and argued that seven Brazilian programs that sought to promote technological innovation and boost exports do not comply with the Organization’s rules.

One of the main complaints was against the tax exemption granted to automotive companies that produced a percentage of their products locally. This would represent a disguised subsidy and distort international competition.

The Panel concluded that Brazil should withdraw all illegal subsidies within 90 days of the final text’s approval. On September 29th, the Brazilian government appealed to the WTO report on both cases. If the panel’s report is confirmed and Brazilian government does not comply with the WTO’s recommendation, parties could retaliate against the country. This could have direct impacts on companies doing business in Brazil.

The future of Brazilian industrial policy

The Brazilian government must now reassess its industrial policy during one of the country’s worst political and economic crises. For two years in a row, Brazil’s GDP has contracted by more than 3%. This in turn has helped drive the unemployment rate of to 13.7%. This economic contraction complicates Brazil’s ability to comply with the WTO’s requirements.

On the one hand, industrial policies have the objective of promoting innovation and productivity. On the other, policies aimed at alleviating the economic crisis should reduce government spending and increase public revenues.

The government will have to think of alternatives to tax breaks to spur industrial development, all with minimum intervention. The new policy will have to follow a more functional development policy, simplifying taxes and reducing the cost of doing business in Brazil, while supporting innovation and creating a proper environment for companies to invest in this kind of activity.

This is no easy task, especially given Brazil’s unstable economy and political scene. This task is further complicated by the lack of attention that the private sector has paid the WTO ruling thus far – even though it will need to be a major partner in drafting legislation, the public sector has largely remained uninterested in the rulings.

The Brazilian government’s ability to carry out these policy changes is further hampered by its entanglement in several ongoing corruption scandals. The government has spent the last 5 months focusing on defending President Michel Temer against two charges on corruption presented by the Attorney’s General Office. Temer’s refusal to resign has had a high cost for the country, and postponed the approval of highly important proposals for a faster economic recovery.

Now, for the next following months, the government will have to articulate to approve several unpopular measures, such as the pension reform, the postponement of salary readjustment for civil servants, and the end of benefits for several sectors. Additionally, the constant corruption scandals revealed by several plea bargains under negotiation by top politicians arrested and the upcoming 2018 presidential elections. Temer’s cabinet will continue to be affected by scandals, and changes might affect the continuity of the undergoing policies.

Starting in around April 2018, the runup to the October 2018 general elections, will further complicate the government’s agenda and make difficult to approve any proposal. It is important to note that any ministers that intend to run for the elections will have to leave their positions.

If the Minister of Development, Industry, and Trade, decides to run for instance, the ministry might be left without a clear leadership until 2019. Something that would reduce political influence in the draft of the new policy, however, without someone ahead of the ministry, the final decision over the policy would be postponed.

A new policy might take longer than expected

Brazil’s appeal of the WTO’s ruling will postpone the final decision against the programs at least 2018. Brazil might also benefit from the number of processes currently under analysis at the WTO and their constant delays – the WTO already broke all deadlines for the final report on the Brazilian cases.

The Trump administration’s recent attempt to block the appointment of new member to the Appellate Body exacerbates the likelihood of further delays. The Appellate Body is already operating with five members instead the normal seven, and will be down to four in December.

If the block continues and no new members are appointed, the delays might increase even more. This delay would allow Brazil to maintain the current policies while the appeal is processed, and would provide the government with more time to work on a long-term and sustainable industrial policy.

Amid major reformscorruption scandals, and elections, the industrial policy reformulation might not have the attention it needs to comply with the demands of the WTO. There is a high chance that any changes will have to be postponed to the next administration.

This exposes Brazil to a medium term risk of retaliatory sanctions from other countries. It is important to note, however, that this retaliation is not an immediate action and it has to be submitted to the WTO and takes a while to be settled. Without the possibility of counting on the government to focus on the discussion, the private sector and the civil society will have to participate actively in the draft of the new programs to promote innovation and productivity in the country.

 

Juliano Griebeler is an analyst at Global Risk Insights. As originally appears at: https://globalriskinsights.com/2017/12/wto-condemns-brazil-industrial-policy-brazilian-government-discusses-new-subsidies-rules-amidst-worst-economic-political-crises/

 

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Catch-22 In The South China Sea: China’s Provocations And ASEAN’s Impotence

Despite upcoming talks, Manila’s deferential stance to Beijing, and wider ASEAN disunity, mean no end in sight for China’s island-building in the South China Sea. Yet those islands will destroy the coral reefs they are built on, and the very fish stocks China wants to control in the first place.

