The Decisive | Season 3 Ep.18 - Domestic Discontent: Election Aftermath and Upcoming Polls

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Kristen Hallam:

You're listening to the Decisive podcast. Insights and analysis to empower confident decision making.

Domestic instability is a growing concern, influenced by various factors such as economic inequality, technological disruptions, and political polarization. These challenges are creating environments where traditional social contracts – understandings between governments and citizens seem obsolete and are increasingly contested. We're going to take you through three focus areas: shaky coalitions and other consequences from 2024’s elections mega-cycle, which we expect to be more fully expressed in 2025 key elections taking place in 2025, and hotspots of political instability and social unrest selected by our experts for their relevance to businesses.

To discuss the three focus areas I mentioned, we are joined by the following experts from S & P Global Market Intelligence. Anton Alifandi, associate director, Asia Pacific Country Risk; Bibianna Norek, senior analyst, Europe Country Risk; Carla Selman, Head of Latin America Country Risk; and Martin Roberts, Associate Director, Sub Saharan Africa Country Risk. We're going to start with shaky coalitions and other consequences of the 2024 mega-cycle, in which more than 70 elections took place.

We're going to do some globetrotting today, and we'll start in Asia Pacific. Anton, where are we seeing the consequences of the 2024 election cycle in the region?

Anton Alifandi:

Thank you, Kristen. There were a number of national level elections across Asia Pacific in 2024. The consequences from several of those elections are still reverberating, not so much because of shaky coalitions, but because of lack of legitimacy and the civil unrest that they have caused. In Bangladesh, for example, there was a general election in January 2024. Prime Minister Sheikh Hasina won a fourth term, but she was overthrown seven months later in August following student protests that killed hundreds of people. Since then, Bangladesh has been ruled by an interim government led by former Nobel Peace Prize winner Mohammad Yunus. Although we're not seeing the kind of large-scale destructive protests and lethal response we saw last year, we are still seeing regular demonstrations relating to various political, economic, and social issues in Bangladesh. Likewise, in Pakistan, where a general election was held in February, there were legitimacy issues with supporters of the jailed former prime minister Imran Khan complaining that they were not allowed to participate in the election as candidates of his party, the PTI party.

The election led to the formation of a coalition government between the PMLN party of Prime Minister, Shehbaz Sharif and the Pakistan People's Party led by Bilawal Bhutto Zardari and his father, Asif Ali Zardari. And the coalition remains stable, and we think will largely remain stable this year. But the lack of legitimacy has caused periodic deadly and disruptive protests, by Imran Khan supporters in Pakistan's major cities, protests which we think will likely continue this year. And I'd just like to mention Sri Lanka briefly while we are on South Asia. There were presidential and parliamentary elections in September and November, respectively. Anura Kumara Dissanayake won the presidential election in September, and a coalition led by his party won the parliamentary election in November. The elections appear to have stabilized the political situation. Protest rallies have declined.

So it looks like Sri Lanka has drawn a line in terms of the instability that first arose in 2022 with the removal of President Gotabaya Rajapaksa. And if we move to, Southeast Asia, Indonesia held national elections in February 2024, but the transfer of power to the new president only took place in October. President Prabowo won the presidential election in one round, and his party and his coalition partners now have a two thirds majority in parliament.

Nevertheless, despite this strong support, in recent months, we've seen large scale street rallies and on online protests that, of course, the government to reverse its policies, notably its plan to increase value added tax, Kristen.

Kristen Hallam:

Thanks for that, Anton. And what are the impacts or potential impacts for businesses?

Anton Alifandi:

Yeah. If I may start with Indonesia for a moment, one of the policy changes that, President Prabowo is proposing is to amend the law governing the armed forces, allowing them to hold more civilian roles, for example, in sectors such as agribusiness. Students and civil society groups are alarmed by this. They see it as a return to the military, led, authoritarian government that ruled Indonesia for three decades until the late 1990s. So we expect more protests this year as parliament debates amendments to the law. And the Prabowo government is also seeking to reallocate the national budget, seeking US$19 billion to fund its free school meals program. One of the hardest hit ministries is the public works ministry whose budget has been cut by 70%, seven-zero. So if implemented, this will likely mean project cancellations.

