Global Public Affairs Newswire – 9 August 2024
Welcome to the latest instalment of FTI Consulting’s fortnightly Global Public Affairs Newswire.
This week, we bring you an election update from the US, where Vice President Kamala Harris has chosen Minnesota Governor Tim Walz as her running mate, as national polls continue to show a tight race between Harris and former President Donald Trump.
Beyond this, we bring you our usual comprehensive market update, with analysis of the latest big public affairs developments across the world’s major markets. This week features updates covering developments in the USA, UK, EU, China, France, Brazil, Spain, and Colombia.
Our global team are closely tracking the key votes and contests in this worldwide ‘Year of the Election’. In each edition of the Newswire, we look to dive into the upcoming implications, considerations, and opportunities for business.
Vice President Kamala Harris chooses Gov. Tim Walz as her running mate: Vice President Kamala Harris announced Minnesota Governor Tim Walz as her running mate on Tuesday. Vice President Harris called Walz a “battle-tested leader who has an incredible track record of getting things done.” Walz is a former high-school teacher, military veteran, and a former member of the U.S. House of Representatives. Democrats are hoping Governor Walz will strengthen the campaign in crucial Midwest states by bolstering support with rural and suburban voters.
Walz commented that it is the “honor of a lifetime to join [Harris] in this campaign,” and said that “Vice President Harris is showing us the politics of what’s possible.” Walz was introduced by Harris as her official choice at a Pennsylvania rally on Tuesday evening, followed by joint rallies in Michigan and Wisconsin. In response to the announcement, the Trump campaign issued a statement which branded Walz as “dangerously liberal” – reflecting general sentiment and interpretation among Republican voters that Harris’ choice for her ticket was a nod to the left wing of the Democratic Party as opposed to other potential candidates who were seen as more moderate, such as Pennsylvania Governor Josh Shapiro. Republicans cite Governor Walz’s response to the violent demonstrations in Minnesota after the death of George Floyd in 2020; his support for issuing government identification for undocumented immigrants; and his record on gender-affirming care.
This comes as Harris received the majority of the Democratic Party’s delegate votes in a virtual roll call on Monday, officially certifying her as the party’s presidential nominee two weeks before the Democrats meet in Chicago for their convention.
National polls continue to indicate a close race: National polls continue to indicate an extremely close projected race between Trump and Harris. According to Real Clear Polling’s average of national polls, the Vice President is leading the former President in the national popular vote by a razor thin margin of 0.2% nationally. One recent NPR/PBS News/Marist poll has indicated Harris is leading Trump by 51%-48% nationally, while a new Marquette Law School poll indicates Harris leads among likely voters by 50%-42%.
Trump blames Harris for market decline: Trump sought to paint Harris as responsible for the global stock market decline this week, in attacking the economic policy of the Biden-Harris administration. Writing on social media platform Truth Social, the former President branded current economic vulnerability and a global market selloff as the “Kamala Crash.” He stated that “stock markets are crashing, jobs numbers are terrible, we are heading to World War III, and we have two of the most incompetent ‘leaders’ in history.”
We will continue sharing insights and implications from key U.S. elections developments through this newswire each fortnight. In addition, updates will be issued during intervening weeks. Join our dedicated U.S. elections mailing list to receive all U.S.-related insights. Subscribe here.
Market updates
This week marks the first in a long stretch of quiet weeks on Capitol Hill, as both chambers of Congress are adjourned for August recess until September 9th. The Senate had a particularly busy final week before lawmakers departed town. In a rare show of bipartisanship, the upper chamber was able to pass two bills designed to safeguard children on social media platforms and enhance privacy protections for minors: the Kids Online Safety Act (KOSA) and the Children’s Online Privacy Protection Act (COPPA 2.0). Both bills now head to the House for further consideration in September.
In step with the Senate’s burst of activity last week, the chamber also took a procedural vote on a $79 billion bipartisan House-passed tax package that would expand the child tax credit and revive certain business tax breaks from the Trump-era Tax Cuts and Jobs Act of 2017. Despite widespread hesitation from Republicans and lacking the votes to advance the measure, Majority Leader Chuck Schumer (D-NY) pushed forward with the vote, which failed to reach the 60 vote threshold and did not advance. However, the tax vote did provide Democrats with a messaging opportunity around the child tax credit going into the November elections.
The tax package is not the only unresolved issue facing lawmakers when they return from recess, as they will have just three legislative weeks in September to negotiate a path forward on government funding to avoid a government shutdown at the fiscal year’s end on 30 September. This will almost certainly be done through a Continuing Resolution, though the duration of which is to be determined.
Last week, the Chancellor of the Exchequer, Rachel Reeves, delivered her first major statement to Parliament following her party’s victory in the 2024 General Election. Reeves accused the previous Conservative government of “covering up the true state of the public finances”. Calling the speech a “Spending Audit”, the Chancellor detailed a number of proposed changes and reforms to tackle the Labour Government’s fiscal inheritance and claimed that since taking office her department had uncovered a £22 billion black hole in government overspend.