China’s provocations and ASEAN’s impotence

Chinese and Filipino diplomats are still deciding when and where to pick up talks on the South China Sea in 2018, but in terms of substance, the two sides are already on the same page. Li Keqiang of China and Rodrigo Duterte of the Philippines spent the 31st ASEAN summit in October jointly insisting a “code of conduct” could stabilise tensions in the South China Sea – but failed to mask the lack of real progress.

The current state of affairs already represents a major diplomatic victory for Beijing. The Philippines, host of this year’s ASEAN summit, has effectively abandoned an unequivocal 2016 ruling in its favour from the Permanent Court of Arbitration (PCA) over China’sconstruction of artificial islands in disputed waters.

China rejected the validity of both the ruling and the PCA’s authority, but the Philippines and its ASEAN partners also failed to stand by the decision. Among member states, only Vietnam has come out in direct support of the PCA decision. China already ignores a 2002 declaration of conduct applying to the South China Sea. There is no indication any new code would be more binding.

This is unfortunate, because the PCA ruling addressed some of the most urgent ramifications of China’s actions in the region. It was particularly scathing in regard to environmental violations, stating “China had caused severe harm to the coral reef environment and violated its obligation to preserve and protect fragile ecosystems and the habitat of depleted, threatened, or endangered species.”

The inherent irony of the dispute is that dredging the sea floor to construct artificial islands endangers the very fisheries Beijing seeks to control. China’s own territorial waters are dead zones as a result of overfishing and industrial pollution, one of the main drivers for China’s claims in the South China Sea. Despite this, China marked the end of the summit (and last month’s visit from Donald Trump) by launching its new “magic island-maker” in a clear sign the island-building campaign is far from over.

Not that China is solely responsible. The failure of ASEAN to present a united front puts the resource-rich waters and the millions who rely on their declining fishing stocks for food and employment at risk. By leaving member states to fend for themselves against China, the bloc is undermining its own commitments to support environmental conservation and sustainability as well as international law.

Political concerns trump environmental imperatives

Preserving fish stocks and the ecological balance of the region as a whole requires concerted multilateral action of the sort current tensions render impractical. As early as 1992, scientists were proposing that the Spratley islands be designated as an international ecological marine park. At that point, the islands were not much more than atolls and rocks incapable of sustaining human habitation.

Since then, attempts at preservation have largely been unilateral and confined to respective Exclusive Economic Zones. As of late 2016, the Philippines intended to declare a marine sanctuary and no-fishing zone in the area that it claimed as its own, in spite of competing Chinese claims.

Worse, the destruction is not exclusive to China. Malaysia, Vietnam, the Philippines and even Taiwan have built airstrips and artificial islands on atolls in the South China Sea, destroying coral reefs in the process. Through its “Island Tracker,” the Centre for Strategic and International Studies (CSIS) has attributed ten such reclamation projects and 120 acres of reclaimed land to Vietnam alone – although it does consider Vietnam’s methods less destructive than China’s.

Even so, the overall ecological costs are substantial. Destroying atolls means destroying natural habitats for over 6,000 species of fish. Thanks to overfishing and environmental degradation, fish stocks in the region have plummeted: overall decline since the 1950s falls somewhere between 70% to 95%. In the 1970s, a Filipino fisher could count on an average daily catch of 20kg. Today, that number stands at less than 5kg.

Coral destruction only aggravates the impact of illegal, unreported and unregulated (IUU) fishing, which CSIS calls “a direct and indirect national security threat” in a report released this month with support and collaboration from the Philip Stephenson Foundation.Chinese fishers have to go farther afield to make a living. Accusations of IUU fishing have followed them, not just in the South China Sea but also in West Africa and South America.

These economic concerns could have serious political ramifications. In an era ofincreasing socio-economic inequality, Beijing obviously seeks to sustain its fishers’ livelihoods. The Chinese fishing industry directly employs between 7-9 million Chinese (in and beyond the South China Sea) and contributes as much as $279 billion USD to the national economy on a yearly basis.

