Monthly Risk Spotlight: December 2022

Debt Servicing and Unrest in the Americas

For numerous economies in the Americas, where entire political and ideological legacies have risen and fallen at the whim of global markets, the concept that events on the other side of the world can define their reality at home is nothing new. In 2022 this is as true as ever with war and great power conflict on the other side of the world seeing inflation spike, interest rates rise, and growth slow. All these factor trends promise to make servicing existing debt exceptionally expensive, particularly for those with high debt-to-GDP ratios.

While globally the Americas are not expected to be the site of dominoing defaults like seen during the 1980s Latin America Debt Crisis (La Década Perdida), this trend is still certain to impact the region. As global trends in inflation, interest rates, and economic growth continue on their current path, it will become increasingly difficult to access and service national debt, particularly in developing countries. This will constrain national budgets and promised government spending on things like subsidies and public works. This, in turn, is likely to increase poverty and prevent those attempting to claw their way out after multiple years of severe economic disruption. The series of cost-of-living protests which erupted across the Americas this past year (Ecuador, Argentina, and Panama to name a few) are prime examples of how populations can be expected to hold their governments accountable and react under these pressures.

As noted, the Americas are not expected to see systemic defaulting on national debt. But regardless of how well a single country manages its budget and services its existing debt, the actions and success of its peers can have serious implications for its economic well-being and political stability. Zambia, Sri Lanka, and Ghana are all currently highlighted as high risk for defaults, while the World Bank predicted this year that “as many as a dozen developing economies could prove unable to service their debt.” Should countries anywhere around the world begin defaulting, the result will likely mean increased cost for new and existing debt payments for countries in the Americas as well. This would be doubly true for neighboring countries should someone in the Americas region default. While by no means certain, Argentina and Venezuela are considered the most likely to experience a debt default in the coming year. Regardless of whether they default though, it is likely that these countries along with others like Brazil, Chile, and Colombia will face existing and worsening fiscal challenges and with it could see unrest as governments are held to account.

Indicators of an increasingly challenging environment for debt access/servicing in the Americas this coming year will be countries (anywhere in the world, but particularly in the Americas) defaulting on their debt. In contrast, indicators the environment for debt access/servicing is becoming less challenging include whether global defaults are minimized and initiatives to facilitate restructuring of existing debt like the G20 Common Framework program become more active. A key indicator here will be whether China, a major loaner to developing countries around the world, will engage in such proposals which it has so far avoided. Should the environment become more challenging, further unrest in countries with high debt to GDP ratios in the Americas region can be expected.

ISIS and the Threat of Resurgence

ISIS’ announcement of the death of its then current leader and the appointment of its new leader, Abu al-Hussein al-Husseini al-Qurayshi, came days before the Syrian Democratic Forces (SDF) announced its joint counter-terrorism operations with the United States that helped defeat ISIS were paused due to Turkish bombardment in the area. ISIS former leader Abu al-Hassan al-Hashimi al-Qurayshi was killed in mid-October during a Syrian rebel operation in Syria’s southern province of Daraa. He is the second ISIS leader to be killed in 2022.

In the announcement, a spokesperson said “currently, we’re forced to be preoccupied with confronting Turkish aggression.” Joint operations with the SDF and the US have since resumed but with Turkey ramping up its air strikes on targets in northern Syria, it is likely counter-terrorism operations could pause and be greatly impacted, in the future. Turkish President Erdoğan is also threatening to send ground troops into northeastern Syria in retaliation for the deadly bombing in Istanbul on November 13, as he blames the Syrian Kurdish YPG (Kurdish People’s Protection Unit for the attack. The group continues to deny any responsibility. Turkey has been actively assaulting northern Syria, starting with air operations known as “Claw-Sword” on November 20. Erdoğan says the airstrikes are “only the beginning.” As the SDF and other militia groups pivot their attention to defend against Turkey, the threat of an ISIS resurgence is increasing.

Back in March, the US-led coalition said the SDF is instrumental in ensuring that ISIS in Syria remains defeated and does not rise again. In addition to its counter-terrorism operations, the SDF maintains 27 prisons across northeast Syria that hold 12,000 ISIS militants. The largest detention center is located in Hasakah and holds at least 5,000 militants. An airstrike on November 23 landed in the prison’s vicinity, within 300 meters of US troops on the ground. An SDF spokesman said Turkey launched an additional five airstrikes against security forces guarding ISIS families in the Al-Hol camp for displaced persons, which gave some of the families an opportunity to escape. Six of the escapees were recaptured.

