<?xml version="1.0" encoding="UTF-8"?><rss version="2.0" xmlns:content="http://purl.org/rss/1.0/modules/content/" xmlns:wfw="http://wellformedweb.org/CommentAPI/" xmlns:dc="http://purl.org/dc/elements/1.1/" xmlns:atom="http://www.w3.org/2005/Atom" xmlns:sy="http://purl.org/rss/1.0/modules/syndication/" xmlns:slash="http://purl.org/rss/1.0/modules/slash/" > <channel> <title>Politics – The Musings Of A Politics Junkie & Closet Economist</title> <atom:link href="https://kurtdavisjr.com/tag/politics/feed/" rel="self" type="application/rss+xml" /> <link>https://kurtdavisjr.com</link> <description></description> <lastBuildDate>Fri, 08 Jan 2021 10:55:41 +0000</lastBuildDate> <language>en-US</language> <sy:updatePeriod> hourly </sy:updatePeriod> <sy:updateFrequency> 1 </sy:updateFrequency> <generator>https://wordpress.org/?v=6.7.2</generator> <item> <title>Lebanon’s Search For A Solution in 2021</title> <link>https://kurtdavisjr.com/lebanons-tragedy-economy-politics-covid-19-solution/?utm_source=rss&utm_medium=rss&utm_campaign=lebanons-tragedy-economy-politics-covid-19-solution</link> <dc:creator><![CDATA[Kurt L. Davis Jr.]]></dc:creator> <pubDate>Fri, 08 Jan 2021 10:31:25 +0000</pubDate> <category><![CDATA[Middle East / Asia]]></category> <category><![CDATA[2021]]></category> <category><![CDATA[Covid-19]]></category> <category><![CDATA[Economic Recovery]]></category> <category><![CDATA[Israel]]></category> <category><![CDATA[Lebanon]]></category> <category><![CDATA[Politics]]></category> <category><![CDATA[Port Explosion]]></category> <category><![CDATA[Saad Hariri]]></category> <category><![CDATA[Syria]]></category> <guid isPermaLink="false">https://kurtdavisjr.com/?p=396</guid> <description><![CDATA[Lebanon has long swept its challenges under the rug and celebrated its successes. But the explosion back on August 4th in the port area of Beirut—the capital of Lebanon—, in a figurative and physical sense, unveiled a tomb of hidden treasures and misfortunes of years past. Yet the tragedy of the blast was it not only took so many lives, but its revelations of treasures and misfortunes were not exactly new...]]></description> <content:encoded><![CDATA[ <div class="wp-block-image is-style-default"><figure class="aligncenter size-large is-resized"><img fetchpriority="high" decoding="async" src="https://kurtdavisjr.com/wp-content/uploads/2021/01/Lebanon-FT.jpg" alt="" class="wp-image-398" width="580" height="326" srcset="https://kurtdavisjr.com/wp-content/uploads/2021/01/Lebanon-FT.jpg 700w, https://kurtdavisjr.com/wp-content/uploads/2021/01/Lebanon-FT-300x169.jpg 300w" sizes="(max-width: 580px) 100vw, 580px" /><figcaption> (Photo Credit: Hamzeh/EPA/Shutterstock)</figcaption></figure></div> <hr class="wp-block-separator"/> <h4 class="has-text-align-center wp-block-heading"><strong><em>Dispersing with the political and economic remnants of civil war</em>…</strong></h4> <hr class="wp-block-separator"/> <div style="height:20px" aria-hidden="true" class="wp-block-spacer"></div> <p>This is not Lebanon. This is Lebanon. Maybe both statements are true.</p> <p>The hope, the destruction, and the hope again…or is it the destruction, the hope, and the destruction again?</p> <p>Lebanon has long swept its challenges under the rug and celebrated its successes. But the explosion back on August 4<sup>th</sup> in the port area of Beirut—the capital of Lebanon—, in a figurative and physical sense, unveiled a tomb of hidden treasures and misfortunes of years past. Yet the tragedy of the blast was it not only took so many lives, but its revelations of treasures and misfortunes were not exactly new.</p> <p>The treasures of Lebanon are its people and culture, and the resilience that keeps the people and culture fastened together. It is hard not to know these treasures or hear about them if you are to know Lebanon and have Lebanese friends. The fears are also known—political induration, economic and financial crisis, and the unavoidable foreign influence—yet they are danced around and skipped over in many conversations. Thus, the mystery of the entire situation is how does anyone, after the explosion, pretend the treasures easily outweigh the misfortunes (especially as the people continue to exit for other countries).</p> <p>More than four months later, the Lebanese diaspora has returned home for the holiday season to find a country still searching for a new way. Many visiting Lebanese diaspora are young(er), employed and idealistic, looking out at a local public that is increasingly old(er), unemployed, and decreasingly optimistic. This is not how their parents described Lebanon in its past days. The stories of today describe a grim reality on the ground…thus what is to be changed in the country if the stories are to resemble the past optimism of their parents’ tales.