ASEAN fishers are just as vulnerable to the threat of unemployment. The South China Sea may be the conduit for $5.3 trillion in annual international trade, but its struggling fisheries also employ at least 3.7 million people across littoral countries. Duterte’s deference to Beijing may partially be a bid to win concessions for Filipino fishers kept away from key fishing grounds by Chinese encroachment. That strategy has secured at least some successes, such as reopening the Scarborough Shoal to Filipino fishing boats.

Ways forward for preservation

With political and diplomatic avenues coming up short, other parts of the globe may offer alternative ideas on how to proceed. In the less geopolitically sensitive Caribbean, governments and international organisations work with non-governmental organisations (NGOs) to identify and implement proactive solutions.

Examples include Dr. Sylvia Earle’s Mission Blue, a project aiming to create a “worldwide network of marine protected areas.” Together with the Philip Stephenson Foundation, Mission Blue president recently hosted a gathering on the Caribbean island of Petit St. Vincent that promoted the goal of making 30% of the world’s oceans “fully protected” by 2030.

The choice of venue is significant, as these and several other NGOs (including CLEAR Caribbean and the Nature Conservancy) are also involved in coral planting there. Thanks to their political neutrality, environmental NGOs may offer a mutually acceptable path to ecological solutions in the South China Sea.

ASEAN and the Philippines have demonstrated their inability to stand by the PCA ruling. Non-state actors could have an easier time fostering initiatives to save coral reefs and the region’s fisheries. If successful, those projects could constitute the first steps to addressing the legal and geopolitical tensions bedeviling ASEAN governments.

 

 

Nicholas Leong is currently a trainee advocate & solicitor for Messrs Lai Mun Onn & Co in Singapore. As originally appears at: https://globalriskinsights.com/2017/12/south-china-sea-environment-fishery/

 

Regardless Of Who Wins Chile’s Elections, Codelco Likely Loses

If Chile’s year-long bull market is anything to go by, conservative candidate Sebastian Piñera is likely to become the country’s next president after the December run-offs. But neither Piñera nor his centre-left rival Alejandro Guillier seem too concerned about state-miner Codelco, whose financial well being could have a ripple effect on the global copper market.

Codelco (1006Z:CI) has consistently posted strong quarters since it began implementing austerity measures during the 2015 copper market dip. Last quarter saw a pre-tax profit of $1.6 billion, an overall improvement of more than three times against the loss posted for the same period last year. Nonetheless, it’s a trend that is hardly sustainable given Codelco’s falling ore grades and aging mines.

The state-miner’s average ore grade has fallen roughly 10% since 2013, meaning Codelco has to process 10% more ore in order to produce the same amount of copper it did five years ago. At a time when declining ore grades are prevalent across the industry, the state-miner has to invest in higher yielding mines to remain profitable.

Codelco, which accounts for around 60% of Chile’s exports, would need around $20 billion to keep output flowing and expand its operations according to internal reports. Codelco has proposed revamping operations at its traditional crown jewels, the El Teniente and Radomiro Tomic mines, as well as resuming interest in investments outside Chile in projects as far away as Mongolia. Can they get it done?

Political Priorities For Codelco

Both runoff candidates, conservative Sebastian Pinera and centre-left Alejandro Guillier have widely differing priorities for the state-mining giant. Piñera, who has shown scepticism over Codelco’s management in the past, has recently told the miner it would have to maximize performance of existing assets and draft a “realistic investment plan”.

During his first administration, Piñera turned to the bond market to finance Codelco, raising the miner’s debt 84% at a time when there were already high market prices for copper. The presidential candidate now promises to reduce public spending and lower the country’s deficit. That would leave Codelco high and dry.

In contrast, Senator Guiller has prioritized relations with the company’s unions, much like the outgoing administration of Michelle Bachelet. Labour actions have hit copper miners hard over the past few years, particularly inside Chile. Melbourne-based BHP Billiton (BHP:AU) saw a 43-day strike in its flagship Escondida mine from February to March, cutan estimated $1 billion off its yearly revenue. Codelco’s Chief Executive Nelson Pizarro freely admits the mining industry is “unpleasant” to most Chileans. Nevertheless, while improving union relations could protect the miner’s bottom line, it would do little to add to production.