So at this stage, we're not clear which projects will be affected. So an increase in in contract cancellation risks are here. And in Bangladesh, the interim government has initiated a review of power purchase agreements signed by the previous Sheikh Hasina government affecting Indian, Chinese, and, and Bangladeshi companies. And the interim government is also seeking to recover money allegedly laundered abroad by individuals and companies connected to Sheikh Hasina. So, you know, these allegations have been denied by those accused by the government, but we we we're likely to see a review of of these contracts. And in Pakistan, not necessarily related to the election last year, but the government has revoked its, contract with, five independent power producers and has renegotiated or is negotiating its contracts with other independent power producers underlying contract cancellation risks in in the country. Similarly, in in Sri Lanka, the government is also reviewing power, contracts signed by the previous government as well as, you know, other contracts more generally, Kristen.

Kristen Hallam:

Thanks, Anton. That's quite the list there. Let's pivot to Europe. Bibianna, where are we seeing fallout from the 2024 mega cycle in Europe?

Bibianna Norek:

Thank you, Kristen. I think for Europe, I would highlight two countries, France and Romania. And definitely, a country that has felt the consequences of the 2024 election cycle is France. The legislative election that was called by President Emmanuel Macron following disappointing results in the European Parliament election, has actually weakened his party and strengthened, on the other hand, the opposition both on the far right and on the far left. And this has created a very fractured parliament that has already the top of the first government that was formed led by Michel Barnier. While the current minority cabinet, which is led by Francois Bayrou, is also, fragilized by a lack of, parliamentary majority and will probably face increasing stability risks more towards mid-2025 when it will be constitutionally possible again to hold another legislative election in France. On the other hand, in Romania, the legislative election had greater parliament fragmentation with gains by the far right and by Eurosceptic parties. But most importantly, the constitutional court has canceled the results of the first round of the presidential election of alleged Russian interference.

And the far-right independent candidate who came first in the first round of the election, Calin Georgescu, has actually now been barred from participating again.

Kristen Hallam:

Thanks, Bibianna. What would be some of the impacts or potential impacts for businesses from that?

Bibianna Norek:

So for France, I would say that the biggest impact has been uncertainty for the business environment with regards to government spending, for example. The 2025 state budget approval was delayed by around two months. But also uncertainty regarding France's ability to actually reduce effectively its fiscal deficit. And we've also seen increased taxes of companies and levies affecting businesses. For Romania, I would say that in terms of the impact, we're looking more at, social stability risks as we have seen large and also violent protests that have been taking place since Georgescu was barred from running in the rerun of the presidential election, and we're likely to see this protest continuing and probably an uptick as well closer to the election.

Kristen Hallam:
Thank you for that. Let's hop over to Latin America now. Carla, where are we seeing these consequences of the 2024 mega cycle of elections? Or late 2024 as the case maybe.

Carla Selman:
Yes. Thank you, Kristen. The largest election we had in Latin America was Mexico, and that saw the transition from President Andres Manuel Lopez Obrador, AMLO, to Claudia Sheinbaum, who was basically, like, his wanted successor. So in that sense, there's unlikely to be major policy changes. What the election did see was a full consolidation of Morena, the ruling party power. So not only did they take the presidency, they also took Congress, which gives them capacity to pass constitutional reform. On the other hand, the opposition has been very weak and is not really presenting a challenge for the government anymore. So the main challenge for Morena will come from the same factions of the Morena party.

That is what could potentially delay policy changes. In any case, President Sheinbaum remains very popular. She's at around 80% of support, and this has been partly dropped by her handling of the dispute with the US over tariffs. The other country that I want to mention is Argentina. As you mentioned, Kristen, this didn't have elections in 2024. But 2024 was the first year of president Milley as representing a radical policy change compared to his predecessor. So Milei came — with his predecessor, a government who wanted to increase the role of the state in the economy. Milei is completely the opposite.

He wants to shrink state institutions and reduce public spending. So these issues are very delicate for Argentinians, but still, he has managed to avoid destabilizing and unrest. So there are having protests, but they have not been so destabilizing because, mainly, Milei remains overall popular. His popularity is at, like, 50%. And this is because of economic results. Specifically, he has shown a decelerating inflation trend, which was the main concern for Argentina.

