Brexit & Venezuela Crisis

Brexit negotiations off to a bad start for Britain with UK conceding several initial points. Venezuela nears crisis points in all sectors as Maduro replaces several military leaders. Likely vote on healthcare bill will affect 1/6 of U.S. economy. All in The Week Ahead.

Brexit negotiations off to bad start for Britain with UK conceding several initial points

Brexit negotiations will continue this week. After the opening of last week’s official Brexit negotiations with EU Brexit negotiator Michel Barnier and UK negotiator David Davis, the UK government has conceded several points and walked back other claims. On the opening day of negotiations, the UK government admitted that free trade negotiations would have to be concluded after a final Brexit package has been arranged, rather than working on the two issues in tandem.

Later that week, the Queen’s speech avoided any major specifics on Brexit, and talk of “no deal is better than a bad deal” has largely been shelved among the Conservatives, particularly Prime Minister May. Several other controversial priorities floated by the Conservatives ahead of the snap election, including revisiting the ban on fox hunting and the introduction of additional grammar schools, were also not addressed by the Queen’s speech, highlighting the delicate position of the Conservatives in parliament.

This bodes poorly for its position in Brexit negotiations looking ahead: without a solid and stable majority to operate with in parliament, major priorities for the government will become more difficult as whips scramble for votes and alter language to gain support. This will absorb both political capital and operating capacity in dealing with Brexit negotiations. This newly precarious position may have also influenced PM May’s recent offer that the rights of EU citizens living in the UK before the date of the referendum for a period of at least 5 years to establish a “settled” status, one of PM May’s “bargaining chips” in the negotiations. The Brexit negotiations are likely to occur on a relatively accelerated timeline as desired by the EU government over the course of the next several months.

Venezuela nears crisis points in all sectors as Maduro replaces several military leaders

Last week, Venezuelan President Nicholas Maduro announced he had dismissed the heads of the Venezuelan navy, army, air force, and the National Guard following several reports on the violent use of force by military officials against protestors, principally in Caracas. The protests, which have been ongoing for several weeks and have already led to the deaths of scores of people, have become a near-daily occurrence and have brought in all segments of society.

A few weeks ago, a youth violist from the broadly popular and apolitical Venezuelan Youth Orchestra was shot and killed during a protest. Medical shortages are reaching levels not seen in Venezuela for at least a century; doctors and nursed have reported fashioning their own syringes and bandages, and medicines for diabetes and malaria are creating widespread health effects. Additionally, with inflation at dizzyingly high levels, food shortages have become endemic. The opposition-controlled Assembly has requested persistent protest from citizens and has expressed hope that the military would step in to end the Maduro crisis.

Last week, Venezuela’s chief prosecutor, a former Maduro ally who has since turned sharply against the government in several high profile instances, may be put on trial after a Maduro-friendly Supreme Court allowed charges to proceed. Luisa Ortega had previously broken from the government in arguing that the Supreme Court stripping the National Assembly of its power was unlawful, and later said that the establishment of a “constituent assembly” to circumvent the Assembly and alter the constitution was also unlawful. Recently, she conceded that a student was shot at point-blank range by a police official, while other Maduro officials, including former foreign minister Delcy Rodriguez, who has resigned to run for a constituent assembly seat, countered that the student was hit by a gas canister operated by a fellow protestor. In addition to a clear attempt at silencing a government critic, this move highlights the collapse of the rule of law in the country: the Supreme Court does not have the authority to allow a case of this nature to move forward; that power belongs to the National Assembly.

Likely vote on healthcare bill will affect 1/6 of U.S. economy

Following the announcement from Senate Majority Leader Mitch McConnell that the Senate Republicans’ highly secretive bill to repeal most parts of the ACA and enact severe cuts to U.S. social safety net, it became increasingly clear that the bill was designed to move quickly through both houses and be signed by the president. Certain components of the bill, including limited funding to Planned Parenthood and the treatment of opioid addiction, appear to have been designed deliberately to draw in wavering senators by allowing them to introduce amendments to plug the holes in the bill and then inform constituents of their efforts to improve the bill.

Although no official time for a vote has been set yet, it appears that there are currently talks to move the bill through around Thursday and have it quickly approved by the House of Representatives either that day or the next. Should it be signed into law, it will likely lead to the eventual elimination of 20-25 million people from their health insurance in the United States. The removal of the individual mandate and certain cost controls and major employer health coverage mandates makes it more likely that the healthcare coverage gaps that had existed before the ACA will return to the U.S. healthcare system. Additionally, the mandate that preexisting conditions be covered by health insurance companies will likely be weakened substantially, which could drive up costs for cancer patients, pregnant women, those with mental illness or physical disability, and those with familial history of debilitating conditions like dementia or heart disease.

The effects are likely to ripple throughout the economy even if the major cuts offered by the Senate bill are enacted further down the line: employees would be far less likely to leave jobs for other positions for fear of losing their health insurance, healthcare costs are likely to rise and lead to reduced consumer spending, and would hamper overall economic growth.

The Week Ahead provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, The Week Ahead presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.

This edition of The Week Ahead was written by GRI Analyst Brian Daigle.

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