By Brian Daigle
China’s President Xi Jinping makes first official visit to the United States. South American leaders meet amid tensions between UNASUR nations. EU officials meet to discuss the ongoing migrant crisis. Pope Francis speaks to the U.S. Congress. Interest rate decisions in major developing markets. All this in the Weekly Risk Outlook.
President Xi Pays First Official Visit to the United States
On Tuesday, Chinese President Xi Jinping will begin his first official visit to the United States, including stops in Washington, DC and New York City.
President Xi will meet with President Barack Obama for a summit and state dinner on Friday, followed by a visit to the United Nations General Assembly from September 26-28th, where Xi will deliver a speech.
The politics leading up to the visit have been complicated in the United States. Several Republican candidates for the 2016 Presidential nomination, including at least one sitting U.S. Senator, have called for President Obama to rescind President Xi’s invitation, in light of the massive Chinese hack on the U.S. government’s Office of Personnel Management’s (OPM) security clearance application documents, exposing millions of government employees’ personal information.
Although suggestions of Chinese government involvement in the hack were rebuffed by the Obama Administration, the issue is very likely to come up. It is uncertain yet what the major thrusts of President Xi’s comments to the UN General Assembly will entail, though they should be watched closely for any indications of China’s foreign policy visions or economic goals.
South American Leaders Meet Amid Tensions Between Colombia and Venezuela
On Monday, the Union of South American Nations (UNASUR) will hold a presidential meeting, with tensions rising between Venezuela and Colombia.
UNASUR, consisting of all South American countries, has traditionally served as one of the few international organizations that Venezuela has allowed to engage in its internal affairs. Past efforts by other pan-American organizations, like the Organization of American States (OAS), to observe elections during the Maduro and Chavez administrations were rebuffed.
As a result, it may be possible for the Venezuelan and Colombian governments to resolve their recent border disputes. However, it is equally likely that the UNASUR meeting will represent an opportunity for other South American governments to voice their criticism of the increasingly authoritarian nature of the Maduro government.
The recent thirteen-year imprisonment of opposition leader Leopoldo Lopez has been criticized by the governments of Chile, Costa Rica, and Peru. Many analysts believe that President Maduro is resorting to increasingly desperate measures, including the border dustup and arrest of Colombian nationals, over concerns that his government will lose key parliamentary support in the upcoming December elections.
The UNASUR meeting may illustrate growing skepticism from other key nations, like Brazil, Argentina, and Colombia, regarding the continued viability of the Maduro government.
Top EU Officials Meet to Discuss Refugee Crisis as Hungary and Croatia Close Their Borders
On Tuesday, European Union Justice and Interior ministers will meet to discuss proposals for the block to accept at least 120,000 refugees, mainly from Syria, but also including Eritrea and Afghanistan. A meeting of EU member state leaders will be held the next day.
The refugee crisis, which expanded significantly following the German government’s announcement that it would accept hundreds of thousands of refugees, has led to profound political divergences in Europe. Hungary has enacted legislation that would hasten the expulsion of refugees, and has introduced a border fence with Croatia.
Germany and the Netherlands recently reintroduced border checks from other EU states (normally a significant violation of Schengen area obligations), and countries like France relented on accepting a greater number of refugees. The UK government has indicated that it intends to economically support refugee camps in the area close to Syria, as Prime Minister Cameron’s recent visit to Lebanon illustrated.
The establishment of a common EU policy on how to process these refugees, and how they should be apportioned among the member states, has already led to recriminations from leaders. This meeting may serve as the first attempt by Germany to circumvent the traditional consensus model in favor of qualified majorities to break the logjams of opposition in Eastern Europe and the UK.
Pope Francis to Speak to U.S. Congress, a First for the Papacy
On Thursday, Pope Francis will speak to a joint session of Congress. This will mark the first time in U.S. history that a pope has delivered a message to Congress. His remarks will be closely watched by both conservatives and liberals as they determine which elements of his speech could be used to advance causes of importance to their respective parties.
On the liberal side, expectations are high that the pontiff, who carries a 59% approval rating among the U.S. populace (and 71% among U.S. Catholics), will highlight his support for a robust response from the United States to act on climate change, typified with his recent encyclical Laudato Se.
On the conservative side, any mention of opposition to abortion will add significant ammunition to current efforts by Republicans to defund Planned Parenthood, which faces almost universal opposition from Congressional Democrats, and would likely be vetoed by President Obama. However, if conservative Republicans dig in and refuse to support the budget supported by the majority of Republicans, and establishment Republicans are unable to garner Democratic support, the government may be forced to shut down on October 1.
Cluster of Interest Rate Decisions in Major Developing Countries will Gauge Response to U.S. Interest Rate Decision
On Wednesday, the central banks of Nigeria, Kenya, Hungary, and Turkey will decide on interest rates, in the wake of the decision last week by the Federal Reserve to not raise U.S. interest rates. A majority of FOMC members, however, believe that a rate hike will occur at some point this year.
Interest rate decisions by the four countries will serve as a snapshot response of the global monetary policy community to the status quo decision made by the FOMC. Nigeria, whose economy has been pummeled by lower oil prices, may feel incentivized to lower interest rates if it believes the FOMC suggestion of a 2015 interest rate hike is credible.
Turkey, whose currency has gone through significant gyrations, may keep interest rates stable to suggest stability in the larger economy, or decide to lower interest rates to jump start struggling growth rates. Hungary, still reeling from the massive influx of Syrian refugees, may take a decision similar to Turkey by keeping interest rates unchanged in times of significant fluctuation.