Monthly Risk Spotlight: May 2021

AMERICAS

Tax Reform Proposal Sparks Protests in Colombia
Wednesday, 28 April the Central Unitaria de Trabajadores (CUT) trade union initiated a national strike (paro nacional) and led mass protests in response to a proposed tax reform championed by President Iván Duque Márquez’s administration. At the time of writing this article, sustained mass protests in Medellín, Cali, Cartagena, Barranquilla, Ibagué, and particularly Bogotá, have resulted in at least 31 deaths (including one police officer) and hundreds injured. Reports of violent clashes between protesters and police have been widespread with reported instances of police using live fire against protesters. Other impacts of the protests have included blockades of major transit routes, closure of many TransMilenio stations in Bogota, and the vandalizing or burning of more than 100 buses.

Though initially sparked by the tax reform proposal, protests have persisted for multiple days since President Márquez’s withdrawal of the proposed reforms and the resignation of their author Finance Minister Alberto Carrasquilla on Sunday, 2 May. The proposed tax reform represented the single specific unifying demand uniting a broad and diverse mix of interest groups participating so far in the protests. The continuation of the movement since then indicates a deeper general discontent with the current Colombian economic, political, and epidemiological situation. Despite that, no other specific unifying demands have been made by the protesters so far, indicating no clear path forward for any of the parties involved.

The April proposed tax reform has been uniformly unpopular both with large swaths of the general population and the political elite class ahead of the 2023 presidential elections. Despite that, there is general consensus amongst Colombian policymakers and economists that some kind of reform is required as growing Colombian fiscal deficits, accelerated by the COVID-19 pandemic, have threatened Colombia’s access to international credit and thus put its ability to finance existing national debt in jeopardy.

The proposed (and now withdrawn) tax reforms were designed to broaden the proportion of the population required to pay taxes. But the proposal also included more progressive and theoretically popular measures such as a new wealth tax, environmental taxes penalizing vehicle pollution and single-use plastics, retention of COVID-19 related tax relief measures, and expansion of the Ingreso Solidario program to support low-income individuals and combat inequality.

The rejection of the recent tax reform proposal may not be due as much to its content, as to the context in which it was considered. The Colombian economy has suffered greatly during the COVID-19 pandemic. Strict lockdown and social distancing measures have significantly worsened the fiscal deficit, but have also closed businesses and taken jobs, disproportionately impacting the most vulnerable. In its annual report, Pobreza Monetaria en Colombia, the National Administrative Department of Statistics (DANE), reports that in 2020, 33.7% of the population was at poverty income levels and 12.5% were in extreme poverty, marking a 3.2% and 1.2% increase respectively over 2019. In this context, any news  indicating that the government makes more people liable for taxation is likely to be a hard sell. This is exacerbated by general perceptions of government incompetence inspired by the continued and worsening national COVID-19 outbreak despite strict government-mandated restrictions, and an engrained history of government corruption.

Any proposed tax reform will likely be a hard sell to the Colombian population; however, the reality remains that reforms of some kind will have to be made to preserve Colombian access to international credit critical to its long-term economic success. President Márquez has stated he is committed to bringing forward new proposals based on “principles of consensus,” but given the combination of factors at play, it is exceedingly difficult to see a path towards either political or policy success.

MIDDLE EAST AND NORTH AFRICA

Syrian Presidential Elections are Anything but Legitimate
For a vast majority of Syrians, the upcoming presidential election at the end of May is predicted to be neither free nor fair. President Bashar al-Assad is running for his fourth, seven-year term in what will be an obvious victory for him. Western officials and media have criticized this election as a theatrical farce.

The presidential election was announced in April and began accepting candidates. The stringent qualifications for candidacy make it nearly impossible for actual opposition figures to run against Assad. Candidates must have lived in Syria continuously for the last 10 years which means citizens in exile abroad are ineligible. They also must receive support from at least 35 members of parliament. Out of 51 candidates, only three have now been approved by the Assad-appointed committee for the final ballot. Abdallah Salloum Abdallah, a state minister from 2016 to 2020, Mahmoud Marei, a member of the so-called “tolerated opposition”, and Bashar al-Assad.