Reeves also told the House of Commons that the Government would accept the recommendations laid out by independent pay review bodies, which would include a pay rise offer being made to junior doctors. She also announced the scrapping of several policies introduced by the previous government, including the Investment Opportunity Fund and ‘Restoring our Railways Programme’. The Chancellor then paved the way for tax rises, telling MPs that the Government would need to make “tough decisions” ahead of her first Budget on 30 October.
In response to Reeves’ statement, her predecessor and Shadow Chancellor of the Exchequer Jeremy Hunt denied leaving a £22 billion black hole in public finances, saying that the Labour Government “will fool no-one” with this claim, telling Parliament that Reeves “was always planning” to put up taxes. Labour ruled out raising VAT, income tax or National Insurance, during the General Election, but has left the door open for increases for capital gains tax or inheritance tax, among others.
On 6 August, the European Union authorised the initial payment of approximately €4.2 billion to Ukraine as part of a larger €50 billion package intended to aid the country’s reconstruction. This decision follows Ukraine’s fulfilment of nine specific reform conditions related to public finance management, state-owned enterprise governance, business environment, energy, and de-mining, as per a statement from the Council of the EU. The EU stated that Ukraine has shown progress in combating corruption and money laundering, including the appointment of a new head of its National Agency on Corruption Prevention. The urgency of the disbursement is underscored by Ukraine’s challenging fiscal situation.
Under the agreement, which frames Ukraine as a prospective EU member, Ukraine will receive €50 billion in loans and grants from now until 2027 to support its recovery from the economic devastation caused by Russia’s invasion in February 2022. In exchange, Ukraine is committed to ongoing reforms that the EU projects could boost its GDP by 6.2% by 2027 and reduce its war-impacted debt by 10% by 2033. The EU hopes that this financial support, and the associated reforms, will be pivotal in stabilizing and revitalizing Ukraine’s economy amidst the ongoing conflict.
On 30 July, China’s President Xi Jinping chaired the July Politburo meeting to analyze the current economic situation and plan for the remainder of the year. Following the Third Plenary Session of the 20th CPC Central Committee, in which the Party leadership set up the reform agenda for the next five years, the July Politburo meeting laid out how China will embark on the challenging reform journey and, in the near term, achieve the economic growth target set earlier this year.
At the overarching level, the July Politburo meeting acknowledged the mounting tasks for the second half of 2024, with an increasingly complicated geopolitical environment, the “pain of economic transition” including weak domestic demand and the uneven performance between manufacturing and services, and the lingering risks most pronouncedly in the property sector. Despite these challenges, the meeting reiterated China’s commitment to attaining the “around 5%” economic growth target for 2024.
On specific agendas, China vowed to further strengthen counter-cyclical policies via fiscal and monetary levers. Boosting domestic consumption – including tourism, entertainment, elderly care, childcare, etc. – will be the priority for the second half of 2024. Lower-income families will likely receive additional fiscal support. With China’s push for “high-quality development”, the meeting unprecedentedly highlighted the need to address “outdated, less-competitive” industrial capacity to avoid “cut-throat competition”, which is a major cause of the deflationary pressure domestically at the production end and the controversy of overcapacity from global trading partners.
On China’s property sector, the meeting did not reveal many details to the destocking initiatives introduced earlier this year, probably due to the complexity of reforms in the area. However, China’s State Council swiftly announced a renewed ambition for urbanization and expanded healthcare coverage to include new migrants in cities. These two reforms are widely considered prerequisites to the much-expected public housing program, which is a crucial part of the property destocking initiative.
President Macron’s desire for a political truce during the Olympic Games seems to have mostly materialised, with politics having taken a step back as the country focuses on the Olympic Games, particularly on the good performance of the French Olympic Team. The Olympic atmosphere in the country has impressed, with the Wall Street Journal writing that the biggest surprise of the Paris Olympics is that ‘even the French have nothing to complain about’. Whether the presidential camp will benefit from an Olympic dividend in the opinion polls remains to be seen.
Backstage, political negotiations for government formation continue, with a centre-right coalition looking increasingly likely, despite the centre-right party La Droite Républicaine (LDR) stating they would not enter a formal alliance with the former presidential majority. President Macron went on 30 July to the presidential retreat in Southern France to consider potential candidates for Prime Minister. The name most frequently mentioned in the media is Xavier Bertrand, the centre-right President of the Hauts-de-France region and former national presidential candidate. Meanwhile, in Parliament, LDR presented its “legislative pact,” a set of 13 measures it aims to pass in the National Assembly. The presidential party Ensemble pour la République made a similar move, presenting its “Action Pact,” described as reflecting a ‘shift to the right’ within the presidential camp, indicating attempts by the presidential parties to appeal to the centre-right. Whether this will be enough to convince LDR to risk associating itself with Macron is still unclear, as the party has set its eyes on the 2027 presidential elections.