Kristen Hallam:
Two relatively popular leaders there. Interesting. So, Carla, what are the impacts or the potential impacts for businesses there?

Carla Selman:
Yeah. As I mentioned, for Mexico, not major changes in policy changes because Sheinbaum represents a continuous from AMLO. AMLO did want to increase the state role in key sectors such as energy mining, particularly by strengthening state-owned companies. Sheinbaum is a little bit moderate. She is more likely to allow slightly increased private sector participation, particularly in the power sector. But one issue that's important to note also is nearshoring because nearshoring has been a priority, and Claudia Sheinbaum will continue with this. She will continue to offer tax incentives to companies trying to set up in Mexico. But the issue here is that this is unlikely to be enough because of all the uncertainty caused by the US tariffs.

She is also promoting other measures, for example, streamlining the permitting process to reduce bureaucracy when starting a project. In Argentina, on the other hand, as I mentioned, major change. It's a complete, a complete, completely different policy. Milei wants to boost the private sector. He is promoting widespread deregulation. He also wants to privatize state-owned companies, and he's also advancing towards removing economic distortion, specifically capital and currency controls, which have been the main deterrent for doing business. So it's a broader process, but he's advancing towards that also with reducing export access and import restrictions.

Kristen Hallam:
Right. Thank you, Carla. And finally, let's go over to you, Martin. In Sub-Saharan Africa, where are we seeing significant consequences of the 2024 mega cycle of elections?

Martin Roberts:
Thanks, Kristen. Well, I think the most significant election, both in terms of results and the ongoing consequences, is from South Africa in May. The African National Congress not only lost its parliamentary majority for the first time since the end of the apartheid era in 1994, and its share of the vote dropped dramatically from 57.5% in 2019 to just over 40%. So this forced the ANC to form a coalition. The only realistic main partner was the Democratic Alliance, which remains closely identified with the country's white minority and is ideologically opposed to the ANC's social welfare traditions.

Now the fractious nature of this coalition's most recently been illustrated by the post-vote budget announcement from February, the nineteenth till today due to disagreements over proposed increases in VAT, which the ANC say are necessary to fund spending programs. The other significant elections I want to mention are Senegal and Ghana. In the first case, rather dramatically just three weeks before the scheduled election date in late February.

The outgoing president, Macky Sall, tried to postpone the poll by ten months. He was forced to backtrack largely because the previously compliant constitutional council overturned the decision. This is basically an attempt to buy time for his faltering coalition candidate, the prime minister, but it backfired in spectacular fashion when challenger Bassirou Diomaye Faye won in the first round. So Faye was only released from jail ten days before the election. He'd been held for nearly a year on defamation charges. And his victory was all the more welcome in the region which not only experienced a series of coups in the last few years but has little prospect of those countries holding elections in the near future. And Sonko followed up his victory by a resounding legislative election win in November when his PASTEF party took on three-quarters of the seats on offer.

Another positive note for West Africa was the election in Ghana, which saw yet another peaceful change of power. Although this time, the victory of former president, John Dramani Mahama, and his national democratic congress was much more clear-cut than the very close outcomes. Far less successful was the Mozambique election in October where, despite official results showing that Frelimo had extended their half-century domination, the independence era under new president, Daniel Chapo, faced unprecedentedly violent protests in support of runner-up Venacio Mondlane, leading to the deaths of at least 320 people. Now the situation is still not stabilized, and that's something I want to come back to discuss later, Kristen.

Kristen Hallam:
Alright. Thank you, Martin. What are some of the impacts or potential impacts for businesses in these countries that you were just talking about?

Martin Roberts:
Yeah. If I could just go back to South Africa, there's clearly a lot going on. I mean, I just mentioned the disputes over the budget. I want to focus on one policy in particular, which is very topical and has exposed the ideological division at the heart of the coalition. So in January, South Africa's new expropriation law received approval. But not only does it increase coalition disunity, it's led to US President Donald Trump announcing a few days later that he was suspending aid funding to South Africa. He accused South Africa of confiscating land and treating certain classes of people badly, clearly aimed at farmers. It probably doesn't help South Africa that the legislation is called the expropriation act.

