14th August 2019

Written by Javier Maquieira (Associate)

Catch-up with Argentina-Brazil relations in this morning's briefing by Javier Maquieira. Spoiler: it's not looking as "indestructible" as previously thought.

Good morning,

Argentina’s former foreign minister, Héctor Timerman, once referred to his country’s alliance with Brazil as “indestructible.” However, the likely return to power of left-wing populism in Argentina puts that sentiment in serious doubt. On Sunday, the centre-right president Mauricio Macri faced an unexpectedly large defeat in the primary elections against the Peronist candidate, Alberto Fernández. The vote saw Fernández – who shares the ticket with former president Cristina Fernández de Kirchner – beat Macri by 16 points; an outcome that took markets by surprise and provoked a sharp depreciation of the peso, which became the worst performing currency in the world. Before Macri was elected president in 2015, Cristina Fernández had gained notoriety for her left-leaning policies based on controlling the movement of capital in and out of the country and government spending. Meanwhile Macri’s austere and pro-business “gradualism” sought to re-gain international trust in Argentina’s economy, but eventually failed to deliver on its promises and deepened a recession that has left three million people in poverty over the past year. With president Macri now predicted to have just a 10% chance of winningagainst the Fernández-Kirchner ticket in the October elections, Brazil’s far-right president Bolsonaro has warned that friendly relations with Argentina could turn sour, calling Fernández de Kirchner a “leftist scoundrel” and saying that he doesn’t “want our Argentine brothers fleeing here.” Bolsonaro, could pose a threat not only to bilateral relations with Argentina, but to the whole world, too. Unlike President Trump, he doesn’t have enough bargaining power to destabilise the global trading system, but his government can certainly accelerate the pace of global warming. His anti-environmental agenda has had a damaging impact on the Amazon, the largest rainforest on Earth and our most valuable carbon store. To get a sense of the seriousness of the issue, deforestation of the Brazilian Amazon increased 278% year-on-yearin July, according to Brazil’s space agency (whose director was immediately sacked after the data was published). As with future relations with Argentina, the Brazilian president has been quite blunt in his response to critics over deforestation, claiming that in order to stop environmental degradation “it’s enough to poop every other day,” and that “the Amazon is ours, not yours.” It would seem “indestructibility” is to Brazil-Argentina relations what “unsinkability” was to the Titanic.  


Flights were cancelled for a second consecutive day at Hong Kong International Airport – one of the world’s busiest transport hubs – amid continuing anti-government protests on Tuesday. Passengers struggled to get into the airport as protesters were sitting inside and blocking departures, with the riot police deploying pepper spray to push demonstrators back. Hong Kong leader, Carrie Lam, warned that the violence displayed during the protests was pushing it “down a path of no return.” Former chancellor Philip Hammond warned prime minister Boris Johnson that he would betray the referendum result if the UK left the EU without a deal. Leading a group of 20 Conservatives opposing a no-deal Brexit, Hammond blamed Johnson’s senior adviser, Dominic Cummings, for demanding a new agreement that Brussels is unlikely to accept. The group, which includes seven former cabinet ministers, wrote to Johnson accusing him of making things harder for the EU in hopes of getting a different deal. The body of 15-year-old Nora Quoirin was found yesterday about a mile away from where she was spending the holidays with her family in Malaysia. She had been reported missing 10 days ago at a jungle resort around an hour south of the capital Kuala Lumpur. The autopsy is due to take place today, according to the family’s lawyer. Nora, who was born with brain defect holopresencephaly, could not make or receive calls independently and was thus considered “vulnerable” by her parents.