Since its failed attempt on 23 July to pressure Macron into nominating Lucie Castets as Prime minister, the left-wing coalition, the New Popular Front (NFP), seems to have lost its momentum. Lucie Castets has struggled to garner significant public interest and support for her candidacy. Recent opinion polls indicate that left-wing politicians are experiencing a decline in popularity due to their inability to leverage the NFP’s success in the legislative elections. Moreover, disagreements over Hamas and the War in Gaza are causing significant tensions within the NFP. Given the Olympics and the long negotiations ahead, it seems unlikely France will have a new government before the end of August.
Around 156 million Brazilians will go to the polls this October to elect mayors, deputy mayors and councilors in Brazil’s 5,569 municipalities. In a year marked by elections around the world, the Brazilian municipal elections add a greater dose of uncertainty to the national and regional context, as the election is already marked by great polarization between candidates supported by President Lula and the left-wing parties, on one side, and former president Jair Bolsonaro and the Liberal Party, on the other. No previous municipal election has had such federal influence. This scenario, apart from posing challenges for the prediction of the elections’ outcome and the resulting distribution of power, could generate noise for various sectors of the economy and will set the presidential run for 2026.
Firstly, unlike other elections in the past, the 2024 municipal elections are likely to lead to increased tensions in Brasilia, impacting the progress of relevant discussions in the National Congress – many Congressmen and Senators have already made the use of voluntary exits in order to act on their electoral corrals. This week, the president of the Senate, Rodrigo Pacheco, said that discussions on the regulation of tax reform should only be finalized after the October elections. The issue has been one of the government’s legislative priorities this year and is closely followed by several industries, as it should lead to a revolution in the Brazilian tax system over the next few years.
Furthermore, the polarization that marked the 2022 presidential elections should continue to influence the municipal disputes this year. In São Paulo, the country’s largest city and the main stage for the electoral dispute, with more than 9 million voters, the three main mayoral candidates are technically tied, with 20% of the votes. According to a survey carried out by Datafolha, 56% of voters in the city admit that they might change their vote for mayor if the candidate is supported by a politician they reject, with 65% of those interviewed saying they would not vote for a candidate supported by former president Bolsonaro. Thus, October’s municipal elections may not only heighten uncertainties and lead to major power shifts at the local level, but will also strongly influence the 2026 national elections
In line with the Spanish political tradition, Prime Minister Pedro Sánchez invited media representatives to an extensive press conference ahead of the government’s summer break to reflect on the actions taken during the first eight months of his third term and the challenges lying ahead. As it was to be expected, Sánchez used this opportunity to particularly highlight the achievements in the social context and to heavily criticise the opposition, accusing it of resorting to personal attacks instead of fruitful political debates.
Macroeconomic indicators were another priority of the Prime Minister during his speech, as the country performed considerably well compared to many of its European peers. Thereby, Spain has proven to be a particularly interesting targets for investors, having attracted more than € 25 billion in FDI over the last year. Jointly with growing exports and the establishment of around 100,000 new businesses, this has resulted in the creation of almost half a million jobs and a GDP growing by 2.9%.
Critics, however, are not to be overheard. Recent developments in the formation of a government in Catalonia, in which the central government is willing to federalise the financing system of the Autonomous Communities, has the opposition taking legal action and also raised critical voices within the Socialist Party. The issue will surely be the hot topic of the political summer in Spain and adds yet another controversy to the already very polemic course of the left-wing coalition government.
After the Venezuelan elections took place on July 28, the Presidents of Colombia, Mexico, and Brazil issued an official joint statement on July 31, expressing their commitment to achieving a political agreement in Venezuela, while respecting its sovereignty.
The statement stressed the need for an independent recount and the release of election records. It sought to create a diplomatic approach that positions them as neutral intermediaries in Venezuela’s democratic transition, avoiding alignment with either the current regime or U.S. international pressure—essentially offering a third diplomatic option.
Colombia, which hosts over 40% of the total Venezuelan migrant population in the world, aims to leverage President Petro’s close ties with the Maduro regime to establish itself as the main international interlocutor with Venezuela. However, this effort faces criticism from the Colombian opposition, which accuses government officials of enabling a non-democratic regime and humanitarian tragedy.
For now the Colombian Congress will hold a special session relocating to the Colombia-Venezuelan border on August 6. The session will include Foreign Minister Luis Gilberto Murillo, Defense Minister Iván Velásquez, and the seven governors of Colombia’s border departments with Venezuela. The main objective is to prevent Venezuela from aggravating its humanitarian crisis’ impact in Colombia; while also evaluating its role as grantor of Colombia’s Total Peace negotiations and natural gas imports negotiations.
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