The Current Account

As a broad trade deal between Beijing and Washington takes shape, we sit down with Asia Practice Head Michael Hirson to discuss what comes next. Throughout the negotiations, it’s been China who has offered more concessions as US negotiators maintained their hawkish stance. As we enter phase two looking beyond headline noise and markets rallying, will be key for investors. This period will continue to antagonize both sides as we shift from deal making, to implementation risks on a host of new and complex reforms. Both sides have vastly different timelines on what constitutes progress, President Xi is keeping a close eye on the 2020 US election, and the likelihood of Trump being reelected. Whereas Trump, wants quick wins across a host of US demands to help his reelection bid. We also touch on another major China story – MSCI’s increasing the weight of China A shares in their indexes. We close with a comment on increasing tensions in the cybersecurity and technology arenas, just as the two countries get closer economically.

On this episode we chat with Africa Practice Head, Amaka Anku on the upcoming Nigerian elections on February 16. The two candidates vying for the nations top office are incumbent President Muhammadu Buhari and opposition candidate Atiku Abubakar. We think Buhari remains favored to win (a 60% probability), but there’s not a lot separating the candidates and that’s led to little excitement in the lead up. Beyond the election, we discuss the outlook for the economy, security and stability given Buhari’s continuing health concerns that have plagued him throughout his first term. One story that continues to track positively is infrastructure with the government committed to continuing its investment in oil, transportation and power generation sectors. We look ahead to the 5-10 year outlook briefly for the country and close with a quick segment on the next generation of leadership bubbling up through the ranks.

On this episode of The Current Account, we discuss the latest standoff in Venezuela with Eurasia Group's Risa Grais-Targow. Risa leads our coverage on Central America and Venezuela. We talk through Guaido's rise to power, the current standoff between Maduro and Western powers recognizing Guaido as the legitimate authority, and what investors should expect moving forward. Hint: it's not a quick and easy transition from Maduro to Guaido, or any successor that comes along. For now, Maduro’s fall does not appear imminent. Key signposts to watch are the scope and nature of social unrest (whether it increasingly spreads to Chavista strongholds), as well as any indicators that the security apparatus is less willing or able to contain unrest than it has been in the past.

Every January, Eurasia Group issues its flagship Top Risks report. This year we discuss why the geopolitical environment is the most dangerous it’s been in decades, despite global economic growth. On this episode we’re joined by Willis Sparks, Director of Global Macro who takes listeners through the report’s drafting process, and tackles a selection of our 10 top risks for 2019. We begin with our #1 top risk for 2019 “Bad Seeds.” It suggests the geopolitical dangers taking shape around the world will bear fruit in the years to come. We define a G-Zero world: one where no state or alliance is willing to lead on a myriad of complex and structural global issues. Our #2 risk is the tense and jittery bilateral US-China relationship, we’re not confident the trade and economic disagreements will be resolved anytime soon. The US at Home, our #5 risk is next given the impasse over immigration and continuing US government shutdown. 2019 will be a chaotic year for US domestic politics, with Trump facing adversarial congressional oversight for the first time, along with Democratic subpoena power. We close with risks #8-10, all discreet country risks on Mexico, Ukraine and Nigeria respectively.

Following the inauguration of Andres Manuel Lopez Obrador (AMLO), we chat this week with Eurasia Group’s lead Mexico analyst, Carlos Petersen. AMLO was elected earlier this year with voters demanding sweeping changes to Mexican politics. Markets have since treated AMLO’s victory with caution but contrary to sentiment, Carlos feels AMLO’s tenure will not upend decades of prudent macroeconomic policy and central bank independence. The real risks stem from the issues AMLO has expended his political capital on thus far including social spending, infrastructure and corruption. Mexico watchers should expect meaningful changes there. On energy policy, his administration will not walk back previous auctions, but has planned to pause any new deep water bid rounds. His approach to security is expected to be more heavy handed with the formation of the National Guard, and voters have stressed the need for drastically improved security in the face of ever increasing violence.

This week, we discuss the post-election political and economic outlook for Brazil with Eurasia Group’s Americas Managing Director, Christopher Garman. Following the victory of far-right candidate Jair Bolsonaro, Chris walks listeners through why voters resonated with his message, and what Mr. Bolsonaro will need to deliver through fiscal reforms to keep Brazilian market sentiment buoyed. We discuss his cabinet appointments to date and provide an early preview of his foreign policy leanings will be. Hint: things are going to get frostier with China, and warmer with Washington D.C. Eurasia Group will be closely watching Mr. Bolsonaro’s ability to navigate Congressional dynamics without resorting to the politics of pork and patronage, the very message he campaigned and won on, his ability to do so is critical to any future success as President. Lastly, we close with a quick take on if we can expect a bilateral trade deal between Brazil and the United States in late 2019 or early 2020.