Guiller’s plans, however, are likely to be heavily influenced by leftist party Frente Amplio and its strong showing in the November elections. Frente Amplio had previously called for the recapitalization of Codelco in order to finance social spending, leaving little room for mining investments.

Surprisingly, both candidates have vowed to unburden the state-miner of its constitutional mandate to fund the military. The Pinochet-era legislation transfers 10% of Codelco’s export sales (roughly $866 million last year) to the Chilean military. The widely unpopular piece of legislation could free up capital for investments. But the laws successful passage will arguably have more to do with the incumbent legislative assembly than the president.

Fractured Landscape

The success of a left-wing Frente Amplio and other non-coalition parties in the legislative elections has muddied the waters for both runoff candidates. Regardless of who wins, they are unlikely to hold a strong mandate and will be forced to balance their centrist appeal and cater to their bases’ extremes.

Chile’s fragmented congress will force the incumbent president to cross party lines in order to pass any significant legislation. This is particularly troubling for Piñera given that both congress and the senate lean towards the left. Passing his proposed tax reforms will be next to impossible without support from the centre-left. For Guiller, this will likely mean his entire agenda will be pulled to the left by Frente Amplio.

In this fragmented legislative environment, a repeal of Codelco’s 10% military burden is highly likely to stall. There is already a broad concern the export tithe will not be cut back regardless of the President’s policy initiative. They point towards the influence the Chilean military continues to wield over all branches of government, irrespective of recent corruption scandals. Mining Professor Gustavo Lagos at the Universidad Catolica is among those that sees doubts that the law will ever get overturned: “I’m not very optimistic (…) we’ve been talking about it for 25 years”.

However, if the military funding mandate were to be repealed, there is no certainty Codelco will keep the 10%. It may very well be distributed to any other policy priority outside the miner’s coffers. So far Piñera has been the only candidate to insinuate he might return the money back to Codelco.

Emerging Risks

It’s a mistake to dismiss Chile’s influence in the world’s copper markets or the outcome of the upcoming election. Asian markets are continuing to demand copper due to higher-than-expected GDP growth and forecasts already seeing a bump in the copper market as high as 2% in 2018. Burgeoning industries, in particular green-products, will also rely heavily on the red metals to go into production.

Copper miners are now branching out into previously untapped mineral sources and investing in mines inside politically volatile areas such as the Central African copper belt. Chile’s copper industry is tantamount to an insurance policy against market dips caused by political instability elsewhere.

Chile has been the world’s top copper producer for the last quarter century and will remain a leading player for the near future. Thus, government policy regulating the state-miner will have a tremendous impact on the overall mining environment in the country, and the wider market.

What Would An Israel-Hezbollah Confrontation Look Like?

All eyes are on Israel after President Trump’s recognition of Jerusalem as its capital. But the most immediate risks have deeper origins. Despite heavy losses in the Syrian Civil War, Hezbollah still stands as a formidable military force equipped with an impressive arsenal and hardened by years of fighting. Now that its militants are returning to Southern Lebanon, the probability of a military confrontation with Israel will escalate.

From the ruins of the Syrian conflict, Hezbollah has emerged a victor. The Shia militia’s involvement in the Syrian Civil War dates back to its start; though its involvement escalated sharply after 2013. As a member of the Axis of Resistance along with Iran and Syria, Hezbollah intervened not only to aid its Syrian ally but also – and perhaps more importantly – to secure its interests. Syria is one of Hezbollah’s main suppliers of weapons, funds, and safe havens. The fall of Assad and subsequent rise of a Sunni-dominated regime in Damascus would have seriously threatened Hezbollah’s regional operations.

A Costly Victory?

The six years long war has been quite costly for the Party of God. The war in Syria has claimed between 1700 and 1800 Hezbollah fighters according to an estimate – more than the organization lost in the 18 year-long Israeli occupation of Lebanon. Many of those killed were seasoned fighters and veterans of the Israeli-Lebanese conflict. This level of loss is unprecedented for Hezbollah. The organization has historically been successful in avoiding loss of life, in large part due to the level of specialization of its fighters. The survival of its soldiers has always been a cornerstone of its operations.

Still, the benefits that Hezbollah has gained from the conflict outweigh the losses. Hezbollah’s recruiting machinery has not “run out” of recruits, as a study of the Institute for the Study of War highlighted. Moreover, the frequent rotations have ensured that a large number of fighters ,up to 20.000,have gained considerable fighting experience. Though a generation of fighters was lost, younger, experienced recruits may have already replaced those killed in action.

