New Week, New Peruvian President; RCEP... Sorry, RWOT?

Honestly, who's in charge of branding at International Trade Deal Inc? 😴

Good morning! Happy Thanksgiving to our American readers, and welcome to the 85 new subscribers this week. You're joining a growing community of curious, thoughtful folks intrigued by international affairs 🕵🏽.

We open this week with knight to queen's bishop 3... forgive us. We're in lockdown and quarantine respectively so The Queen’s Gambit and Netflix in general have taken over our lives. We're fine though, unlike poor Sophie here:

The less said about that the better, so let's just jump straight in this week shall we?

First up is politics in Peru. Allegedly, when asked for an opinion on Venezuela’s instability Peruvians responded: “hold our cervezas”.

Then we’ve got a primer on the recent conclusion of the Regional Comprehensive Economic Partnership (RCEP), which answers questions like: what the hell is RCEP?

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1. Peru sees your chaotic politics; raises you 3 presidents in a fortnight 🌋

By John

Remember the popular card game 'President' (which goes by a crasser name where we're from) where the aim is to get rid of all your cards first? Remember how you could go from winning the 'presidency' to finding yourself the humiliated loser by the next hand? Well, over the past two weeks, Peruvians decided to take that game very, very literally.

The most dangerous job in Peru

Tragically Garcia committed suicide in 2019 when police arrived at his home to arrest him on corruption charges. And technically, Toledo hasn't been arrested because he's fighting an extradition request in the US.

The last two weeks...

President Martín Vizcarra enjoyed two very popular years in the top job until he was impeached for "moral incapacity" on 9 November. Luckily for him, he’s avoided the infographic above... so far.

Vizcarra’s impeachment was seen by many Peruvians as a bloodless coup. He was popular with the public because of his anti-corruption efforts, and equally unpopular with the elected legislature, 68 of whom are facing corruption charges.

You come at the king, you best not miss

Peruvian corruption to former President Vizcarra, 2020

Vizcarra, no doubt wishing he learned the timeless lessons of The Wire, was replaced by the President of Congress, Manuel Merino. Merino is a controversial figure in Peruvian politics and promptly formed an alliance with military leaders that threw the anti-corruption efforts into doubt. But Peruvians weren't having it:

Merino stepped down on November 15 (6 days later 🤯) following allegations of brutality and the deaths of two protestors. He was replaced by a congressman, Francisco Sagasti. Confused? So are Peruvians but they, and we, are pretty sure Sagasti is still president.

Odebrecht: scourge of Peru (and Latin America)

Brazilian-based Odebrecht is the biggest engineering and contracting company in Latin America. They're infamous for paying more than US$3.3b in bribes and causing the biggest political scandal in Latin American history.

In a delightful nod to corporate efficiency and with all the proud flair of the samba, Odebrecht paid bribes through a dedicated bribery division (though we hear Janet down in bribery was notorious for losing receipts).

The list of suspected politicians involved is enormous and includes heavy hitters like former Brazilian President Luiz Inácio Lula da Silva. All but one living Peruvian president is accused of involvement.

Corruption Schmorruption

But why worry? Between 2002 and 2013, Peru was one of the fastest-growing countries in Latin America with a GDP growth rate around 6%. Poverty decreased, employment increased and inflation was low.

We too often forget to interrogate the validity of established wisdoms, simply accepting them as shibboleths. Everyone agrees that corruption = 👿, but the truth is that studies often struggle to find causal links with worse economic outcomes. Low level corruption might even help things get done.

You can all unclench now - even we are not contrarian enough to advocate for corruption, but it is more complex than "corruption is bad, mmmkay". The real evil is that corruption destroys trust in leadership and societal cohesion and from there, myriad damage flows.

In Peru, corruption is structural and will require concerted efforts to change. According to an LA Times quote from Samuel Rotta of Transparency International :

Many lawmakers enter office already with investigations, many enter politics to access immunity

What's next?

And so we return to the ‘so what’ of Peru's two-week drinking game bender. Vizcarra is gone, along with the public hope that corruption may finally be rooted out. The new President *checks notes* Sagasti now has a hell of a job ensuring Peru can recover from its two weeks of own goals.

COVID must be managed, economic stimulus enacted and most importantly, stability and trust re-established. A tall order. But, given ceviche and pisco sours, only a brave soul would bet against Peru having more miracles up their sleeve.

*Sincere thanks to Peru's superb unofficial ambassador Alonso Bustamante for patiently helping us understand his country’s many political happenings.

