Unfortunately politics are led by people. And people have their faults. investment decisions are more challenging by the situation. We seem to be in an era of ‘Cult of Personality’ leaders for many countries. President Trump is one of these leaders. He is still popular. If he had taken care of pandemic and listened to experts he likely would have won reelection.
My comments about the leaders reflect no bias against people from anywhere. Had and have wonderful coworkers and friends from all continents including almost all the ‘Axis of Evil’ countries. My wife family is of Chinese descent in Indonesia, and my family immigrated from all over Europe. Think I could start WW1 by myself. Working in technical fields always impressed with how intelligent and talents everyone is. Most people are wonderful.
Leaders do affect what happens and may happen in the future, so we have to evaluate risks. This is a short discussion of what could happen. The subject is complicated and points are simplified for length.
Myanmar
After 10 years of partial democracy, the military known as Tatmadaw declared a national emergency after ~83% voted for the party they didn’t like. Television, phone service, newspapers, internet and international flights have been shut down.
The protests were large and immediate. Violence began with military shooting protestors. Now there is a general strike. The strong arm tactics are not working and military may not realize the mess they created. Not sure how long this will last, but investments are pulling out until resolved.
Russia
President Putin has been extending his ability to be elected for life. Opponents are jailed and Alexander Navalny was poisoned. Crimea was seized 6 years ago and Russia has recently stockpiled military troops and equipment along the eastern Ukraine border. Ukraine east of Dnieper river was part of the Soviet Union for many years. Most residents speak Russian. President Putin believes taking over this territory will solidify his popularity despite international consequences. Russia has recently been partnering with China for aerospace, military and space.
China
China’s economic growth is unparalleled over the last 30 years. They have grown to one to the world’s largest economy by building cities and support systems for products, technologies and whatever customers needs. They became the factory to the world. The Belt and Roads initiative are aimed at growing future trade.
China negotiated trade advantages with the WTO. Business partners had to give up intellectual property to trade in China. China is working on making their currency a major trading standard. The Great Firewall of China keeps out the internet. It does not prevent the military from hacking secrets. Russia has been holding back its technologies because the agreements are not in place.
China’s goal is to be a regional superpower equivalent to Europe and the US. The takeover of Hong Kong was easy and fast. They are fighting neighbors by claiming the Chinese Sea and building island air and military bases, ignoring the UN 2016 ruling. They have militia marine vessels to take over areas by number alone. They have been challenging Indonesia, Japan, Vietnam, Philippines, and South Korea.
President Xi has been consolidating power and eliminating opponents. In his next 5 year plan he would like to ‘reunify’ Taiwan into China. Currently there is a campaign of intimidation, pressure and interference in politics against Taiwan. Despite the threat of invasion, this is the least likely approach China would take. Step by step political accommodation and a feeling of inevitability is the desired path.
Taiwan
Taiwan is the world’s 21st largest economy, has advanced technologies and is main designer and supplier of the world’s computer chips. China is their largest trading partner. Taiwan businesses have made significant investments in Chinese factories.
Independence needs to be supported by other trading partners.
European Union
EU is larger than the US economy. Despite the name is less unified than thought. Every country has personal interests first before EU priorities. Brexit is evidence of the disunity. The pandemic has hurt economies and arguments about vaccine allotments are an issue. Europe’s growth is slow or negative where many thought would be the first to recover.
India
President Modi has claimed a lot of credit for India’s successes of which there are many. However the pandemic is damaging his power. They had contained it well and are producing vaccines in country, but distribution is the issue.
India has always done things their own way. The desire to modernize the military with China next door is making changes. India has tremendous capabilities in computers, engineering, software and space. Modernization continues unevenly.
Turkey
President Erdogan would like to be a regional power and is involved throughout the Mediterranean including Greece, Libya, and other conflicts. Being part of NATO, there are concerns about weapon systems from Russia. They are going their own way.
Iran
The development of nuclear weapons, rockets and drones continues along with supporting militias in other countries. Their small navy ships have been around several bombings and challenging warships in the strait of Hormuz. Iran is a regional power who would like to stay in control.
However the leadership is aging and population is suffering under economic blockades. There are rumors of a nuclear agreement circulating to open up their economy.
North Korea
Kim Jung Un has stayed in power with constant threat of war, people who admire and love him, and being unpredictable enough no one is sure if he would use nuclear weapons. It is a porcupine defense, too much trouble to take over his country.
Asia
Asian economies are growing 7.3%. Mask wearing, tracking infections and isolation of the sick contained the pandemic mostly. These countries are growing well.
Japan
World’s 3rd largest economy is growing and low unemployment. Effective pandemic response has been helpful.
Indonesia
The world’s 4th largest by population and 10th largest economy. Diverse population groups and 1,700 islands. Indonesia has been growing since becoming a democracy. There are still issues including the pandemic, but an overlooked opportunity for most of the world’s businesses.
Mexico
Economy is growing healthy 3.8% in 2021. Recent updates to NAFTA and increasing education of population is helping growth. The issue is drugs gangs and violence. If under control, growth would be stronger. Neighbor to the north is issue with demand for illegal drugs.
South America
Individual countries are making the news for pandemic denial (Brazil), or socialistic government corruption and failure (Venezuela). Did you know at one time Argentina was the world’s 6th largest economy?
Many other countries including Argentina have healthily growth in their economies. This is an area more investment should be made.
Africa
Political wars, drought and locust have been in the news. But this is misleading as education and economies are growing.
China has been investing in African countries and hoping to grow another breadbasket to feed their population. Major cities are as modern as the rest of the world. Another area investments need to be made. European companies are already interested.
Summary
The combination of political risk, egocentric leaders, an ongoing pandemic, plus rising shipping costs have made moving supply chains, reshoring or near shoring more popular recently. Look for resiliency as well as costs when investing in new production lines. Evaluate where your current suppliers could have issues during the next few years. China is shaking up the world again. Expect other countries will benefit.