The use of the term is deliberate in a bid to head off criticism from more radical parties opposed to the ANC-dotted coalition, but it doesn't actually allow for actual expropriation. And it probably also doesn't help South Africa's case vis-à-vis the US, as the second-largest party in its coalition government is firmly opposed to the legislation. More than the aid funding, the greater concern for South Africa is if the US investigation triggers action to exclude South Africa from access to the US market and to the African Growth Opportunity Act (AGOA). This is a US trade policy that provides eligible African countries with duty-free access to the US market for thousands of products. South Africa's probably the largest beneficiary, having exported around $7 billion worth of goods to the US under AGOA in 2024, predominantly from the automotive and agricultural sectors. So US action to exclude South Africa would result in significant job losses and reduced foreign investment commitments to South Africa in those areas.

Now in Senegal, the new government promised radical change, taking greater ownership of mineral resources, and fixing the constraints of a neocolonial legacy were important themes of the election, and they helped explain Bassirou Diomaye Faye’s convincing victory. But he spent the last year mostly coming to terms with the financial legacy of previous governments, which Faye states that concealed a true level of the budget deficit and public debts. Ratings agencies, including S&P Global, last month downgraded Senegal. The IMF has reiterated the need for major reforms. A phase repeatedly pledged to renegotiate oil, gas, and mining contracts to maximize income and increase benefits for citizens. But his government remains unlikely to enforce major changes to contracts, which is going to be very difficult, legally, to do anyway. It's instead probably going to implement new tax measures that will be detailed in forthcoming reforms to the tax code and very much focus on increasing local content. Any of the more radical suggestions during the election campaign, such as leaving the West African common currency zone, have finally dropped recognition for financial stability as confirmed.

Finally, very briefly, in Ghana, the finance minister yesterday announced a raft of fiscal measures and spending cuts to address the financial crisis. But one other key policy that will affect almost all businesses in the country concerns the power sector, which has been suffering persistent outages. Now, day after his inauguration, president Bahama asked the World Bank's delegation for technical assistance in drawing up plans to privatize the state utility. Our customers are still probably on the way for years' situation to improve, not least because the government owes $2.4 billion to independent power producers.

Kristen Hallam:
Right. Thank you, Martin. Let's shift the conversation now to elections taking place in 2025. Bibianna, I'm going to start with you this time since we've recently had elections in Germany. Could you give us your hot take on the outcome of those legislative elections?

Bibianna Norek:
Of course. So in Germany, the Christian Democratic Union or the CDU came first in the election ahead of the far-right AfD party, and its leader, Friedrich Merz, has already reached an agreement in principle with the Social Democrats of the SPD. So we are likely to see a swift government formation probably by April. And if the parties agree on major policy priorities and policy differences, reaching compromises in those areas, we're also likely to see a fairly stable government going ahead in Germany. It has wider implications also regionally, given the weight of the German economy, which is the largest one in Europe, and also big spending plans that have been announced by Emirates regarding infrastructure and defense amid the current geopolitical shifts and developments.

Kristen Hallam:
Right. Thank you for that. And, Bibianna, what other elections are coming up in Europe this year that could influence the operating environment for businesses?

Bibianna Norek:
So one election that I think is worth mentioning is the presidential election in Poland. The president in Poland has strong veto power, and currently, President Andrzej Duda is slowing down policy implementation for Prime Minister Donald Tusk's government, including regarding the reversal of its previous government's judicial reform, which is tied to EU funding disbursement in Poland. More generally, I would also say that the results of this election will be interesting to watch given the importance that Poland has as a key EU partner and member state on the eastern flank, particularly when it comes to security. Poland is the main hub for the delivery of military aid to Ukraine, and it also has NATO's highest defense spending currently at 4.7% of GDP planned for this year.

Kristen Hallam:
Martin, let's come back to you. What about Sub-Saharan Africa? What elections are you and the team keeping a close eye on there this year?