2. The Regional Comprehensive Economic Partnership (RCEP): A party without the USA 🤝

By Helen

If your eyes glazed over reading that title, you’re not alone – I fell asleep writing this (though that could also be my flight to Australia and 14 day hotel quarantine). But as dull as trade deals may be, the recently-concluded RCEP is worth knowing something about.

What even is an ‘RCEP’?

RCEP (‘AR-sep’, not ‘ar-SEP’) is a trade deal between 15 countries in the Asia-Pacific, bundling together the region’s existing agreements into a mega-deal: much like the Power Rangers morphing into Megazord to take on trade protectionism.

The deal created the world’s largest free-trade zone and includes: the ten ASEAN states (see below), the Aussies, Kiwis, China, Japan, and South Korea. Together, these countries cover a whopping third of the world’s population and economic output, with the estimated potential to add US$200b annually to world incomes (or about the same as Jeff Bezos' net worth 🙄).

All it’s cracked up to be or just pretty packaging?

In lieu of dragging you through ‘harmonized tariff schedules’ 😵, here’s our RCEP take: ambitious in scope; anaemic in substantive changes (like most New Year’s resolutions).

The Strong Stuff:

  • ✅ Simplifies customs paperwork and lowers cost of trading goods regionally. Traders will now only need one piece of paper, instead of 15, to show where a product is made, which makes doing business far easier.

  • A win for free trade, multilateralism, and the liberal world order, especially after, well, 2020 (🔥⛹🏾‍♂️🦇, etc). RCEP is a boost for free trade, bringing forth regional supply chains with tighter economic integration.

  • ✅ Getting Japan, China, and South Korea in agreement is no small feat. RCEP marks the first(!) time the three have been in a single free-trade agreement. Surprising until you read about the baggage from their colourful histories.   

  • Launches Asia closer to becoming a coherent trading zone like Europe or North America. This is good for us all given the region’s contributions to global commerce (especially in tech and manufacturing).

The Weak Stuff:

  • ❌ Regional behemoth India is out (for now), having waved ‘bye, Felicia’ in 2019 over worries that RCEP would not protect its industries and farmers from a surge in imports – particularly from China.      

  • ❌ The planet takes a hit and plays second-fiddle to the economy. RCEP does not cover environmental protection and sustainability, and may increase fossil fuels trade and carbon emissions.

  • ❌ Same goes for labour standards and workers’ rights protection, arguably creating a ‘race to the bottom’ (every college economics major’s pet topic).

  • ❌ The deal’s lacking on some pretty important issues, including dispute settlement, competition, and agriculture (a perennial headache). There’s also little improvement on current trade in services and investment rules.   

It always circles back to the US and China…

Despite the deal’s flaws, it’s still seen as a win for China at the (perhaps self-inflicted) expense of the US. And, in international relations, optics and posturing matter:

China is the region’s biggest economy and political powerhouse. With RCEP, China can now sell more things to more people for less, and build its economic power further (along with its Belt and Road Initiative). Sure, others in the deal will push back on China, given they aren’t stoked about China’s COVID handling and territorial claims. But China is part of the deal and can use it to shape global trade rules.

Like batteries for your Christmas toys, the US is simply not included. Nor is it part of the other regional trade deal, the Trans-Pacific Partnership (TPP), led by Obama to bring the US economy closer to Asia. The US left the TPP as part of Trump’s ‘America First’ policies. And now with RCEP done, the US is seeing its political and economic influence dip even more in the region.

What’s next?

Established economies tend to overlook Asia. They still see the world through a Euro/US-centric lens, with a cursory nod at Asia’s growing population and economy. While RCEP is hardly a blockbusting game-changer, we think it’s just Asia just getting on with the business of dominating the 21st century - rest of the world included or not.

Our ‘Follow to Not Follow’ 💊

This week, we're channeling our inner Captain Planet 🦸🏻‍♂️ and present to you: Rebecca Henderson. She's the author of 'Reimagining Capitalism in a World on Fire' and a rockstar professor at the Harvard Business School. She pushes corporations to think seriously about climate change and 'sustainable capitalism' (an oxymoron? 🤔):

Thank you for spending your time with us again this week! We hope you're enjoying reading International Intrigue as much as we're enjoying writing it for you all. And if you’re new…

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This week, we've got 2 questions for you:

  1. What international affairs story are you dying for us to cover in the coming weeks? Anything is fair game!

  2. Here's a story about the Vatican asking Instagram how in this earthly realm the Pope's account could have 'liked' a photo of a Brazilian model 🤥. So, what's the worst excuse you’ve used to pretend you weren't creeping on someone via socials?

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