</p> <p class="has-medium-font-size"><strong>A Civil War Chameleon</strong><strong></strong></p> <p class="has-normal-font-size"><em>The Civil War That Never Ended But Adjusted</em></p> <p>More than 45 years ago, in April 1975, the Lebanese civil war broke out. The war lasted 15 years, taking more than 150,000 lives, injuring more than 300,000, and leading to the mass emigration of Lebanese. The end of the war was equally catastrophic with both Israel and Syria making best efforts to control the country. A series of political assassinations and the continuous picking at old political scabs fueled further instability in the country. It was the assassination of former Lebanese Prime Minister Rafiq Hariri on Valentine’s Day in 2005 by a suicide truck bomb in Beirut that ultimately made Syria quit its occupation of the country. A senior member of Hezbollah was convicted for the planning of the assassination by an UN-funded special tribunal in the Hague back in July last year. A new war with Israel would erupt in 2006…for many Lebanese (and Israelis), this was only a continuation of the strained relationship that has soiled regional peace efforts for decades. The uprising in Syria in 2011 further picked at old wounds as Syrian refugees flooded into Lebanon for safety.</p> <p>Elections and protest movements are equally both synonymous with Lebanese politics and can function as a never-ending extension of the Lebanese civil war. The country existed without a president for about 29 months until October 31, 2016 when the Lebanese Parliament elected Michel Aoun after 40 failed attempts to fill the post. Various political parties undermined previous efforts to fill the vacancy with boycotts that prevented the necessary quorum for a vote. Following the 2016 election, President Aoun reappointed Saad Hariri as prime minister. Hariri previously served as prime minister from 2009 to 2011. He would unexpectedly resign on November 4, 2017 in a televised statement from Saud Arabia with unabated references to Iran and Hezbollah’s interference and influence in the greater Middle East politics and fears of assassination. </p> <p>Then Hariri, after a series of maneuvers and failed attempts to leave Saudi Arabia, would find his way to France to meet French President Emmanuel Macron and then back to Beirut where he suspended his resignation on November 21<sup>st</sup> and fully rescinded it on December 5<sup>th</sup>. Hariri would later announce another resignation in October 2019 following a series of street protests by the Lebanese public against a lack of transparency and accountability in government. He would leave office when Hassan Diab, the former education minister, was appointed to prime minister on January 21, 2020 and then be reappointed as prime minister on October 22<sup>nd</sup> after Diab resigned following the aforementioned explosion at the port. </p> <p>Lastly, the most recent parliamentary elections due for 2013 did not happen until May 2018 with the March 8<sup>th</sup> coalition, a coalition of political parties and independents united by a pro-Syria stance and allied with Hezbollah, taking a majority share of the power. The March 8 Alliance and the March 14 Alliance—a coalition of political parties and independents united by an anti-Syria stance—both formed in 2005 are manifestations of the ongoing alliances from the civil war codified into contemporary Lebanese politics.</p> <p class="has-medium-font-size"><strong>The “Slicing the Cake” Nature of Lebanese Politics</strong><strong></strong></p> <p class="has-normal-font-size"><em>Political Power Sharing and Patronage</em></p> <p>So many in Lebanon grew up being told that Lebanon’s political system was necessary to protect the country. The UN-brokered Taif Agreement and related agreements following the end of the civil war was explicit in terms with a pre-assigned number of seats in the Lebanese Parliament to each of the different religious groups and sects. Unsurprisingly, political parties have been designed around these groups to ensure political power and mobilize voting blocks. Thus, although more religiously diverse than its Middle Eastern neighbors as well as having a very sizeable Christian population, Lebanon cannot escape the very palpable Sunni-Shia sectarian divide that permeates the politics of other predominantly Muslim nations in the region. </p> <p>Furthermore, the selection of candidates and subsequent voting is filtered through the same religious lens. Candidates are generally selected along religious fidelity with repeat selection of candidates for parliament by elder Lebanese which generally frustrates young Lebanese. The patronage system for cabinet posts, jobs and so on consequently remain dominated by specific families. Voters, especially younger voters, complain about the results, but the rules generally ensure the same outcome or, at least, prevents things from changing. The “system” also finds strength through continued emigration of talented Lebanese, who, in a figurative sense, are invited to send and spend money in Lebanon to support a fragile economic state but should stay out of politics. As a result, the protestors on the street are increasingly younger and mobilized by weakened social services and a troubled economy, ultimately exhibited by the country’s sovereign default last year.