Millions of domestic refugees reside in the northwestern province of Idlib and in areas in the east that are outside of the government’s control and are therefore unable to vote. The Kurdish majority in northern Syria is also excluded from voting in this election. Although Syrians abroad can vote at embassies by 20 May, many refuse to register. Syrian state television filmed citizens registering outside the embassy in Lebanon though many view the clip as propaganda. People are afraid to go to the embassies and they are afraid to pass through checkpoints for an illegitimate election. Most Syrians, abroad and domestic, believe Assad is the guaranteed winner.

Many doubt that this election will be held in accordance with a UN Security Council resolution that calls for a free and fair election. Assad has invited representatives from allied countries such as Russia, Iran, China, Venezuela, and Cuba to observe the election process. He is using this election to further legitimize his regime and to strengthen his power. Syria’s bloody civil war has been raging on since 2011 and has killed over 500,000, a majority of which were killed by the Assad regime itself.

Bashar al-Assad came to power after the passing of his father who held power for nearly thirty years. Assad has been using the same playbook that his father created during his rule by bombing Syrian cities, murdering civilians, and holding sham elections. Like father, like son.

ASIA-PACIFIC

Taliban Attack Sends Message to Coalition Forces
In what many are seeing as a symbolic gesture, the Taliban conducted a rocket attack against Kandahar Airfield on 1 May. The airfield had been used extensively by US and NATO forces throughout the near twenty-year conflict in Afghanistan but as of the time of the attack, only a small contingent of US and NATO forces remained on the base. No casualties have yet been reported amongst Afghan or Coalition forces and the US announced it swiftly retaliated against the Taliban by launching aircraft from the USS Eisenhower which subsequently conducted airstrikes against the Taliban’s position. In comparison to previous attacks by the Taliban, this engagement may seem rather insignificant; however, that the attack occurred on the date by which the US government had previously agreed to withdraw from Afghanistan, indicates that the Taliban intended this attack to send a message to Coalition forces: if the US does not abide by a previous ceasefire agreement, neither will the Taliban.

In the waning days of former US President Donald Trump’s term in office, US Special Envoy Zalmay Khalilzad announced an agreement on a peace deal with the Taliban following months of talks in Doha, Qatar. The deal stipulated, amongst many things, that the Taliban would reduce attacks against US and other Coalition forces in Afghanistan, and that all foreign forces would withdraw from the country by 1 May. As President Trump left office and President Biden assumed the mantle, it became increasingly clear that the US and Coalition governments were not yet prepared to completely dismantle their bases in Afghanistan and withdraw their forces by the agreed upon deadline. While there was some speculation that foreign forces may completely change course and remain in Afghanistan long term, this possibility was put to rest when President Biden announced a full withdrawal on the symbolic date of 11 September 2021, the twentieth anniversary of the terror attacks against the US that prompted the invasion of Afghanistan.

In the lead up to the initial withdrawal date, the Taliban announced that the US would be in violation of the peace deal if they remained in Afghanistan past 1 May. Thus, according to the Taliban, the decision of the Biden Administration to remain in Afghanistan until 11 September provided justification to resume attacks against US and Coalition forces. During a recent interview, a Taliban fighter confirmed this when he stated that while he had no intention to immediately resume attacks, he would do so if ordered to by senior Taliban commanders. This interview alongside the recent 1 May attack in Kandahar provides general insight into the current strategy of the Taliban: do not fully engage US and Coalition forces while they are organizing their withdrawal but keep the pressure up through hostile rhetoric and by conducting occasional harassing attacks. Thus, there is a possibility that similar attacks as to that which occurred on 1 May could continue until the 11 September withdrawal date.