Martin Roberts:
It's a quieter year than 2024, but there are still some interesting elections taking place in Cote D'Ivoire, Cameroon, and Gabon in particular. In Cote D'Ivoire, Alassane Ouattara will be at term at the age of 83, presidential election in October. He seems like a spring chicken, however, compared to Paul Biya, who's on course to be the ruling party candidate in Cameroon's presidential election, also in October, at the age of 92. Biya's already, unsurprisingly, the world's oldest head of state, having been in charge since 1982. Although in recent years, he hasn't even spent much time in the country. The last election's personal campaign consisted of one- to ten-minute speeches in public. He's unlikely even to match that this time around.

Martin Roberts:
A full seven-year term would theoretically take him to a few months short of his one hundredth birthday. Gabon's general election takes place in April, so over the next few weeks, this will complete the country's transition away from the Bongo family, which has ruled for fifty-six years. Ali Bongo was removed in a coup in August 2023 just as fabricated results in his favor were being announced. The coup leader, General Brice Oligui Nguema, is a strong odds-on favorite to turn his interim presidency into a democratic one.

Kristen Hallam:
And why are these elections significant, Martin?

Martin Roberts:
It's more of a general point about the election in Cote D'Ivoire, which is to put the country back on a sound democratic footing. Possibly the darkest blot on Ouattara’s record is his decision to stand for a third term five years ago after persuading the courts that the new constitution permitted a reset of term limits. He originally said he wouldn't stand, but his intended successor, the prime minister, Amadou Gon Coulibaly, died before the poll could be held. Ouattara simply didn't trust anyone else in his party to take over. The poll was boycotted by the entire opposition, and several dozen people died in confrontations between rival groups and with the security forces. Now, a fourth term this time is perhaps all the more contentious, but a free and fair election is a requirement to cement the country's political stability, keep it on a high growth trajectory, and also regionally, given the leading role of both Qatar and in Frankfurt, West Africa. It's important to set a democratic example to give a foreboding wave of coups in the region since the last election.

Now in Cameroon, the long dominance of Biya and his ruling party, including the way they've kept opposition parties divided, means that barring a health crisis, he's all but certain to win the game. But that would just underline there's no succession plan in place because for over four decades, he has consistently cut down anyone who showed too much ambition to ensure there was no challenge to him personally. Now there are at least three credible successors to Biya, but they've had to plot in secrecy, and the bitter rivalry between them ensures that any handover process is unlikely to be smooth. We think this increases the prospects of the armed forces stepping in, particularly because Cameroon faces security challenges that would be exacerbated by prolonged political stalemates. There's an embedded insurgency in Cameroon's two English-speaking provinces, and Islamist militants continue to stage regular attacks in all regions.

And just briefly with Gabon, you know, it's a small country, less than 2 million people, but the election's significant because of the example it provides. It's a state that has experienced a coup that could return to democracy. Now, generally, the game was originally set to your time by when you removed Ali Bongo, but we'd like to think he will actually beat that by over four months because he's very keen to legitimize his rule. In a world where military-led countries like Mali, Burkina Faso, and Niger, the complete security situation doesn't allow elections to be held. The Gabon example will at least increase pressure on Guinea's interim ruler, Mamady Doumbouya, to hold elections this year. He staged a coup in September 2021, but still little toward organizing polls.

Kristen Hallam:
Very interesting. Very interesting. Lots to keep an eye on there. Let's move over to the Asia-Pacific region. Anton, what elections are you and the team keeping a close eye on there this year?

Anton Alifandi:
As you see on the list there, there'll be midterm elections in The Philippines on May 12. That election will elect all seats in the House of Representatives, half of the 24 member Senate seats, and thousands of local government and local municipality posts will also be up for grabs. In Australia, elections must be held by May 17, and it looks like that'll be in May after the Labour Party prime minister Anthony Albanese seemed to rule out a general election in April. So Mr. Albanese's Labour Party will be facing the opposition Liberal National Coalition led by Peter Dutton. Polls are relatively tight, and we think there is the prospect that the two main parties may have to rely on minority parties or independent members of parliament to form a government.

