Listen: The Decisive | Ep.26 - 2024 in Review: Geopolitical Reordering

View Full Transcript

Kristen Hallam   

Hello, and welcome to The Decisive podcast. I'm your host, Kristen Hallam. As we approach 2025, we are reflecting on our key themes for 2024. In this episode, we're revisiting some key moments and insights from our previous episodes on geopolitical reordering with a focus on the significant elections taking place in 2024 and their implications for global dynamics. The interconnectedness of these elections is evident when we consider the global South and the role of groups like the BRICS Alliance. Let's hear from Laurence Allan, our Head of Europe Insights and Analysis. 

Laurence Allan   

From our perspective, we are less concerned about labels and more about how groups of countries align around specific issues. If we're talking here about some sort of cohesive sense of what does the Global South mean, the BRICS group is a great example of what it can mean and what it might not mean. There's definitely going to be closer alignment around, for example, challenges to the way that the multilateral system works, which many in countries ranging from China to Brazil view as being too U.S./Europe-centric. And so we'd expect to see that in the BRICS group, there's going to be a push towards, for example, finding ways to challenge that status quo, potentially to think about how financing terms from, for example, the IMF and the World Bank are calculated and continuing to build an alternative, slow though it might be, to the exclusive dominance of the U.S. dollar as an international reserve currency. Having said that, both within the G20 under the Brazilian presidency and within the BRICS, of course, countries that are understood to be part of the Global South have at least as many differences as similarities. So interestingly, I think the expansion of the BRICS as an example, brings that group in as many challenges as it does opportunities. 

Kristen Hallam   

BRICS member India held elections that left Prime Minister Modi's BJP party reliant on coalition support to pass future legislation. Let's hear from Deepa Kumar, Head of Asia Pacific Country Risk on what the election results mean for India's geopolitical goals. 

Deepa Kumar   

So we are expected to see strong continuity in the geopolitical objectives and in their addressing of regional challenges and opportunities. To remind our listeners, the concentric circles is basically a multi-circle approach where if you think of India in the middle, its first priority is always its first circle, which is its neighborhood, which was also evidenced by the guests who were invited to Prime Minister Modi's inauguration on the 9th June. They were leaders from India's neighborhood countries, including from Maldives, Sri Lanka, Bangladesh, Nepal, Bhutan, including the Seychelles, basically the Indian Ocean region. The second layer is where India is looking immediately west and immediately East, which is the next geographical parameter, which is all the countries in Asia to India's East right out to Japan, Australia, ASEAN and immediately to India's West, which is the Middle East and North Africa region as we identified and the Sub-Saharan Africa region. Of course, it also includes some strategic partners for India like U.S., like Russia, although they are not within the same regional or geographical bandwidth. And the third is rest of the world, all the other countries that India then looks at its relationships with. I would think the most important pillar of India's geopolitical objective in this term is going to be how they try and realize an ambition that the Indian government has for India to become a leader of sorts of the emerging economies, so especially that Circle 1 and Circle 2 and not just be a leader for the emerging economies in and of themselves or like a siloed group, but to be a bridge of this group with the advanced economies like U.S. or with Russia or with other countries in the European Union like France and Germany. So that's the kind of role. And given that there seems to be high levels of domestic support, there seems to be some level of cross-party support. We don't see too much opposition challenges of foreign policy objectives. 

Kristen Hallam   

Another BRICS member, South Africa, also held elections in 2024 that resulted in a loss of majority for the ruling party. Here what Lange Malimela, Head of Sub-Saharan Africa Country Risk has to say about the formation of a coalition government there. 

Lange Malimela   

Yes, it was an interesting set of events, but it became quite clear quite early that a coalition would be necessary and that President Cyril Ramaphosa, the incumbent President, President of the ANC himself preferred a sort of centrist coalition, in other words, going into partnership with the Democratic Alliance, which is the historical official opposition in South Africa. That was something that was difficult for many within the African National Congress to accept. There was a lot of strong feeling that the ANC in order to be able to reach the 50% mark in the formation of a coalition should rather partner with these historical parties that were formally within the ANC. In other words, the economic freedom fighters and the MK, which really was formed in December 2023. And so that was what are the main contention points and the decision that the ANC and Ramaphosa came to was to offer them to form a government of national unity, which is something South Africa formed in 1994 after the end of apartheid and the first democratic elections and essentially inviting all of the parties that have participated and who had achieved recognition at least representation of parliament to be part of the executive. And those more radical parties, those parties that used to be part of the ANC that have broken away from the ANC that have a far more radical outlook were less inclined to be part of the government of national unity. 