Regardless of casualties, the intervention’s overall success has significantly boosted the group’s morale. In addition, Hezbollah and the Syrian army have become quite proficient in joint operations, as well as in operational planning and training, making it capable of carrying out sophisticated ground operations alongside allies. This coordination would definitely prove useful in the event of a new regional conflict.

Hezbollah gets an upgrade

Over time, Hezbollah’s alliance with Iran and Syria has given it a steady flow of sophisticated weaponry and technology. Most likely, there is no other non-state actor that is currently able to match the Party of God in this regard. Throughout the Syrian Civil War, Hezbollah has further increased its capabilities despite Israel’s frequent strikes on its supply chain. On top of the hundreds of thousands of missiles that Hezbollah owns, the acquisition of the anti-ship Yakhont missiles and the Russian anti-aircraft system SA-17has been game-changing. These weapon systems give Hezbollah the capability to challenge Israel air and naval superiority, which is something that – with the exception of the attack on the INS Hanit in 2006 – Hezbollah has never been able to do. Being able to compete with Israel in these domains represents a shift in the balance of power with Tel Aviv.

Additionally, the Party of God has been experimenting with new tactics in Syria, such as drone strikes. Weaponizing drones represents a further technological leap for Hezbollah, whose use of drones in the past was confined to reconnaissance.

Hezbollah’s homecoming

The return of Hezbollah fighters en masse will coincide with a strengthened presence of Iran along the Lebanese-Israeli border. Iranian presence among Hezbollah is nothing new, but Hezbollah’s involvement in Syria has only  reinforced Iran’s influence in the organization.

For Israel’s part, Prime Minister Benjamin Netanyahu has already warned that he will not allow Tehran to establish a military presence on Israel’s borders. As such, any potential conflict between Israel and Hezbollah should be seen as an Israeli attempt to counter Iran’s expanding influence in the Middle East. Avigdor Lieberman’s appointment as defense minister is a clear indication that Israel is preparing for war, as some analysts believe. In addition, the Trump administration’s hostile stance towards Iran could embolden Israel to embark on an offensive sooner rather than later, as it would likely enjoy unconditional support from the United States.

What would a conflict look like?

Yet, a military confrontation envisaging a ground invasion of Southern Lebanon would be far more complicated than the  2006 July War. Israel would face a barrage of missiles aimed at their urban centers. Despite their efficacy, Israel’s missile defense systems ‘Iron Dome’, ‘David’s Sling’ and ‘Arrow’ would most likely be unable to withstand the number of rockets that Hezbollah would launch. The economic, political and humanitarian loss Israel would suffer would be immense.

Tel Aviv has stated it will deploy all of its strength from the very beginning if war was to break out on Israel’s northern border. The likely objective of such an offensive would be to wipe out Hezbollah’s missile capabilities before they could be fully deployed. Alternatively, Israel might be tempted to launch a preventive strike in Southern Lebanon. As Major General Amir Eshel claimed, Israel certainly does not lack the capability to do so.

The likelihood of a military confrontation between Tel Aviv and the Shia militia has not been this high since 2006. Whether or not a conflict will break out, 2018 will see tensions rise between Israel on one side, and Hezbollah and Iran on the other. This regional instability is largely due to the growing influence of Iran. Tehran’s desire to emerge as a regional leading power of the Middle East has placed it in a direct confrontation with Israel and Saudi Arabia. The worries about Iran’s regional influence have led to a paradoxical Tel Aviv-Riyadh alliance, which is supported by the new US administration. With the region being pulled into the fold, any potential military confrontation between Israel and Hezbollah could have greater repercussions, depending on Iran and Saudi Arabia’s level of involvement.

 

As originally appears at: https://globalriskinsights.com/2017/12/israel-hezbollah-war-jerusalem/

Overlooking Widespread Human Rights Abuses In ASEAN Could Trigger Destabilization

Less than a month after the Association of Southeast Asian Nations (ASEAN) celebrated its 50th anniversary in Manila, Philippines, the UN Security Council called on the government of Myanmar to end its military campaign against the minority Rohingya Muslims. If the region continues to overlook widespread human rights abuses, political stability and economic growth will be at risk.