</p> <p>The apportionment and later subdividing of the spoils of patronage is a rather limited course of action for reversing the sectarian challenges. In other words, the “slicing the cake” style of politics has created an outwardly image of a functioning political system while mistrust percolates among religious sects and the greater Lebanese population. And, as the economic cake and associated positions of political power shrink, it is increasingly hard to find agreement on how to share responsibility and rewards. The pie is also shrinking as state-owned enterprises labor through economic turmoil caused by both mismanagement and the economic demise of the state. In the past, the state could financially engineer higher returns for investors and citizens willing to lend their dollars to the state. Today, both markets and Lebanese citizens are backing away.</p> <p class="has-medium-font-size"><strong>The IMF is Not a Miracle Worker</strong><strong></strong></p> <p class="has-normal-font-size"><em>The Deeper Problems and Challenges</em></p> <p>Lebanon’s economic challenges are not new. The country has regularly walked a tightrope with its sovereign balance sheet and avoided collapse with some form of financial sticky plaster from Middle Eastern neighbors or the market at the last minute. Yet the sovereign default last year completely exposed the bleeding in the system, with a shortage of foreign currency, an unclear strategy for attracting additional foreign currency, and an unceasing impatience and disdain from the public for the financial system in its entirety. A number of economists inside and outside the country supported the country defaulting on its debt with one common theme underlying their thinking: Lebanon needed to start over from scratch.</p> <p>Now, from “scratch” is hard unless you can blow up the entire system which is complicated for several reasons. First, decades of extracting income from rent-based sectors, including banking, real estate, and remittances to fund imports and consumption has emptied the coffers of the government as well as frustrated that small group still willing to fund the government. International markets have turned off the tap while neighboring countries show some willingness to finance the country only if that money can come with some political fidelity which Lebanon cannot offer within today’s politics. Secondly, the financial sector, in particular the banks, cannot find the usual support from the Lebanese population. Local Lebanese have lost significant wealth and buying power with the plunge of the Lebanese pound to roughly 8,000 to 9,000 pounds per dollar (versus the peg rate of 1,500) and have been hammered economically by covid-19 at home. Lebanese diaspora outside the country struggle to bet on the resilience and recovery of the country and choose to safekeep their money elsewhere across the globe. </p> <p>The IMF accordingly will struggle to employ the normal tactics in its reform toolbox. Currency devaluation… already done. Shrink the public sector…that could work but the local population is already combating inflation near 60% and struggling to pay for basic goods and services. Thus, the stripping of subsidies on energy and gasoline alongside food products ostensibly seems impossible today. Lastly, the focus on fiscal consolidation is not necessarily an easily digestible medicinal pill for a country that requires real economic growth, i.e. beyond infrastructure spending at the government level or inflow of dollar bank deposits from Lebanese both of which are unlikely in the short term in today’s environment</p> <p class="has-medium-font-size"><strong>“Falling on the Sword” to Save the Country</strong><strong></strong></p> <p class="has-normal-font-size"><em>Looking Back at Turkey in the 2000s and De Klerk in the early 1990s</em></p> <p>Lebanon may require the most extreme series of reforms. That said, the likely initiator of such reforms will likely not have long-term political survival. Consider the case of Turkish economic crisis in 2000s. The IMF provided more than $11 billion in loans while the state sold 51% stake of Turkish Airlines with advertisements placed in newspapers to attract buyers. Lebanon will require major loans to fund economic growth as foreign investors—similar to the experience in Turkey in the late 1990s—are reluctant to return to the country today. That said, Turkey became indebted to the IMF and, in the view of some critics, was placed at the mercy of the IMF’s political <em>and </em>social willpower. Additionally, some treasured Turkey state assets were no longer fully owned by the state…privatizing Lebanese state assets is already a delicate subject. </p> <p>Despite all these efforts in Turkey, the ruling party could not prevent the landslide victory of the AKP led by current Turkish President Recep Tayyip Erdoğan in 2002. This point is to say the system may need its F.W. de Klerk reform moment. De Klerk remains a controversial figure in South African history. He was the leader of the Afrikaner ethnic National Party (disbanded in 1997) yet he also later dismantled apartheid with universal suffrage to the South African population. He would win the Nobel Peace Prize for figuratively falling on the sword for the National Party’s historic wrongs and upending the system that maintained its white-minority rule. Lebanese politics may require several De Klerk moments…absent that, a new inflow of foreign capital or sale of state assets may not be enough to calm the angst of the young Lebanese and beyond, especially if an economic recovery only ultimately reinforces the old political system. Every party runs out of cake to eat and share at some point…or better said, a political system that sustains itself solely on perfectly allocating the spoils of war is bound to continuously falter and ultimately fail unless it can evolve and change (the jury is still out on Lebanon).