Kristen Hallam   

In the European Union, parliamentary elections in June resulted in mainstream parties retaining a majority of seats. Groups that are opposed to immigration and green legislation increased their share of seats in parliament to almost 1/4. Here's what Dijedon Imeri, Senior Analyst for Europe CIS Country Risk, had to say about the key issues that drove voters in those polls. 

Dijedon Imeri   

Yes. It's interesting. If you have a national breakdown, if you look at individual countries, there are obviously some recurring themes, but with different emphasis. So for example, the Nordic countries, they ran against the grain insofar as the more left wing and green parties were able to prevail in those countries, which stands in sharp contrast to countries like France, Germany, Austria as well as Italy, where the far right we were able to achieve the biggest gains. But obviously, some of the recurring themes include the cost of living crisis, which although inflation is coming down, there remains a key concern for European citizens, things like migration as well and also climate policy. And this last one is an interesting one because although there remains a very broad public support for climate action in Europe, there are some key and influential constituencies that are skeptical of the European Green Deal or at least elements of it. And here, I would highlight the protesting farmers, for example, who made a concerted effort to protest aspects of the European Green Deal, putting pressure on EU institutions and also political groups running for these elections kind of changed track and review and revisit some of the policies that impact the agricultural sector. And to this end, for example, the European Commission backtracked on its proposal to half the pesticide use by 2030. And you also had mainstream political groups like the EPP shifting towards the right on a lot of these individual issues in order to court protesting farmers. And this was reflected in their political programs and manifestos.   And I think this was reflected in the rightward shift of the European Parliament. This shift wasn't so dramatic in terms of the actual results if you look at them at a superficial level. The crucial point is to look at the rightward shift that was imminent to or that happened within mainstream groups like the EPP, which, to be very clear, they remain formally very much committed to the European Green Deal, and they are very serious about maintaining their pro-EU credentials. And it remains to be seen going forward in the next coming weeks and months to what extent this was purely a tactical consideration or whether we're seeing a genuine shift towards the right. 

Kristen Hallam   

And how are these election results shifting the relationships between the members of the G20, a forum for international economic cooperation. Let's bring back Laurence Allan to tell us more. 

Laurence Allan   

We've had a series of elections over the last few months. And plus we've got German federal elections for a new government in Germany next year before, if I'm correct, the next G20 heads of government summit. So over this kind of 12- to 18-month period, there's actually been quite a bit of flux among some of the key players. Most obviously, of course, we've just had a pretty indecisive election in France, one of the EU's 2 largest economies. A lot of uncertainty as to what that's going to lead to both for France's own political stability, but also what that means in terms of inter-EU dynamics and the way that the EU projects itself externally. Outside of the EU, of course, we've got a relatively new government in the U.K. after quite a long period under a conservative government. So we've yet to get a full picture of what this new U.K. government is going to do and how it's going to position itself around some of the issues that we're going to see raised at the G20. It's also worth pointing out, of course, that to some degree, Europe is heavily overrepresented at the G20 because as well as the 4 countries that are there, we have the EU represented. So in effect, we've got the 27 full members of the EU there as well. I think the major overarching question in terms of the way that those European countries interact here is how much they're going to be pulling in the same direction given some of the dynamics that I've just underlined. I think on a couple of the key areas, for example, on Ukraine, Russia and particularly on the support for sanctions, we don't expect to see much difference from what we've seen over the last 12, 24 months, which is broadly speaking, unity and the EU and the U.K. attempting to lobby other G20 members to get on board with that. 

Kristen Hallam   

Brazil held the presidency of the G20 in 2024 and hosted the Annual Summit. How did Brazil approach this role? And how might that reflect the views of other Latin American countries on the global stage? Let's bring in Carlos Cardenas, Head of Latin America Insights and Analysis, to address that question. 