Each year, tourists descend on the many resorts, shops and convenience stores that have come to form the backbone of the beach town of Bangsaen, Thailand. In 1967, however, Bangsaen was an isolated, little-known village on the brink of becoming a landmark of Asian diplomacy. It was here that five foreign ministers from Indonesia, Malaysia, the Philippines, Singapore and Thailand negotiated and signed the Bangkok Declaration for the foundation of ASEAN, with the purpose of ensuring the stability of the entire Southeast Asian region.

Fifty years later, the organisation has ten members, and ten additional dialogue members that include India and China. Asian economic growth consistently leads global figures, and its populations and enterprises are projected to continue to prosper for decades to come. On its silver jubilee, ASEAN remains firmly dedicated to boosting security in the region, with ongoing tensions over the South China Sea and immediate nuclear threats from North Korea forming the pillars of member discussions. Even so, the organisation has thus far failed to address pervasive human rights violations committed by member countries, with critics warning of rising authoritarianism in the region.

Increasing rights violations

In Myanmar, this month has seen longstanding ethnic tensions erupt into bloodshed after minority Muslim Rohingya fighters attacked police posts and prompted a military crackdown that has seen over 370,000 Rohingya flee their homes. The Rohingya face widespread discrimination and violence at the hands of a Buddhist majority, though the group had received chronically little press attention before recent weeks. Adding to their isolation, the government has repeatedly refused to permit UN investigators entry to the country. Even so, the Rohingya have been labelled the most persecuted minority in the world, at risk of genocide, with the community fleeing in the thousands to Myanmar’s neighbours- especially Bangladesh, Malaysia, Indonesia and Thailand. Despite this, host countries typically refuse to grant Rohingya refugees any legal status; in the weeks before the current escalation, India was in talks with Myanmar and Bangladesh to deport 40,000 Rohingya Muslims.

In the same vein, the Philippine President Rodrigo Duterte has refused to discuss the topic of human rights abuses with the US Secretary of State and, given the US-Philippine partnership targeting a military insurgency in the Philippines’ southern island, social justice advocates would be foolish to hold their breath. This despite the fact that since Duterte’s so-called war on drugs began last year, widespread violence has resulted in the deaths of some 5,000 to 8,000 people. Duterte has also blocked the UN from conducting an independent investigation into the violence, thus far labelling his critics “crazies” and insisting that he shouldn’t be trivialised by upholding human rights standards. With sustained approval ratings, his campaign to reintroduce the death penalty may indeed be successful; the violence continues unchecked.

In Vietnam, authorities have broadened a crackdown on dissidents in recent years. In July this year, prominent human rights defender and activist blogger Tran Thi Nga was sentenced to nine years in prison on charges of conducting propaganda against the state in accordance with the controversial Article 88 of the penal code. The law has proven an effective tool of the government in silencing activists, along with reports of government sanctioned harassment and intimidation techniques.

ASEAN values versus national actions

Authoritarianism in the region runs counter to the otherwise liberal economic goals of Asia’s rising tigers: Vietnam has embarked on a decade-long campaign of labour and market reforms in a bid to attract foreign capital, with FDI flows rising as much as 6 percent in the first half of 2017 to $6.15 billion. At the same time, the Philippines’ Duterte is embarking on an ambitious goal of infrastructure spending at 7 percent of GDP, valued at $160 billion, by 2020. Bordering Bangladesh, China, India, Laos and Thailand, Myanmar represents a mammoth of untapped economic potential, but FDI flows will remain volatile as long as the bloodshed continues.

In most cases, human rights abuses are tied to failings in judicial independence, indicative of state support of illegal activities and poor protection for firms who seek to conduct transparent operations. Moreover, repression of the media and journalists frequently goes hand in hand with unsustainable, unbalanced economic development, such as a dependence on raw materials and energy resource revenues.

Poor governance throughout the Asian region, combined with skyrocketing economic growth and a burgeoning middle-class, sets the stage for political and social discontent to emerge in the near term. As the ASEAN community has become more integrated over the past fifty years, there has been increased pressure to implement the organisation’s vision of a “people-centred” community of nations. The finalisation of the ASEAN Charter at the end of 2008 sparked debate about utilising grassroots participation and bolstering civil society groups- in response, the group articulated the ASEAN Vision 2015, setting lofty goals for the widespread protection of human rights in a just, democratic environment. The stark reality of 2017 shows a clear trend in the opposite direction, and a disturbing reticence on the part of ASEAN’s leadership.

