2/14/2024 - Politics and Society

GEOPOLIC RIESGO: What is it TRUMP?

By Jose Daniel Salinardi

GEOPOLIC RIESGO: What is it TRUMP?

The years 2020 and 2021 were marked by a tragic pandemic of the SARS-CoV virus, which we usually call Covid, which cost the lives of millions of people worldwide. In February 2022, Vladimir Putin made the decision to invade Ukraine and to unleash a military conflict that still continues with uncertain end. October 2023 surprises us with a deadly attack by the Hamas terrorist group on Israel. The number of people who died later, during the harsh armed response of Israel, is still discussed, but thousands, in addition to the 110 hostages taken by Hamas that remain hidden somewhere in Gaza.

These three traumatic events have had effects on the global economy of which the world still cannot recover. Extended quarantines, paralysis of activities in factories, transportation companies, banks, shopping centers, shops, etc., characterized the measures taken by almost all the governments of the world as a measure to reduce personal contacts and avoid contagions. The economic effects were devastating for companies and individuals. The logistic distribution chains were fractured, raw materials, finished products began to fall, and considerably increased the cost of a key element: energy. Governments responded with majority aid plans funded by numerous money emissions that boosted government deficits and the result of this equation is known: pandemic + emission + increased energy price = inflation explosion.

When the world attempted to recover from the health, humanitarian and economic disaster caused by pandemic, and the central banks of the world's main powers struggled to impose restrictive monetary policies (via increased interest rates mainly) to prevent the greater availability of money in the power of individuals originated in emission from not impulsive consumption and inflation, energy again gave another blow. This time driven by the wishes of Vladimir Putin to return to Russia his imperial splendor. It invades Ukraine, suspends the remittances of oil and gas to Europe against the economic sanctions imposed by the international community, and inflation is in force again: the gas and electricity invoices during the next European winter were impossible for users, and the governments had to recourse to the aid of the machinery to print money. The economic effect for some countries was devastating. Germany, for example, decided to suspend its plans for the peaceful development of nuclear energy and return to the consumption of fossil fuels, paid a very high cost for this uncertained decision. We do not just refer to the change of your energy matrix, but to someone who warned the mistake, but instead of listening, they laughed at it. It was nothing but the President of the United States of America, Donald Trump, during a session of the United Nations General Assembly.

So we arrived on 7 October 2023, the day of the deadly attack of Hamas, with the Middle East, converted into a garrison and the permanent threat of an open military confrontation between Israel and Iran. We already referred to the consequences, but what were the causes that facilitated this true genocide? Most analysts agree that U.S. endeble foreign policy in the region since Joe Biden assumed the presidency of the country, the disregard of the Abraham agreements signed during Donald Trump's government which, among other issues, resumed diplomatic relations between Israel and the United Arab Emirates, and the complacency of the new administration with Iran, generated the ideal framework for the Hamas attack.

Every crisis in the Middle East immediately generates uncertainty about the evolution of the oil price. But in this particular case, the appearance of a new protagonist added an additional component of economic concerns: the attack of ships from allied countries to Israel who sail through the Red Sea, by a political and religious armed group, the Huts, which identifies with the Muslim minority of Yemen, and together with Hamas and Lebanese Hezbollah, was placed against Israel, the United States and the West. The economic result of the attacks is catastrophic: new rupture of supply chains, more expensive shipping freight for exchange of routes and increased cost of insurance to be absorbed by the price of goods transported.

Three events of global consequences, occurred without a solution of continuity, which in our view originate in a false perception of what we call "geopolitical risk". That is, the cost of bad political decisions originated in a wrong reading of the world scenario whose result are human and economic losses to individuals and companies, and measure of power to the states involved. The clearest example of today is the United States: a government that has lost preponderance in its own region, especially in Latin America, which must make unacceptable concessions to dictatorships such as that of Nicolás Maduro in Venezuela in exchange for oil for not knowing how to articulate a policy in the Middle East that allows it to preserve its strategic reserves and ensure the provision for domestic consumption.

In each of the events we discuss, there is a strategic error of the United States product of an inadequate assessment of geopolitical risk. 1. Disassemble the warnings about China's biological experiences and the data confirming them. The result was Covid 19. 2. Overvalue the possibility of an armed conflict between China and Taiwan, while Russia used this distraction to prepare its invasion of Ukraine. 3. Disabling the Abrahamic Agreements reached by Donald Trump in the Middle East, relying on the promises of Iran not to pursue its nuclear program, while Israel was at the mercy of its enemies in the region: Hamas, Hezbollah, Yemen, Syria, Lebanon and Iran.

The geopolitical risk has become an inviable element (and it is good that it is) in the formulation of projects and business plans of all companies, beyond their global, regional or local presence. The underlying idea is that there are no relevant facts of whose effects are exempt, in addition to what place of the world is produced, and the proximity or geographical distance with it.

A world icon of what is considered the entrepreneurial success, has just fehacietiously checked what we say. McDonald’s reported much smaller sales than expected in its fourth quarter of 2023, since the fast food chain became the last company to warn that war-related boycotts in Gaza undermined their business.

Within the division that covers the more than 80 international markets where McDonald’s licensed their franchise rights, sales increased only 0.7% in the period, much below the expectations of analysts of a 5% increase.

McDonald’s contributed mainly to a drop in demand in its Middle East restaurants, as well as in predominantly Muslim countries such as Indonesia and Malaysia.

“We do not expect to see a significant improvement until there is a solution in the Middle East,” CEO Chris Kempczinski said at a meeting with investors. This is the geopolitical risk, and these are the consequences of not paying attention it deserves.

Starbucks and The Walt Disney Company were also heavily affected. The suggestions of home-based alternatives to Starbucks proliferated on social media after they were affected by global protests and base boycott campaigns since the beginning of the Israeli military offensive in Gaza. In the case of Disney proposes cancellation of subscriptions and the immediate boycot to your films.

In several passages in this article, we mention the name of Donald Trump, President 45° of the United States, who, according to the majority opinions of analysts, communicators and survey data, will again go to the White House. Trump's strategic vision is indisputable, and perhaps the most envy by his opponents. Observer with great and successful experience in the world of business and politics, does not ignore any detail as trivial as it may seem.

Shortly after the 2007–2009 global financial crisis, among American politicians and entrepreneurs who argued that the Chinese currency, the yuan, was deliberately undervalued, stood out Donald Trump. While all would resort to incomprehensible monetary and macroeconomic explanations, Trump made this simple: “To know, you may need to order a burger. Comparing the price of a Big Mac in different countries with its exchange rates gives an approximate idea of whether its currencies are overvalued or undervalued. ”

The last update of the US Big Mac index suggests that the yuan is undervalued by 39% against the dollar. Trump is still right: he has always regarded China as a “exchange broker” country.

A geopolitical analysis that seems funny, but whose conclusions can be very dangerous for the US trade balance and fiscal deficit.

Do you want to validate this article?

By validating, you are certifying that the published information is correct, helping us fight against misinformation.

Validated by 0 users
Jose Daniel Salinardi

Jose Daniel Salinardi

Jose Daniel Salinardi is a Certified Public Accountant graduated from the School of Economics of the University of Buenos Aires.

TwitterLinkedinYoutubeInstagram

Total Views: 25

Comments