The SDF and the US both warn that Turkey’s offensive in Syria could revive ISIS in the country and call for an immediate de-escalation. US General Pat Ryder says, “the continued conflict, especially a ground invasion, would severely jeopardize the hard-fought gains that the world has achieved against ISIS.” Russia, an ally of Syria, is also calling for restraint as Russian troops are also operating in the area.

ISIS was never really eradicated completely, and it has been trying to restore itself again. ISIS fighters are now either members of sleeper cells or guerilla groups. Earlier this year, ISIS-affiliated groups attacked the al-Sina prison in the southern part of Hasakah in an attempt to free detained members. The attack continued for nine days and resulted in the deaths of dozens of ISIS fighters and 140 members of the SDF. There is conflicting information about the number of ISIS fighters who managed to escape the prison during the attack. Anywhere between 30 and 100 fighters are believed to have escaped, including two important ISIS leaders. Attacks in other parts of the country and in neighboring Iraq have started slowly increasing. ISIS affiliates in Afghanistan also claimed attacks that killed dozens in recent months.

Turkey says the military operations are necessary and blames what it calls “Kurdish terrorists” that have targeted the Turkish government for decades. While the SDF and other Kurdish militias are US partners in combating terrorism in the region, Turkey has been fighting the Kurdish militia, PKK, and considers the group a terrorist organization. While President Erdoğan may be testing the US and Russia to gage their level of response to the operation, escalating any ground or air offensives could cause the suspension of counter-terrorism efforts in northern Syria and severely risk destabilizing the region while in turn enabling the resurgence of one of the world’s deadliest terrorist organizations.

Protests Over Zero-COVID Policy in China

China’s notorious zero-COVID restrictions have resulted in nationwide protests in all major cities, including Kong. Demonstrations were triggered by a fire outbreak in a residential building in the Xingjiang province. Video footage of the incident showed rescue efforts being hampered and delayed due to stringent COVID-19 restrictions and barriers, resulting in the deaths of ten people.

Public dissent spread rapidly, and from Shanghai to Beijing, residents gathered to grieve the ten people killed in the blaze and call for an end to the nation’s stringent COVID-19 policies. Protests have also taken place across university campuses in the country, which have a history of being particularly sensitive towards the Communist Party.

Protestors turned their anger to Xi Jinping and the communist party, who enforced excessive lockdowns, mass testing, and digital tracking due to the pandemic. Many openly recalled for his removal from power. Such widespread anger and scenes of defiance are incredibly rare in China, where the ruling communist party cracks down on all expressions of dissent. However, after three years of incessant lockdowns and quarantines, the people of China have grown increasingly frustrated.

Despite Hong Kong’s national security law, which bans group gatherings, demonstrations spread to the Special Administrative region, taking place at the Chinese University of Hong Kong as well as its main commercial district. While many protests were peaceful, some led to scuffles between demonstrators and law enforcement. In Shanghai, video footage showed police officers beating and pushing protestors, with many being taken into custody. These videos have since been scrubbed from the Chinese internet.

Since the demonstrations, China’s government has accelerated the easing of COVID-19 restrictions in several cities and provinces. Many areas have scrapped testing requirements for traveling on public transportation. The government also allows COVID-19 positive patients to quarantine at home rather than a centralized facility. Despite the easing of restrictions, there has been no indication of whether or not China’s zero-COVID policy could end anytime soon. The nation’s top leadership body has not made a formal announcement on its stance toward loosening restrictions.

Though this seems like a win for its residents, Chinese authorities have also initiated the highest ‘emergency response’ level of censorship in the country. This includes a crackdown on VPNS, tracking and questioning protestors, and checking mobile devices. Following the unrest, China published new rules which hold Internet users liable for liking or interacting with posts deemed illegal, harmful, or subversive. All online sites will also require users to verify their identity by providing personal identification, phone number, or social credit numbers. Many worry that these new regulations are a sign that the authorities are stepping up their crackdown on dissent.

Ebola Outbreak in Uganda Showing Optimistic Signs

An outbreak of Ebola that began in September in Uganda and gained momentum throughout October, reached a peak and decline in November which has health officials cautiously optimistic for the future in achieving the end of the outbreak. The spread of the outbreak and its ultimate impact was driven by the Sudan strain of Ebola. The Zaire strain is the more common strain of Ebola that has been seen in recent outbreaks in other countries over the past several years. Unlike the Zaire strain, there is no proven vaccine for the Sudan strain, which elevated concerns while the outbreak continued to spread as Ebola statistically kills half of all infected patients.

