The EU: Trade off.
Also: Spain, Venezuela, Colombia, Panama, the US and Sudan.
EUROPEAN UNION. Trade off.
Piecemeal deals replace free trade agreements.
Canberra rejected a free trade deal with Brussels on Monday on account of a “dud” agricultural offer. Earlier this month, a document seen by Reuters suggested Argentina and Brazil wanted €12.5 billion in EU aid in exchange for a trade deal.
INTELLIGENCE. Since Brexit and the election of Donald Trump, the EU has been a lone bastion of free trade, but Australia’s walk-out and signs of discord over a separate deal with South America’s Mercosur bloc suggest Brussels is losing its touch. The long-held logic of FTAs is that difficult compromises are made possible through system-wide deals, but truculent farmers, rising populism, the pressure of Ukraine and inter-EU spats are now getting in the way.
FOR BUSINESS. As Brussels struggles to build mandates that work for Europe’s 27 member states, individual countries are going their own way with one-off arrangements and MoUs. This week, Olaf Scholz visited Ghana and Nigeria to barter energy for aid. On Tuesday, Emmanuel Macron will visit Central Asia to sell nuclear technology for uranium and other metals. Truly substantive deals with the US and China are meanwhile being indefinitely postponed.
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SPAIN. Quixotic, chaotic.
Madrid mulls extreme measures to avoid another vote.
Thousands marched on Sunday after Spain's prime minister said he would favour an amnesty for Catalan separatists as part of a coalition deal. Pedro Sanchez's Socialists last week signed a similar deal with the hard-left Sumar party.
INTELLIGENCE. Since inconclusive elections in July, Sanchez has had to entertain difficult trade-offs lest Spaniards return to the polls. The compromises he may soon need to juggle, however, could be too much for his centre-left voters to bear. Having already agreed with Sumar to raise taxes and reduce working hours, he may now need to agree to a constitution-defying independence referendum, which most Spaniards, including most of his supporters, oppose.
FOR BUSINESS. Catalonia had Spain's biggest regional economy until its separatist movement drove many firms from Barcelona to Madrid. Still, with an approximate 19% share of GDP, its secession would harm Spanish influence in Europe and beyond. Scotland, by contrast, has a share of around 7% of the UK's GDP. Sanchez would unlikely survive any timeline for independence, but reopening the prospect will further divide an already polarised electorate.
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VENEZUELA. COLOMBIA. PANAMA. Ay caramba.
Uncertainty builds for Caribbean South America.
Colombia's opposition trounced the left-wing government in regional polls on Sunday. On Monday, Venezuela's top court suspended the results of the opposition primary, while Panama promised a vote on a controversial mining deal.
INTELLIGENCE. Colombia’s veto-wielding president won’t be impacted by the vote, but it was seen as a resounding rejection of his amnesties with militias and drug gangs. Venezuela’s authoritarian leader wasn’t on the ballot, but the endorsement of Maria Corina Machado augurs a change in government, should free elections be held. Panama is meanwhile under pressure to scrap First Quantum Minerals’ copper concession, despite its 5% contribution to GDP.
FOR BUSINESS. Panama’s problems are partly the result of drought. Amid canal restrictions, voters are worried First Quantum uses too much water. Problems in Colombia and Venezuela are even harder to resolve. Crime and bad governance are driving violence across borders and refugees to the US. Around 3,500 migrants left southern Mexico on Monday. Should Caracas block free elections as promised, US sanctions will return, and those numbers will rise.
UNITED STATES. It’s (not) the economy, stupid.
Markets are beginning to reflect political problems.
US 2- and 10-year Treasury yields rose Monday despite expectations the Fed will hold rates on Wednesday and recent good news on GDP and core inflation data. Consumer confidence is likewise down despite higher consumer spending.
INTELLIGENCE. Americans believe the economy is getting worse in spite of their own experiences. A National Opinion Research Center poll on Friday found 54% think their situation is very or somewhat good, but only 27% think this for the nation. Living costs and party allegiance are behind the discrepancy. While consumer prices have stabilised, worries persist on mortgage and interest bills. Voters are moreover polarised on which party can seemingly fix things.
FOR BUSINESS. It’s no surprise voters are split ahead of 2024’s election, but should partisanship impact spending behaviour, the economy will start to look like US politics. A debt ceiling crisis in November could be the trigger. While markets typically ignore Congress spats, fear over the domestic and geopolitical context could change this. Key is a debate on aid for Israel and Ukraine. House Republicans on Monday vexingly proposed splitting funding bills in two.
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SUDAN. Flipping the negotiating table.
Sudan’s rebels seize territory amid peace talks.
Peace talks between Sudan's army and the rival paramilitary Rapid Support Forces resumed in Jeddah last week. The RSF on Monday said it captured a key airport close to oil fields. On Thursday, it captured Sudan's second city, Nyala.
INTELLIGENCE. With the backing of the United Arab Emirates, which skipped the talks, the RSF is gaining ground on the military government, now based in Port Sudan. And close to Russia’s Wagner Group, and having been accused of war crimes, the RSF does not seem biddable to a ceasefire, despite claims Egypt is replenishing the army’s drones. Further, by capturing Nyala, the RSF can now receive supplies from its Russian friends in the Central African Republic.
FOR BUSINESS. Continued fighting, let alone an RSF victory, will distract Egypt from a solution on Gaza and test unity between Saudi Arabia and the UAE on broader regional issues. While Sudan’s economy is broken and its key players sanctioned, it has immense mineral wealth and strategic geography. It sits amid other hot spots, including Libya and Ethiopia, where civil conflicts continue, and Chad and Eritrea, where Russia and the West compete for influence.