Counter/Consensus: Argentina political risk, Chinese Consumer Boycotts, Global ESG and Canada-India Relations

1.  Argentina (Counter)

Down or out? Last week we issued a downside ratings watch for Argentina as part of the October release of our Global Political Risk Ratings, corresponding to a ratings transition from BBB+ to BBB, connoting a worsening risk profile (interested readers can find an overview of our ratings work here). And we expect things to worsen further in the months to come.

While the Argentine public’s optimism in the face of austerity and currency devaluation is commonly seen as remarkable, we took the view in late August that the limit to the public’s patience was approaching amid underlying discontent among President Javier Milei’s most ardent supporters (who may have disliked the necessary watering down of certain elements of his economic reform agenda) and detractors (who may have chafed at seeing the core elements of his policy agenda enacted despite a fractious congress). 

Since then, we have seen this dynamic play out in Milei’s early September veto of an opposition-led Senate measure which would have raised pensions in line with triple-digit inflation rates, but also would have raised government expenditures by 1.2% of GDP. This fed into a noteworthy softening in the topline metrics feeding into Argentina’s risk rating, namely net approval of Milei and the public’s overall optimism surrounding the country’s trajectory. 

Given the high base, the challenging economic situation in Argentina at present, and the prospect of Milei-led reforms causing further near-term economic pain, we expect both metrics will decline further, in turn worsening Argentina’s risk profile in the months ahead.

A companion assessment by Morning Consult economists adds nuance to our understanding of these dynamics through our Argentina Index of Consumer Sentiment (chart above). Similar to Argentina’s risk rating, the Index — which is constructed from five component data series assessing both current conditions and future expectations — has seen two consecutive months of decline beginning in July 2024, paralleling the decline in the political indicators underlying our risk rating.

Crucially, it’s the latter set of indicators (those focused on future expectations) that are doing most of the work driving deteriorating economic sentiment, while current buying conditions actually ticked up slightly month-on-month.

On Oct. 10, Argentina’s National Institute of Statistics and Censuses released the CPI figures for September. In line with projections, topline inflation eased to a rate of 3.5% m/m or 209% y/y. As price increases continue to moderate, we expect the current buying conditions series will continue to improve. But trends in the forward-looking components of the Index, coupled with our parallel assessment of related political dynamics, suggest there are still storm clouds on the horizon. 

2. India-Canada Relations (Consensus)

It’s all coming back... Canadian Prime Minister Justin Trudeau’s decision to expel India’s top diplomat in Ottawa has dramatically upped the ante in the ongoing bilateral feud over allegations that the Indian government supported the assassination of a Sikh activist on Canadian soil in June 2023.

In October of last year, we noted a precipitous drop in Indian views of Canada surrounding the incident that was visible in our data. What is noteworthy at present is that Indian sentiment has seen virtually no recovery in the intervening year (first chart below), in a clear sign of how much the incident has rankled the public, with the decline in sentiment supported by a sharp uptick in the share of Indian adults holding “very unfavorable” views of Canada (second chart below).

Where do things go from here? At a minimum, we expect this week’s developments — which are just beginning to be priced into our data — to drive net favorability of Canada among Indian adults back toward the low-water mark we observed in Q4 2023. We expect movement in that direction to begin in the coming week.

Beyond Canada, there’s also a risk of renewed strain in India’s relations with the United States: An Indian delegation is holding meetings with U.S. officials this week over a parallel assassination attempt in which New Delhi’s involvement was also suspected. But we think this is a tail risk and — if history is any guide — we expect U.S.-India relations to remain in stable territory barring statements by high-level administration officials (e.g. President Biden) surrounding the incident. 

As distinct from Trudeau’s administration, the Biden administration has remained relatively mum on the incident over the past year, dodging a question about it in a recent press briefing and largely addressing the matter in private, in the interest of preserving deepening bilateral strategic ties in a bid to shore up a regional hedge in competition with China. So far the gambit seems to have worked: Indian favorability toward the United States has remained far flatter surrounding the incident compared with Canada, barely budging from about 65 points in the months just afterwards (though today it sits closer to 58).