In Bangladesh, the head of the interim government and the head of the army, the two most important political figures in the country, say elections will be held in December, and there is no opposition from political parties regarding that timeline. So it's likely that elections will take place around about December, or maybe it'll slip by one or two months. In South Korea, we're waiting in the coming days and couple of weeks, perhaps, whether the constitutional court upholds the impeachment of President Yoon Suk-Yeol. If his impeachment is upheld, presidential elections will be held within sixty days. The two main camps are the conservative PPP of President Yoon Suk-Yeol, who won't be able to contest the election this time around, of course, and the progressive DPK party led by Lee Jae-Myung. And briefly in Myanmar, the head of the military a couple of days ago said that he plans to hold national elections in December this year or January next year. If it happens, it's a big if; there will be the first election since the military overthrew the elected government of Aung San Suu Kyi in 2021, Kristen.

Kristen Hallam:
Wow. Lots to watch there for sure. And, Anton, can you tell us what the significance of those elections is for businesses?

Anton Alifandi:
Yeah. I think, with Bangladesh, it's the prospect of an orderly transfer of power to an elected government, and that it would bring stability to the country following reforms in state institutions. The hope is that the elections will be legitimate. Another thing to mention about the election is that it will likely end the two-party competition that has marked Bangladeshi politics since inception. The interim government has tried to reform the institutions, as I mentioned earlier, in the hope that the state will be less partisan and more impartial in terms of its conduct of elections, for example. Likewise, in South Korea, I think the hope is that there'll be clarity and stability after six months of unrest and all the implications on business confidence that it has caused in the past six months since President Yoon declared martial law in December.

You may have read in the news that former Philippine president Rodrigo Duterte has been flown to The Hague in The Netherlands following his arrest yesterday on a warrant issued by the International Criminal Court for alleged crimes against humanity. We are likely to see efforts by his daughter, Vice President Sara Duterte, to support Senate candidates that are sympathetic to her in the midterm election. The composition of the senate also matters greatly as there's an upcoming impeachment trial involving Sara Duterte, and she is one of the front runners for president in the 2028 presidential election. So if she's convicted by the senate, she will be barred from public office. So there is a lot at stake there.

And in Australia, there is a clear policy divide between the current government and the opposition. For example, the Labour government favors an industrial policy, the so-called future made in Australia policy, while the opposition coalition favors lower taxes. In terms of energy policy, it favors building more nuclear power stations as opposed to other renewables such as solar and wind that the current government favors. Back to you, Kristen.

Kristen Hallam:
Never a dull moment. That could be our tagline for 2025 for sure. And let's round out our election discussion with a visit to Latin America. Carla, what elections are you and the team keeping a close eye on there this year?

Carla Selman:
Well, Chile is having presidential and legislative elections in November. We still don't know who the candidates are. There's supposed to be primaries in June to define the candidacies. But up until now, polls are favoring the candidates from the opposition right wing. So there are three probable contenders. Two of them have already run before in previous elections.

So we have Evelyn Matthei and Jose Antonio Kast, who have already run and lost in their respective run-offs. And there's also a newcomer, Johannes Kaiser, who used to be from the Republican Party, also libertarian. So Evelyn Matthei, the former mayor of Providencia Commune, which is a commercial district, is leading in the polls. But this, Kaiser, who, as I said, is a newcomer, is also rising. So it's not clear, but it is clearer that in the ruling coalition because the ruling coalition has not yet defined their candidates. Only a few days ago, the interior minister Carolina Toha resigned from her position to run, but she will have to go to primaries too. She still is polling very low, but we'll have to see because she has grown a little bit. So still a bit unclear with the final decisions likely in June.

In any case, if the right wing comes to power, if they win the election, there are likely to be major policy changes or structural policy changes. The main difference is likely to be in the emphasis on security, with the right wing more likely to prioritize security and increase, for example, deployment to the Northern border to prevent illegal migration and also a focus on the economy, specifically reducing fiscal spending. The other election that is important is Argentina, again, is legislative elections. This time, it's the midterm elections. So this election is very important to assess if President Milei will be able to pass policy in the second half of this term. So far, his party, La Libertad Avanza, has a very slim representation in congress. Up until now, he has used decree powers to pass policy.

But decree powers are going to expire; he has some special prerogatives to use decree powers for a certain part of this year, but not after the election. So he will need congress to pass policy in the second half of his term. Because he's popular, early polls are giving his party an advantage, approximately 30% of preference, followed by the main opposition Kirchnerists with 18%. So he still has a big gap to close, but he faces the challenge of trying to build alliances with the opposition, with what they call the friendly opposition. Some political parties have given him ad hoc support to pass certain policies, so they're working to try to build more stable alliances. Obviously, if that materializes, then that will increase their chances to increase representation.