Carlos Cardenas   

Brazil is using the G20 to, as always, promote and elevate the position of developing economies when it comes to multilaterals, reforms of institutions, but particularly because they're aware of those difficulties. They're looking into creating a global alliance against hunger. They're looking into discussing issues related to global taxation and also, in particular, looking to climate issues, especially channeling more financing towards emerging markets. I think the majority of countries in Latin America have in a way adopted a strategy of trying to get the best out of both sides out of both the U.S. and China, often going to the partner that will offer the best conditions. For Brazil, in particular, it's a bit tricky because in this context of a world in flux and a world of geopolitical realignment and rebalancing, Lula has pursued his strategy of multiparity, his strategy of an autonomous foreign policy. And in doing that, there have been deep misalignments when it comes to many of the G7 economies. Russia, Ukraine and the position of Brazil, it's a case in point. But when it comes to China, in particular, Brazil sees China as extremely important to achieve its own economic growth and its own growth potential. We have seen very deep cooperation trying to strengthen trade. And as you see what is happening in Europe, for example, with EVs, Brazil has actually welcomed and will continue to welcome investments on EVs from China, again, because it sees the country as a strategic partner. The key thing is that it's important to see things in a nuanced way. At the same time, in that context of strategic competition and even though you have those misalignments, you would say, with the U.S., they have signed with the U.S. and with this administration agreements on labor issues, agreements on cooperation against political extremism and also agreements on the environment. So they're taking in a way, a pragmatic approach. And what we're seeing from the G7 economies is that they're also willing to deal with those misalignments to do that. And again, a very pragmatical point of view, they are aware that they have that connection to China being the main buyer of the majority of the commodities that Brazil sells and exports. And to try to mitigate those risks, they're trying to diversify the trade relationships and a big push that they have done so far this year, it's trying to get the interest of countries in the Gulf. There was just a meeting with the Gulf Cooperating Council, and they're trying, again, to position agribusiness as a big opportunity to enhance trade and in a way, try to bring investment from that part of the world to Brazil. 

Kristen Hallam

While we're in Latin America, we'll round out our round up with a visit to Mexico. Mexico's elections resulted in the MORENA party taking control of the presidency, the Congress and numerous other offices in the country. New President Claudia Sheinbaum took office in October. Let's listen to Jose Enrique Sevilla Macip, Senior Analyst for Latin America Country Risk, discuss what's on MORENA's agenda. 

Jose-Enrique Sevilla Macip   

MORENA has a quite ambitious constitutional reform agenda. In February this year, just 8 months before leaving office, AMLO announced a set of 18 constitutional amendments that would structurally change the nature of the Mexican state. Among the most important of these proposed reforms include the transfer of the National Guard, which is a militarized police corporation, its administrative transfer to the Defense Ministry. Currently, it is at least legally a civilian corporation. With this reform, it will now be fully and legally a military corporation, which will grant the Defense Ministry a stronger position in the conduction of Mexico security policy. The second relevant amendment is the so-called judicial reform. Both AMLO and Sheinbaum have singled this reform out as its first order of business for the new Congress. Another very relevant amendment proposal is an administrative reorganization of the Mexican state, which contemplates the elimination of several regulatory organs. For example, the energy regulatory organism, the regulation agency for the telecom sector and the antitrust organism. And the final of these major structural reforms is a change in electoral rules. What MORENA is trying to do is to reduce the number of deputies and senators basically by eliminating proportional representation seats. This would allow the majority party to have even more power in future congresses. So far, AMLO and Sheinbaum, after discussing which of these proposals they were going to prioritize, they decided to, as of now and within 2024, focus only on the reform of the judiciary, not because they have discarded the other ones, probably Sheinbaum is going to go for them, but probably in 2025 or beyond. 

Kristen Hallam   

Let's hear more from Jose Enrique on what Mexico's election results mean for relations with the United States. 

Jose-Enrique Sevilla Macip   

Relation between the U.S. and Mexico currently is centered around 3 topics: immigration, security and particularly fentanyl trafficking, and trade and regional supply chains. Under AMLO, we've seen broad alignment with the U.S. on all these 3 accounts. Again, rhetorically, AMLO has been critical of the U.S. foreign policy in other parts of the world, but AMLO has maintained a 28,000 strong military deployment all over Mexico, focused only on containing illegal immigration flows towards the U.S. Mexican law enforcement is detaining above 100,000 illegal migrants per month during 2024, preventing them to reach the U.S. border. So despite all the rhetoric about the need of investing in human development in Central America, AMLO has complied with U.S. demand of Mexico helping to prevent migration flows to reach the border. On fentanyl trafficking, there have been differences regarding how they proceed operationally against drug trafficking organizations. But certainly, AMLO has been willing to maintain this cooperation with U.S. strategic objectives. And finally, on trade, well, Mexico is fully dependent on U.S. for its trade policy. 80% of Mexican exports go to the U.S. The U.S. is the prime foreign investor in Mexico. So on that regard, we expect Mexico to maintain broad policy continuity. What's going to be more interesting is what is the U.S. policy towards Mexico after the U.S. election in November. But that will depend on the results, and I would leave that to our U.S. colleagues to analyze. 

Kristen Hallam   

And that's our look back on geopolitical reordering in 2024. Next week, we'll round up key insights around the theme of economic fault lines on our way to revealing our big themes for 2025. Until then. Thank you for listening to The Decisive podcast.