 

Article as appears on Global Risk Insights: http://globalriskinsights.com/2017/09/seeking-stability-human-rights-failures-asean/

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Guatemala Faces Political Uncertainty As It Continues Its Fight Against Corruption

Guatemala’s political stability suffers again, due to a significant corruption scandal involving President Jimmy Morales, who attempted to expel the chief of a UN-backed anti-corruption panel from the country.

In 2015, the Central American country’s former president Otto Perez Molina was forced to resign following an extensive corruption investigation, questioning the political future of Guatemala and its repercussions on investors.

Corruption in Guatemala

On August 27, Guatemala’s already troubled political situation worsened when President Jimmy Morales attempted to expel Ivan Velazquez, the chief of the International Commission against Impunity in Guatemala (CICIG), a UN-backed anti-corruption commission. Morales’ decision followed the panel’s announcement to strip the President of immunity in order to continue its investigation into illegal campaign financing.

The probe would target several political parties in Guatemala, including Morales’ National Convergence Front. The party, as stated by the Attorney General, received approximately $325,000 in anonymous donations, as well as having $600,000 in unreported expenses.

Morales declared that Velazquez overstepped his authority by advocating changes to Guatemala’s legislative process, violating the country’s sovereignty. Although Guatemala’s Constitutional Court provisionally overruled Morales’ order of expulsion, the President’s announcement sparked two major protests in the capital Guatemala City, and further attracted criticism from the international community, fueling further political instability in the country.

Corruption scandals and political crises are unfortunately not new phenomena in Guatemala. In 2015, former President Otto Perez Molina resigned as a result of corruption allegations, resulting in his detention. He and former vice president Baldetti have also been investigated for bribery and money laundering, being suspected of awarding construction contracts in return for almost $38 million and other gifts.

The probe resulted in tens of thousands of protesters gathering for months in Guatemala City, giving rise to a strong anti-corruption movement among Guatemala’s citizens. Since 2007, the CICIG played a major role in cooperating with Guatemalan prosecutors in order to tackle corruption amongst high-level officials, sparking the investigation and movement which led to Perez Molina’s resignation.

Despite running his campaign revolving around the slogan “not corrupt, nor a thief” in 2015, Jimmy Morales’ reputation as an anti-corruption crusader will soon be under severe scrutiny. Besides being at the center of the recent scandal, in May a judge accused Morales’ son and brother of fraud, as they allegedly submitted $23,000 of false receipts in a tax fraud scheme in 2013.

This political climate will likely have a negative influence on Guatemala’s economy

Were this crisis to continue over a prolonged period of time, it will likely have negative repercussions on the country’s economic growth and investors’ confidence, stated Guatemala’s Central Bank President Sergio Recinos. Systematic corruption would result in a gradual erosion of the rule of law within the country, further challenging its already fragile institutions.

As a result, conditions for new investments and growth opportunities for businesses are not expected to be strong for the next six months. Recinos has also pointed out that Morales’ attempt to expel Velazquez was a major factor in the Central Bank’s decision not to raise interest rates, damping investor confidence.

This is significant when taking into consideration other factors, which combined with the recent crisis, might hurt growth and employment in Guatemala.

For instance, this year a court decision suspended work at a Tahoe Resources silver mine, resulting in a decrease in national growth by 0.4 percent. Furthermore, public spending and private sector lending have slowed down, partly due to the 2015 political scandal involving former President Perez Molina.

Nevertheless, it should be highlighted that Recinos added that the political situation has not yet had a negative effect on Guatemala’s economy, as any consequences are likely to be felt over a longer period of time. In order to support this view, Recinos referred to the economic slowdown in 2016, during which growth decreased from 4.1 to 3.1 percent, arguing that the corruption scandal involving Perez Molina likely had a strong influence.

In conclusion, Guatemala’s political future remains paved with uncertainty, as Morales’ future as President is still unclear. Ivan Velazquez has confirmed he will be continuing his role as CICIG commissioner, despite the President’s attempt to expel him. Meanwhile, the Supreme Court has requested to lift Morales’ immunity, although the final decision will be taken by Guatemala’s Congress.