Kristen Hallam:
Friendly opposition. I like that idea. Thank you, Carla. Carla, let's keep you on the hot seat as we pivot to the post-election landscape and potential hotspots of political instability and social unrest. Does this entail a risk of protests in those two countries you just told us about?

Carla Selman:
In Chile, I would say protest risks have remained overall stable, so we are unlikely to see another escalation of violent unrest like we saw in 2019 and 2020. We are still likely to see localized protests, specifically in main hotspots such as Santiago City Center. If the right wing wins and comes to power, and if they try to reverse some social reform that has been approved in the last government, specifically, the candidates have criticized an education reform approved by former President Bachelet that gives free education to higher education.

Also, there have been some criticisms of a pension reform that was approved in January by President Boric. If they do attempt to change it, this will likely trigger more protests by students and unions, which are very militant protest groups. But still, we think that they are going to remain localized, specifically at hotspots and not destabilizing for the government. And in Argentina, President Milei will continue with austerity, and maybe if he does get a majority in congress, he may want to try to pass labor reform.

If that is the case, that is likely to trigger more protests by unions and social organizations, but still not destabilizing if he remains popular. He will remain popular if the economy continues the trend that it has been showing. If inflation continues to decelerate, then that will maintain his popularity. Another indicator of political stability in Argentina is often linked with currency stability. What we have seen in the past is that when currency is unstable, the government also becomes unstable. For now, he has managed to control that, reducing the fluctuations of the currency gap between the official and unofficial exchange rate, which has become narrower. So that is a positive sign. If he continues on this path, then protests shouldn't be destabilizing.

But, of course, the situation remains fragile, and any small change to the economic situation can change the outlook.

Kristen Hallam:
Interesting. Interesting. And, Carla, what strategic sectors are likely to be impacted there?

Carla Selman:
Well, in both countries, I want to highlight lithium particularly because lithium is kind of a new sector. There are only two projects operating in Chile, but in Argentina, these countries are redefining their frameworks for the sector. For example, in Chile, lithium is a strategic mineral, which means that concessions are not allowed. The private sector has to develop projects in partnership with the state. But President Boric launched a new strategy that gives a predominant role to the state in strategic salt flats. The private sector will still be allowed to operate as they want in the other salt flats that are not being classified as strategic. This new strategy will start to be implemented next year by the new government.

So we think that if the right wing, the opposition comes to power, then there's a minor risk of contract reviews, but cancellations are less likely because lithium will continue to be a priority under any government, and any government will recognize the need for private sector involvement, particularly the right wing. In Argentina, the sector is advancing a little bit faster than in Chile. There are five projects that are coming online more quickly. Argentina does allow concessions, but there's no specific framework for lithium; it's just the normal mining framework. If Milei does get a majority in congress, he is likely to accelerate his plans for deregulating business in general, removing capital controls, reducing export controls, and all those distortions that have deterred foreign investment in Argentina, which could also prop up the sector.

And I know that we don't have a lot of time, but I do just want to briefly mention another sector and two elections that are also happening. It's the energy sector because there are also elections happening in Guyana in November and in Suriname in May, and both countries have found massive reserves of hydrocarbons.

Guyana is already producing; Suriname not yet. They are all having elections. In Guyana, President Ali remains popular. The opposition is divided and weak, so this improves the prospect for the ruling party to be reelected. If this happens, they would continue to promote private and foreign investment in oil and gas, maybe with some changes in the regulatory framework because it's also a very new set for them. If the opposition wins, which is divided and weak, as I mentioned, they would likely seek to review and renegotiate some contracts to try to get more revenue for the state and tighter environmental regulations.

In Suriname, President Chan Santokhi has lost popularity because of austerity measures that he has been implementing, and while the opposition National Democratic Party seems to be increasing its support after a change in leadership, in any case, if either one wins the elections, support for the oil sector will continue. If the current government is reelected, then they will continue their policies of providing incentives for the sector. If the opposition wins, they are likely to moderately increase demands, for example, local content, and those types of things, leading to a slight increase in state intervention, but unlikely to result in contract cancellations.