Business & Economy

The Trump administration announced that it would delay the implementation of 10% duties on Chinese consumer goods and clothing until the end of the year. With the postponement, the US government seeks to allow retailers to import targeted products – including laptops, cell phones, and toys – before the holiday season without extra tariffs. The decision came after the US trade representative and US Treasury secretary agreed with China’s vice premier, Liu He, to engage in new talks in two weeks, causing US equities to edge higher after struggling with big losses in recent sessions. (£) The Office for National Statistics (ONS) revealed that unemployment in the UK grew by 31,000 to 1.33 million during the April-June period – the biggest rise since 2017. Commenting on the ONS report, the work and pensions secretary, Amber Rudd, warned that there were “no guarantees” for jobs under a no-deal Brexit and emphasised the government’s focus on getting a withdrawal agreement with the EU. In contrast, wage growth experienced its strongest upturn since 2008, partly due to a change in the timing of pay rises for health workers in the public sector. Rail ticket prices are expected to surge again next year in the UK based on the Retail Prices Index (RPI) measure for July. Ahead of today’s announcement, analysts projected that the figure would be around 2.8%, translating into a rise of more than £100 in the annual cost of train commuters. Train fares had already gone up at the start of this year by 3.1% in England and Wales and 2.8% in Scotland. The Campaign for Better Transport (CBT) called the price rises “exorbitant,” and insisted that the Consumer Prices Index (CPI) should be used instead of RPI to calculate the fares.


What happened yesterday?

London closed in the green on Tuesday after the Trump administration said it would delay tariffs on Chinese imports, and market participants digested the latest data on wage growth in the UK. The FTSE 100 reversed early losses and rose by 0.33% to 7,250.90, while the pound was weaker against the dollar by 0.07% at $1.20 but 0.19% firmer on the euro at €1.08. A similar reverse in shares was experienced in Europe, with the Stoxx Europe 600 up 0.5%. News of the reprieve was also well received in Wall Street, where the S&P 500 and the tech-heavy Nasdaq Composite surged 1.5% and 2%, respectively. Among the risers, Apple (up 4.4%) notably benefitted from the tariff delay on technological items, as well as suppliers to the iPhone and other semiconductor groups. In Asia, the disruption of Hong Kong’s airport for a second consecutive day amid anti-government protests left the Hang Seng down 2.1%, losing almost a tenth of its value this month.

Whats happening today?


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Int. Economic Announcements

(07:00) GDP (Preliminary) (GER) (10:00) GDP (Preliminary) (EU) (10:00) Industrial Production (EU) (12:00) MBA Mortgage Applications (US) (13:30) Import and Export Price Indices (US) (15:30) Crude Oil Inventories (US)

UK Economic Announcements

(09:30) Consumer Price Index (09:30) Retail Sales (09:30) Producer Price Index

Columns of Note

The Guardian’s Gaby Hinsliff opines that the US’ “enthusiastic” support for a no-deal Brexit responds to Trump’s protectionist agenda to take profit from a weakened UK desperate to accept his demands in return for a trade deal. She further argues that the country is bound to go from depending on the so-called “diktats” of the EU and other international organisations to the diktats of the US, with both economic principles and foreign policy being at stake this time. Hinsliff concludes that the British government is so “trustingly inclined” to go down that road, that it risks turning the UK into a “panicky minnow” rather than a chooser during trade negotiations. Taeku Lee and EunSook Lee write in The New York Times that discredit of women of colour by US Conservatives unmasks their recognition of these women’s political power as significant forces in progressive politics, both in office and as mobilisers, while liberal candidates appear to take them for granted. The authors echo reports showing that women of colour have grown by 18% in the general population since 2008, a trend that has started to materialise at the ballot box. With 93% of black women, 68% of Native American women, 76% of Latinas, and 73% of Asian-American and Pacific Islander women supporting a Democratic House candidate, Trump’s strategy of appealing to disaffected white men may well not work again for the incumbent president. Lee and Lee sum up arguing for the importance of engaging with women of colour through further research and greater innovation in voter contact tools so as to safeguard their access to democracy. 

Did you know?

Of the 108 billion people that have ever lived, 52 billion are estimated to have died from malaria, making the mosquito the leading cause of human death.

Parliamentary highlights

House of Commons

In recess until 3rd September

House of Lords

In recess until 3rd September

House of Lords

In recess until 2nd September.