</p> <hr class="wp-block-separator"/> <p></p> ]]></content:encoded> </item> <item> <title>Top Economic Predictions For Africa In 2019</title> <link>https://kurtdavisjr.com/top-economic-predictions-for-africa-in-2019/?utm_source=rss&utm_medium=rss&utm_campaign=top-economic-predictions-for-africa-in-2019</link> <dc:creator><![CDATA[Kurt L. Davis Jr.]]></dc:creator> <pubDate>Wed, 26 Dec 2018 16:00:16 +0000</pubDate> <category><![CDATA[Africa]]></category> <category><![CDATA[Brexit]]></category> <category><![CDATA[Financial Markets]]></category> <category><![CDATA[Financial Restructuring]]></category> <category><![CDATA[Politics]]></category> <guid isPermaLink="false">https://kurtdavisjr.com/?p=168</guid> <description><![CDATA[With the new year only a few days away, we look ahead and make a few economic predictions for the African continent in 2019...]]></description> <content:encoded><![CDATA[ <div class="wp-block-image"><figure class="aligncenter size-large"><img decoding="async" width="870" height="450" src="https://kurtdavisjr.com/wp-content/uploads/2020/08/The-fallout-from-Brexit-will-affect-African-economies-in-2019.-Image-AP-Photo-1.jpg" alt="" class="wp-image-189" srcset="https://kurtdavisjr.com/wp-content/uploads/2020/08/The-fallout-from-Brexit-will-affect-African-economies-in-2019.-Image-AP-Photo-1.jpg 870w, https://kurtdavisjr.com/wp-content/uploads/2020/08/The-fallout-from-Brexit-will-affect-African-economies-in-2019.-Image-AP-Photo-1-300x155.jpg 300w, https://kurtdavisjr.com/wp-content/uploads/2020/08/The-fallout-from-Brexit-will-affect-African-economies-in-2019.-Image-AP-Photo-1-768x397.jpg 768w, https://kurtdavisjr.com/wp-content/uploads/2020/08/The-fallout-from-Brexit-will-affect-African-economies-in-2019.-Image-AP-Photo-1-750x388.jpg 750w" sizes="(max-width: 870px) 100vw, 870px" /><figcaption>The fallout from Brexit will affect African economies in 2019. (Photo Credit: Associated Press)</figcaption></figure></div> <p><strong><em>This originally appeared in the Africa section on Moguldom.com</em></strong></p> <div style="height:20px" aria-hidden="true" class="wp-block-spacer"></div> <p>From financial restructuring and the global economic slowdown, to debt investing and politics, we forecast the road ahead in the coming 12 months.</p> <h2 class="wp-block-heading">A Global Slowdown in 2019 Will Hit Africa (Hard)</h2> <p>Economists are not in a consensus on whether there will be a recession, but they are all in agreement on a downturn in 2019.</p> <p>“There is a confluence of deep-seated, structural headwinds that threaten to upend the global economy,” warns Zambian-born economist Dambisa Moyo.</p> <p>A mix of massive debt burdens on governments, corporations and individuals juxtaposed with political instability, growing inequality, and a workforce ill-prepared and ill-adapted to rapid technological change, among many other structural factors, will underpin a hard 2019 for many countries.</p> <p>The Chinese economy is already slowing, and the U.S. economy is expected to follow the same course in 2019, having a distressing effect on emerging economies with consumption of goods and services from emerging markets likely dropping in the coming year.</p> <p>The economic malaise in India and Brazil as well as slow growth in the European Union only add to the concerns for some African leaders.</p> <p>The economists (in a relatively small group) betting on a moderately bullish global economy in 2019 point to a massive downturn in 2020, suggesting a downturn is inevitable and timing may be the only disputed factor.</p> <h2 class="wp-block-heading">More Financial Restructuring in 2019</h2> <p>Restructuring in 2018 was not as big as expected in some economist and banker corners, but it will likely be a different narrative in 2019.</p> <p>Many companies are not prepared for a global slowdown, especially after less than exciting growth numbers in the last three years (due to low commodity prices).</p> <p>A significant amount of debt was issued in 2013-2015 with maturities in 2018 ignored by many lenders. Maturities in 2019 are top of mind for many companies, while maturities in 2020 are not far out enough to create a timeframe for finding a solution to balance sheet challenges.</p> <p>A new slump in oil and gas prices will not have a similar dramatic effect on African economies as the price plummet in 2014 had on 2015, but the current price levels indubitably suggest that $100 oil prices are far away, and firms must adjust their operations and cost structures for the long term (many national firms are still in the early to middle stages of that change process).