November began with officials announcing on November 3 that the death toll from the outbreak had risen to 48 confirmed deaths with 131 confirmed cases, which marked a noticeable increase from 30 confirmed deaths and 109 active cases at the end of October. Officials continued to maintain confidence to the public that they were optimistic the outbreak could be over by the end of the year and continued to advocate for thoroughly adhering to risk-mitigating measures including contact tracing, communicating risks, and continuing proper treatments and burials to contain the outbreak.

By November 7 the death toll had risen to 53 confirmed deaths and 135 confirmed cases followed by officials announcing on November 8 that the school term would be shortened by two weeks as a containment measure for the outbreak by reducing daily contact between students. Pre-schools, primary schools, and secondary schools were impacted by the decision. By this point, 23 cases had been confirmed among students during the outbreak and eight of those students had died. Previously contained to central Uganda since the start of the outbreak, a case was confirmed in the eastern Uganda city of Jinja on November 13 and sparked heightened concerns among health officials that a case was being detected outside of the outbreak’s established area of concentration. The patient had died the previous week after seeking treatment at a private clinic, prompting officials to begin contact tracing and investigating when the case was confirmed.

Toward the end of November officials reported that new case numbers were beginning to decline as some districts had not recorded any new cases for weeks. As cases began to drop off in multiple areas, officials announced on November 27 that quarantines placed on two districts that had been the epicenter of the outbreak would be maintained for an additional 21 days to help preserve gains made in containing the outbreak and keeping it on the decline after two months of struggling to control the spread of infection.

As the outbreak continued to spread since September, staff became increasingly more reluctant to continue working at hospital isolation units. The decline in morale was brought on by a number of factors, including the death of two healthcare workers, personal concerns of being infected, exhaustion, and delays in receiving wages. Doctors noted that only a few patients would be needed to overwhelm a low-staffed isolation unit. Such staffing issues are exacerbated by Uganda having one of the lowest doctor to patient ratios in the world. Regardless of low numbers of patients in some areas, such an outbreak quickly exposes the deficiencies in a system that can negatively impact both residents and travelers under completely normal situations.

Deadly Landslide on the Italian Island of Ischia

On November 26th, a devastating landslide occurred on the Italian island of Ischia. Eleven people have been confirmed dead. The landslide was caused by excessive rainfall in the port town of Casamicciola. At least 30 buildings were destroyed, and the force of the slide pushed cars and buses into the ocean. The island of Ischia has seen major landslides before, most recently in 2006 and 2009 that caused excessive damage.

Soon after the disaster, there were overt expressions of concern over building standards and illegal construction on the island. The island has seen an increase in tourism in the last decades, as it is known for its natural springs and close proximity to the Italian mainland. With the increase in tourism and high-end housing, building development has also increased drastically. Some experts said that the buildings were illegally developed, and the biggest criticism is that the mass development had disrupted the land, increasing the likelihood of landslides. The community of Ischia quickly took to this dialogue, and though there was unlikely to be overt unrest on the island, there was an increase in frustration on social media towards the Italian government and specifically developers on the island. In the wake of disasters, there can often be attempts to place blame, but regardless, development and tourism on Ischia is expected to be hindered.

Another concern is the growing risk of landslides throughout Italy (and the world) because of climate change’s increased rainfall. The head of the Ischia engineer’s association, Claudio D’Ambra, commented on the need for preparation by saying, “We need to plan canals and routes for these flows of mud,” as the risk of landslides is increasing. D’Ambra also commented on how it showed the need for increased investment in safety measures, highlighting again the likelihood of increased pressure on the development sector of Ischia and the likelihood of a decreasing tourism sector.

Following this disaster, Italian officials have also expressed desire to start monitoring areas prone to landslides throughout the country ahead of the next rainy season which is April-May. The disaster in Ischia is not the first and unfortunately unlikely to be the last for Europe and the world. In November, areas of Brazil, Panama, the Democratic Republic of the Congo, Indonesia, Portugal, and Venezuela experienced deadly landslides.

It is increasingly important for travelers to assess both the weather patterns and locations of intended travel. Mountainous regions have a heightened risk for landslides. The disruption of a landslide in a region can range from minor travel disruptions within the region to major injuries and potentially death. Strategies such as pre-emptive accommodation assessments and seasonal travel decisions can mitigate the risk of both travel disruptions and experiencing a landslide.


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