While experts consider that the Congress might rule in favor of the President, this result will likely lead to nationwide protests, further weakening Morales’ mandate. Lastly, Guatemala’s future is thought to have regional implications with regards to anti-corruption efforts.

CICIG enjoys strong popular support, its focus on strengthening criminal investigations targeting high-level officials has inspired similar initiatives in Honduras and Panama.

 

Article as appears on Global Risk Insights: http://globalriskinsights.com/2017/09/guatemala-faces-political-uncertainty-continues-fight-corruption/

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

How Trump’s NAFTA Negotiations Could Help Expand Chinese Influence In The Americas

Trump once labelled NAFTA, “the worst trade deal maybe ever signed anywhere”. This month, he unveiled the NAFTA negotiating agenda, providing a template for trade negotiations yet to occur with other countries – such as China, Germany, and Japan. With an emphasis on tackling tax systems and removing barriers to the US agriculture and manufacturing industries, Asian negotiators will be watching closely.

As the United States Customs and Border Protection prepares to begin construction on the first segment of President Trump’s infamous border wall with Mexico, his administration is anticipating raising trade barriers with their beleaguered southern neighbour.

Trump’s blunt mercantilism, however, risks pushing both Mexico and Canada into China’s open arms. Both countries have already expressed interest in signing a deal with China, and China has reciprocated. With North American Free Trade Agreement (NAFTA) negotiations set to begin in August, they have the potential to tilt the global trade balance even further away from Trump.

Given that Trump has defined his mantle, in terms of reducing deficits with a number of major trade partners, including ChinaJapan, and the EU, the negotiations provide a crucial glimpse into US trade policy moving forward. The US currently runs trade deficits with nine of its 10 top trading partners; last year, it ran a trade deficit of USD 728 billion, ranging from USD 347 billion with China and USD 146 billion with the EU, to USD 63 billion with Mexico.

According to Trump, the deficits are undoubtedly tied to exploitative trading partners, a misplaced trust on the part of an open US economy, and widespread currency manipulation. Earlier this month, the Trump administration released its broad goals for a new and improved NAFTA, demanding increased exports of its dairy products, wine and grains; opened trade in telecommunications and online purchases; an entirely new dispute settlement mechanism; greater access for US banks abroad; and new guidelines for currency manipulation.

There is much riding on an equitable outcome from the negotiations: over 80 percent of Mexico’s trade is with the US, for Canada the figure is closer to 70 percent. There can be no doubt that Canadian and Mexican negotiations face a long, drawn-out battle ahead.

What Trump may have failed to take into account, however, is China’s rising attractiveness as a global consumer and trading partner. As one of the world’s largest oil importers, China is is keen to start talks with Canada over a free trade deal. At the same time, Canada is reaching out to Asian economies in an effort to reduce its trade dependence on the US, as Trump’s unpredictable brand of protectionism keeps economists and corporations guessing.

During a recent visit to Beijing, Canadian Governor General vowed to boost bilateral cooperation between the two countries; and the Ontario Premier has already scheduled her third trade mission to China for November this year. Last month, the two countriessigned a bilateral security agreement regarding intellectual property, trade secrets and other confidential commercial information, an agreement may indicate a greater commercial alignment to come.

Mexico has been more explicit about its options regarding the NAFTA negotiations, pointing to an upcoming visit by Mexican officials to China as a sign that the dance card of Latin America’s second largest economy is far from waning. China’s ambassador to Mexico has also hinted at the possibility of a future free-trade agreement with Mexico, citing “no difficulty” from China’s side in broadening ties between the two countries.

Though a trade deal between the two countries would result in lower tariffs, which is a tough sell for Mexican manufacturing jobs, uncertainty over US-Mexico relations would mean that Mexico is accelerating trade talks with other partners, and China might just want a piece of the action.

As the Trump administration goes after China’s trade practices, they risk alienation, as world leaders appear determined to forge ahead with global trade liberalisation. The potential impact on major US industries, and the corresponding opportunities for Chinese trade negotiators, is incalculable.

 

 

Joanna Eva is a Political Risk Analyst at Global Risk Insights. As originally appears: http://globalriskinsights.com/2017/08/trumps-burn-book-nafta-negotiations-will-extend-chinese-influence-americas/

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.