Beyond their strategic implications, from a corporate advisory perspective incidents like these are also worth watching for their commercial impact, with our own research finding that views of foreign countries can shape consumers’ views of companies and products from those countries, raising reputational risks and potentially driving boycotts. For those keeping an eye on these dynamics, we see limited risk on this front for U.S. companies doing business in India at the moment. But we think Canadian companies should keep their eyes peeled.

3. Chinese Consumer Boycotts (Consensus)

The West and the rest. Earlier this week we launched a Chinese Consumer Boycotts Tracker to provide foreign multinationals with insight into the likelihood and drivers of Chinese consumer boycotts — as well as mitigation strategies — alongside data on Chinese demand for foreign-made goods and services and related purchasing considerations.

If you suspected that the risk of Chinese boycotts was on the rise amid strained relations between Beijing and the West, you’re correct. As of September, 57% of Chinese adults say they would be willing to boycott a foreign company doing business in China over the next 12 months, extending a marked 2024 rebound in Chinese consumers' boycott propensity. U.S.-China relations specifically are at least partly to blame: The rebound has coincided with renewed U.S. efforts to ban TikTok, and has largely undone the softening of boycott sentiment that followed U.S. President Joe Biden's meeting with Chinese President Xi Jinping at the November 2023 APEC summit.

While non-trivial shares of Chinese consumers are willing to boycott foreign companies, it’s worth noting that a solid majority of them — led by higher-income and college-educated segments of the population — remain interested in purchasing the goods and services they offer, raising both the risks and the rewards for foreign firms. 

On this front, quality, product safety, and affordability lead consumers' purchasing considerations among most core demographic groups, followed closely by strong company-China ties. For the geopolitically inclined business leader, the latter item highlights the potential advantages of a well-managed relationship with Beijing and with its people, with Chinese consumers citing corporate statements praising China as the most surefire way to end a boycott, should one arise.

For those interested in monitoring Chinese boycott risks on a forward-looking basis, we’ll update the tracker quarterly. Check it out here. 

4. ESG (Counter)

RIP ESG? News has been rife with reports of the death of corporate purpose amid a conservative backlash that has thrown sand into the gears of the ESG juggernaut. Counter-narratives have responded that ESG is not only alive and well, but likely to accelerate. Our data from 19 of the world’s largest economies on consumer demand for corporate activism shows both narratives come up short.

As others have noted, ESG is a big tent, with a number of hot-button issues contained within it. Furthermore, most analysis tends to focus exclusively on U.S. consumers’ views. By disaggregating the issues and looking beyond the United States, we can see notably different trends on various components of ESG. Take corporate action on climate change to start. 

In Europe and Africa, support for companies taking a stance on climate change has declined somewhat over 2024. In the Americas, support remained flat, while Asian consumers increased their support for corporate activism in this space. 

We see a similar trend in consumers’ views of whether companies should take a stance on unionization. Recent months have seen Europeans show more skepticism towards companies’ role in this regard, while Asian respondents showed more enthusiasm. 

To throw a controversial social issue into the mix for comparison, we see more stability in consumers’ views over the course of the year on corporations taking a stance on access to abortion. 

In a surprising trend, Europeans’ support for corporate action on climate change, unionization, racial equality and transgender rights all declined over the course of 2024. Europe has seen a spate of elections in which right-wing parties have challenged the status quo using platforms favoring lower immigration and more independence from the European Union — an institution that is often perceived as synonymous with stringent environmental regulation and social progressivism. On the other hand, Asian consumers are beginning to demand more from corporations on issues like climate and sustainability as well as social issues like unionization. 

For more information on the expectations of global consumers around corporate action on key social issues, see Morning Consult’s Global Corporate Purpose Tracker, which will update with refreshed country-specific data next week.