Kristen Hallam:
Alright. Thank you, Carla. Let's move over to Europe. Bibianna, what hot spots or potential hot spots are we watching there, and what could be the potential impacts for businesses?

Bibianna Norek:
So we have, I've already mentioned elections in Poland and the protests that are happening in Romania.

So I would say that—What we are seeing a lot in Europe at the moment is so-called black swan events that are usually accidents or natural disasters that trigger waves of protests against what is deemed to be slow or inadequate state response. We have seen this, for example, with the train crash anniversary in Greece, with the floods in Valencia, in Spain, and also in Serbia, with the collapse of the train station canopy. What we usually find when this happens is that there are persistent levels of domestic discontent in the countries that kind of boil under the surface due to dissatisfaction with government performance, various economic grievances, standards of living, or perceptions of corruption that then are channeled through the opposition to the government response to these events and have the power to drive large and disruptive protests. In these cases, the sectors that are mostly affected would be supply chain disruptions, as transport and cargo are very highly affected.

Kristen Hallam:
Thank you, Bibianna. Martin, what hot spots or potential hot spots are we watching in Sub-Saharan Africa, and what could be the potential impact for businesses there?

Martin Roberts:
I think we're running a little short of time, but I just want to focus on what's clearly the most important, which I think is Kenya. The reintroduction of many provisions of the initially withdrawn finance bill 2024, coupled with the probable imposition of further new taxes this year, is a likely catalyst for further mass nationwide protests, following the pattern of the Generation Z demonstrations that took place between June and August. Although they were triggered by the proposed additional tax burden, this unprecedented level of protest clearly embodied frustration over jobs, living costs, and the failed promises of the Kenya Kwanza coalition of President William Ruto.

Now, additional factors fueling potential further unrest include the opportunistic seizing of places in the so-called unity government by the Orange Democratic Movement rather than leading the opposition to the government in parliament. Now ODM leader, Raila Odinga, signed a new cooperation agreement on Friday, but it seems likely to split his party, providing only temporary respite. His finance minister, John Mbadi, has to announce what new taxes he's planning by April and present the 2025-2026 budget by June. So both events are likely catalysts for further mass protests, which were previously so disruptive to businesses in Nairobi and most other major urban settlements. The proposed tax increases, mostly VAT and excise duties, would also directly affect businesses as well as reducing the purchasing power of citizens.

Kristen Hallam:
Thank you, Martin. And Anton, bring us home. What hot spots or potential hot spots are we watching in Asia Pacific, and what could the potential impact be for businesses?

Anton Alifandi:
Yeah. Just very quickly, I mentioned earlier about the civil unrest risks facing Pakistan. We think that is something that is likely to continue this year. But beyond that, terrorism risks in Khyber Pakhtunkhwa and Balochistan, the latter being carried out by the separatist movement, the Balochistan Liberation Army. You've probably read in the news about the attack on a train where these militants have taken hundreds of people hostage. The BLA, the separatists in Balochistan, they attack security forces, but they also attack commercial projects, particularly those that are China-funded, because in Balochistan, there is the China-Pakistan Economic Corridor. So we think there'll be an intensifying risk of both civil unrest and terrorism in Pakistan.

In South Korea, protests have so far been confined to the political space. They have been becoming more intense, and the number of protesters in December were larger protests by those who opposed President Yoon. But lately, they've equalized somewhat. So we're watching whether these protests will escalate and affect, for example, the operations of businesses, given South Korea's importance in the global supply chain of so many manufactured goods.

In Bangladesh, we're watching whether when campaigning starts ahead of the election planned for later this year, the situation will be calm or whether we are likely to see an uptick in disruptive and destructive protests affecting, for example, port operations that we saw in February 2024, Kristen.

Kristen Hallam:
Thanks, Anton. Thank you for that. And I think that's all the time that we have for today. We've given you a lot to think about, and we are committed to continuing the conversation. Thank you to Anton, Bibianna, Carla, and Martin for sharing their insights with us. And thanks to you for engaging with us today. Thank you for listening to the Decisive podcast from S&P Global.

Please subscribe and join us for next week's episode. Until then, stay curious and stay informed.