Algeria Inches Forward With Reform

Managing the domestic economy will be Algiers' primary focus in the fourth quarter as the country continues along a careful but deliberate path toward implementing reforms and preparing for an eventual transition from the leadership of ailing President Abdel Aziz Bouteflika, who is 78. At the heart of proposed changes to offset the fall in global oil prices is a new taxation scheme currently being debated in parliament. It includes modest hikes in power, Internet and diesel taxes and a proposed 9 percent cut in state spending. While all proposed measures may not be adopted into the 2016 finance law, Algeria is likely to push ahead with selective tax increases and spending cuts to maintain the bulk of its extensive social subsidy spending on housing, food items and education. The drop in oil prices may also delay planned offshore exploratory drilling and shale test wells anticipated late in the quarter or in early 2016.

Having secured the backing of mainstream political parties and restructuring leadership within military and intelligence circles earlier in the year, Algiers will continue its work to organize Islamist party support for proposed reforms and the transition process. Additional adjustments to the Cabinet will be made as necessary while the question of who will lead the country after Bouteflika will not be settled before 2016.

Libya's Troubled Transition

The UN-mediated negotiation process will remain the focus of Libya's political transition; rival camps in Tripoli and Tobruk as well as various militia and tribal circles all support the process just enough to keep it moving. Deadlines will be set and missed, but the dialogue will continue to serve as a venue for Western governments to vet local power brokers ahead of an eventual unity government.

Against the backdrop of an ongoing military campaign against Islamic State affiliates based in the central coastal city of Sirte, a brewing conflict between rogue Gen. Khalifa Hifter and his political rivals will only add to Libya's security troubles. Hifter has increasingly found himself at odds with the UN dialogue process, which seeks to create a civilian-led transitional authority with Islamist representation — groups Hifter, with Egyptian and Emirati support, has vowed to destroy. Any potential foreign military action in Libya will be limited this quarter; more robust foreign military involvement is unlikely until after a national unity government is established. In this interim period, Libya's oil production volumes will remain sporadic and exports far below capacity.

LATIN AMERICA

Venezuela's Crises Continue

Venezuela is scheduled to hold legislative elections Dec. 6. This election is an important date for the ruling United Socialist Party: High inflation andpersistent food shortages will surely impact some voters' attitudes toward the ruling party. The elections come at a time when the ruling party has no guarantee of maintaining control of the legislature. An outright cancelation of the election is unlikely, but the government could rely on other measures, such as restrictions on political rallies and organization in opposition-leaning border states, to limit opposition votes and thus mitigate the ruling party's electoral losses. But the opposition is unorganized, and voters are fairly apathetic, so a major outbreak of social unrest directed by the opposition is unlikely.

Venezuela will keep several of its border crossings with Colombia closed during the fourth quarter. The Venezuelan and Colombian governments will discuss what they can do to reopen them, but the border closure benefits Caracas by disrupting the flow of smuggled food and fuel to Colombia and by providing propaganda value ahead of the election. The Venezuelan government therefore has reason to keep the border closed for a while longer. States of emergency, which give greater leeway to security forces as they crack down on smuggling operations, will continue in the border states of Tachira, Zulia and Apure.

Venezuela's public finances will be highly stressed during the fourth quarter — around $5 billion in foreign debt is due for the government and for state-owned energy firm Petroleos de Venezuela. Most of these payments will fall in October and November. A default would devastate the economy by further isolating the country from foreign lenders amid a worsening economic crisis, but notably, a default appears unlikely.

Date: 2016-04-22; view: 541