</p> <p>Power companies will also be a concern for many African economies as their balance sheets and accompanying debts will weigh on government coffers. Lastly, the challenges encountered by many financial institutions in the last couple of years with interest rate caps, limited retail growth, and high non-performing loans (NPLs) could boil over in a greater economic slowdown.</p> <h2 class="wp-block-heading">Brexit Will Force Some Changes for Africa-Focused Investors</h2> <p>Africa-focused investors are in the same boat as other emerging market investors – if not London, then where? This question is layered with several realities of recent years in the industry. Africa investors have gone through cycles with office location and regional focus.</p> <p>The early 2000s are best characterized by firms being based in the U.S. (i.e., Emerging Capital Partners in Washington, D.C.) or the U.K. (i.e., Helios Investment Partners in London) but then development finance institutions (DFIs) started advocating a focus on localized offices towards the end of 2000s in cities such as Lagos, Nairobi, and Johannesburg, among others.</p> <p>Localized offices have struggled with economic troubles in South Africa (and the declining appeal of Johannesburg), the never-too-high appeal of living in Lagos, the politics of Kenya (and a growing local objection to foreigners flooding Nairobi), and the emergence of Francophone and Lusophone economies (and the lack of flight connections within Africa).</p> <p>As a result, London was re-emerging as the headquarter focus for many firms. An unplanned Brexit (or “no-deal Brexit”) will confound many emerging market players (including those Africa-focused players) as there is no uniquely popular financial home for many firms if London struggles to maintain its place.</p> <p>Some investors are already blaming Brexit (and its unexpected unpredictability going into 2019) for the growing expectations of a 2019 economic downtown and their potential exit from London (a city many of those departing have called home for decades).</p> <h2 class="wp-block-heading">Debt Investing Will Be the Focus in 2019</h2> <p>Africa investors will focus on debt investments (with some equity kickers). Equity investing is simply not providing the returns imagined by investors. Many L.P.s quietly confirm that the annual internal rates of return (IRR), net of management fees, remain under 5 percent for Africa-focused investors, with the number only slightly rising to sub 6 percent when excluding South Africa.</p> <p>This level of return pales in comparison to mezzanine and credit investors, and look unattractive when placed side-by-side with infrastructure funds.</p> <p>Expect many investors to be happy to put in debt structured investments into Africa coupled with security against assets, potential risk guarantees from local banks or international institutions and an equity kicker to gain on the upside.</p> <p>Debt investors also benefit from weak financial institutions in many countries when it comes to lending. High NPLs at some banks across the region have spurred a decline in lending appetite in the near-term.</p> <p>Interest rate caps create mixed results, subsequently creating more opportunity in some countries and exposing the challenges of lending in general in other countries.</p> <h2 class="wp-block-heading">Politics and Poverty Will Be Dangerously Overlapping Subject Matters</h2> <p>Many countries, including Nigeria and South Africa, have elections in 2019 (see some predictions <a href="https://kurtdavisjr.com/top-elections-to-watch-in-africa-and-predictions-for-2019/" target="_blank" rel="noreferrer noopener">here</a>). The trajectory of these countries will depend on their ability to enable democracy and economies to address the concerns and challenges of many individuals feeling left out of the system.</p> <p>Nigerian politicians must prove their victory and subsequent decisions can help the country escape its economic malaise while South African politicians, specifically the African National Congress (ANC), will have to shore up its voting base under President Cyril Ramaphosa in the next five years (assuming a victory in 2019) or deal with more investor and citizen flight from the country.</p> <p>Tunisian politicians are still working to prove democracy works in North Africa and that it will solve the economic challenges of the ‘average’ Tunisian.</p> <p>All this political rancor will overlap with undying clamor from politicians and philanthropists among others that enough is not being done to address poverty in Africa, in particular sub-Saharan Africa.</p> <p>Education and healthcare investment may be up in Africa but many children (and families) are still trapped by location on the continent (i.e., being born in certain cities severely undercuts opportunity for certain people without access to living necessities such as running water and basic healthcare).</p> <p>And many investors admit that there are parts of Africa that they simply will not invest in, at least, in the near-term, and as such, public and philanthropic capital will have to step in.</p> <hr class="wp-block-separator"/> ]]></content:encoded> </item> </channel> </rss>