SUB-SAHARAN AFRICA

What’s Next for Chad?
On 20 April, the devoted Chadian President Idriss Déby died after being wounded on the front lines battling Islamist militants. He had just won a sixth term in office the day before his death. The exact details of his death remain unknown. His campaign had announced that he was traveling to the north of the country to visit troops fighting the FACT rebels. President Déby was one of Africa’s longest-serving heads of state, ruling Chad for 30 years. He took power in 1991 through a coup and survived multiple rebellions. Although his government acquired a reputation for corruption, nepotism, and human rights abuses, Déby was a key partner in fighting counterterrorism for the United States and France and a powerful Western military ally.

Immediately after his death, the military council took power declaring Déby’s son, a military general, the interim president until elections could be held in 18 months. That decision is in direct violation of Chad’s constitution which states in the event of the president’s death, the speaker of parliament will step in until elections are held. Backlash quickly grew and protests broke out in the capital N’Djamena. The country’s political opposition condemned the establishment of a transitional military council as a coup and civil society groups called for demonstrations. Protestors took to the streets defying a ban on protests to demand a transition to civilian rule. Days later, protests turned violent. More than 700 people have been arrested after participating in the demonstrations. At least seven people have been killed, although a local NGO claims the death toll is nine.

In response to continued anger, the military council has named a transitional government comprising of 40 ministers and deputy ministers and created a new national reconciliation ministry. The military council also lifted the nightly curfew put in place after Déby’s death.

A team from the African Union arrived in the capital to assess the situation and examine ways of a speedy return to democratic rule. Chad’s neighbors and international allies are concerned about the stability of the country and region. Déby’s death has made security in the wider Sahel region even more fragile. All eyes will be on Chad for a while now with hopes that the next ruler can fill Mr. Déby’s shoes.

 EUROPE

Italy Takes on Europe’s Greatest Threat
 Italy’s trial of the century is currently underway in a high security call center turned courtroom.  The focus of the trial is the ‘Ndrangheta, Italy’s richest and most powerful criminal organization, but the 355 defendants are not limited to mafia leaders and henchmen. High-level politicians, police officers, and all varieties of white-collar professionals have been accused of working with the most powerful drug trafficking and money-laundering empire in Europe. Emanuele Mancuso, a high-level ‘Ndrangheta member turned informer, is a key witness to the trial and has spent the past few days revealing the extent of the organization’s activities.

The ‘Ndrangheta (derived from a Greek word that translates to “society of men of honor”) have been present in the Calabria region of southern Italy since the mid-1800’s. In the 1970’s, they began to make a sizable profit in the kidnapping and ransom business, but when Italy made ransom payments illegal in 1992 the organization turned to drug trafficking. When the Sicilian mafia began to decline around the same time, the ‘Ndrangheta formed an alliance with the Mexican and Columbian cartels which established a monopoly on cocaine trafficking into Europe. Now it is estimated that the ‘Ndrangheta is responsible for over 80% of all cocaine trafficking into Europe with estimated earnings of 50 billion euros a year.

As the drug trafficking business grew, the ‘Ndrangheta became equally successful in the money laundering enterprise by investing in legitimate businesses around the world. Economic hardship created even more opportunity. In March 2020 the ‘Ndrangheta began distributing food baskets to families facing financial hardship due to the COVID-19 pandemic, which resulted in multiple small businesses turning to the criminal underworld for business loans. According to the European Union’s Serious and Organized Crime Threat Assessment 2021 (SOCTA 2021,) “The scale and complexity of money laundering activities in the EU have previously been underestimated… money launderers have established a parallel underground financial system.”

Now the ‘Ndrangheta empire is facing a serious threat. As the maxi trial continues to determine the extent of criminal activity and those involved, the business side of the organization could sustain serious damage. The ‘Ndrangheta will never disappear, but the trial is certainly a major step in combating one of the biggest security challenges in the European Union.

 

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