Venezuela Crisis: Maduro Sticks Around

Per last week’s Insight, our indicators continue to suggest that Nicolas Maduro will remain the president of Venezuela in 2019, despite the growing Western recognition of opposition leader and self-proclaimed interim president Juan Guaidó. Recent events have not changed the baseline view that Maduro has consolidated sufficient support among the military (keeping Institutional and Elite Support Risk low) and the PUSV party base (bounding Mass Support Risk — especially given large scale migration of those most harmed by the regime) to survive domestically.

Geopolitically, international pressure is clearly growing and — given the size of economic ties to the US — pushing the regime toward dialogue with the opposition. That said, major powers (and military backers) China and Russia have rushed to Maduro’s defense and while both Geopolitical Risk and External Security Risk are elevated for Venezuela, they remain (i) below historic highs during the Maduro era; and (ii) are projected to decline in the near future, around mid February. As such, we predict not only that a U.S.-led military intervention in Venezuela is very unlikely, but that foreign diplomatic pressure on Maduro will not dislodge him from power.

U.S.: Shutdown Part Deux unlikely — but all bets (and predictions) are off

As predicted, the longest government shutdown in U.S. history ended (i) before the end of January; and (ii) without approved funding for a border wall with Mexico. Per below, the U.S. State Capacity Risk indicator we have been using to analyze the shutdown is decreasing into the upcoming 15 February deadline for negotiations between President Trump and Congress over border wall funding, suggesting the issue will not shut down the government again.

Per below, the Trump administration’s Government Risk remains elevated after the shutdown, reiterating the weakness of the current U.S. government even when compared with a historically weak late term Obama administration. This suggests Trump is unlikely to force another shutdown at the risk of becoming a still-weaker president, putting his agenda — and potentially, his political survival — in greater peril. That said, a similar analysis led us astray in late December, so this time we hesitate to make  a binary prediction on the outcome. Last time we suggested a shutdown was unlikely but the Trump-related tail risks were fat; this time we concede the tail may be wagging the dog and not the other way around.

Nigeria: chief justice suspension swings election in Buhari’s favor, increases social & sovereign risks

The 25 January suspension of Nigeria Chief Justice Walter Onnoghen by President Buhari — just three weeks before a competitive 16 February presidential election — clearly increases Buhari’s chances of maintaining power and weakens the prospects of opposition challenger Atiku Abubakar of the PDP. Specifically, Buhari’s move supercharges his (already substantial) incumbency advantages ahead of the poll, giving him and his APC party greater control over a likely court challenge to the election outcome (which would ultimately be decided by the chief justice). Even if Onnoghen’s suspension is temporary and/or overturned by the Senate — the constitution requires 2/3rds of the Nigerian Senate to approve the replacement of a chief justice and the body will hold an emergency session on Tuesday — he is unlikely to be reinstated before the 16 February election. As a result, Institutional Support Risk to Buhari’s government going into the poll has decreased significantly from that projected on 6 January (dotted line).

At that point in time — 6 January — GeoQuant predicted in our 2019 outlook that Buhari would actually lose the election, albeit closely. This counter-consensus prediction was based on our overall Government Instability Risk indicator, whereby Nigeria’s Government Instability Risk surrounding the 16 February 2019 election was projected to be at about the same level as that surrounding the 16 March 2015 election. In that election, Buhari displaced the previous incumbent Goodluck Jonathan. What is good for the goose is good for the gander; as such, we predicted a similar turnover of government this time around.

Now, however: (i) the drop in Government Instability Risk between the 16 March 2015 election and 16 February 2019 election is larger; and (ii) the indicator, while still rising after the election, no longer does so in a linear fashion. This helps underscore that the suspension of the chief justice favors Buhari and swings the election in his favor: i.e. the overall risk that the incumbent government is displaced is now lower.

In addition to growing Social Instability Risk, note that recent events will also increase Sovereign Risk surrounding the election, as the chance that Atiku’s more market-friendly approach to macro-economic policymaking (including CBN independence) will make it into the presidency is now reduced. That said, note that such risks are still quite a bit lower than the recent peaks of 2016/17.