Recommended Weekend Reads
Looking at the Effects of Mexico’s Judicial Reform on FDI and USMCA, The Strait of Malacca Emerges as China’s Achilles Heel, Looking at Africa’s Financial Flows, and the Growth of Export Controls as a Strategic Weapon
July 11 - 13, 2025
Below are the reports and studies we found of particular interest this past week. We wanted to share them with you in the hope they will be useful to you. Please let us know if you have any questions. We hope you have a wonderful weekend.
America
No Checks on Power? The Effects of Mexico’s Judicial Reform on Foreign Investment and the USMCA Center for Strategic and International Studies
On September 11, 2024, Mexico’s senate approved a sweeping constitutional reform meant to fundamentally reshape the country’s judicial system, principally by having all judges in the country be popularly elected to their positions. Its architect, former President Andrés Manuel López Obrador (AMLO), had spent his six-year term railing against the Mexican judiciary, asserting that the rot of corruption, nepotism, and abuse of power had spread to judges at all levels—federal, state, and local. The genesis of the reform is AMLO’s clashes with the judicial branch. Frustrated by the Supreme Court repeatedly striking down important aspects of his legislative agenda, AMLO came to believe that the Fourth Transformation, his ambitious project to end the “neoliberal era” in Mexico, would require far-reaching constitutional changes to be truly consolidated. During a recent CSIS Americas Program event on the immediate and long-term effects of the reform, panelists and legal experts noted that the constitutional amendment was a key piece in a larger political chessboard aimed at transforming Mexico into a more consolidated state under one-party rule, with potentially disastrous consequences for Mexico’s legal and economic future.
Colombia Wages War on Cash With New Central Bank Payment Network Bloomberg
Colombia’s central bank needs to win over skeptics as it tries to modernize the financial system and reduce the nation’s heavy reliance on cash. While most Colombians now have access to financial products, adoption of digital payments lags emerging market peers such as Brazil due to high transaction costs and a lack of trust. The bank thinks it can fix these problems with the upcoming launch of Bre-B, its new payment infrastructure. Colombians are signing up for digital wallets and low-value deposit accounts at a rapid pace, but they’re still not using them much. As of 2024, about 70% of Colombian adults had at least one such account, and yet nearly 8 out of 10 transactions still take place in cash.
What Passage of the “One Big Beautiful Bill” Means for US Energy and the Economy The Rhodium Group
The fiscal year 2025 budget reconciliation legislation, commonly called the “One Big Beautiful Bill” (OBBB) and signed into law by President Trump last week, will have meaningful reverberations across the US energy sector and economy. We estimate the law will increase national average household energy bills by $78-192 and increase total industrial energy expenditures by $7-11 billion in 2035. The OBBB will cut the build-out of new clean power generating capacity by 53-59% from 2025 through 2035. All told, the law puts more than half a trillion dollars of clean energy and transportation investment at risk of cancellation. It also puts new economic pressure on operating facilities that manufacture clean energy technology—tied to nearly $150 billion of investment—given greatly reduced domestic demand for these products. Though these figures represent substantial changes from the baseline, the impacts could be even more substantial depending on how executive actions shape the law’s implementation.
‘The president is pissed’: Trump's Brazil tariff threat is part of a bigger geopolitical dispute Politico
President Donald Trump is framing his threat to slap a bruising 50 percent tariff on Brazil as a quest for justice for his friend and ally, far-right former President Jair Bolsonaro. But it was his displeasure at a gathering of emerging market nations in Rio de Janeiro over the weekend that tipped the president over the edge, convincing him to send a letter laying out the new levies, according to four people familiar with the situation, granted anonymity to share details. The White House concluded that other methods of punishing Brazil for its perceived mistreatment of Bolsonaro and its alleged censorship on social media, like sanctions, would take too long or were too complex, according to two of the people. But “BRICS tipped the scale,” said Mauricio Claver-Carone, a close ally of Secretary of State Marco Rubio and Trump’s former special envoy to Latin America.
China
The Malacca Dilemma: China’s Achilles’ Heel Modern Diplomacy
President Trump’s recent claims on the Panama Canal and the annexation of Greenland in the Arctic Circle have brought to the fore one of the most paramount notions of geopolitics: command of the sea. “Who rules the waves rules the world.” For China, there is growing concern over a major maritime chokepoint of the Strait of Malacca. All of China’s energy sea lines of communication (SLOCs) converge through this strait. Each year, $3.5 trillion worth of trade—equivalent to one-third of global GDP—passes through the Strait of Malacca, including two-thirds of China’s total trade volume, over 83% of its oil imports, and approximately 16 mb/d of oil and 3.2 mb/d of LNG. Roughly 6.4 billion deadweight tons (dwt) of cargo pass through the strait annually, with about 10 vessels entering or exiting every hour. Most of these shipments consist of fossil fuels from the Middle East and Africa.
Quest for Strategic Autonomy? Europe Grapples with the US - China Rivalry Mario Esteban, Miguel Otero-Iglesias, Cristina de Esperanza, eds., European Think Tank Network on China
The intensifying rivalry between the US and China has reshaped Europe’s strategic calculations. Building on the 2020 European Think Tank Network on China (ETNC) report, which assessed Europe’s positioning in this context, this edition re-examines the geopolitical landscape in light of the Covid-19 pandemic, Russia’s war in Ukraine, and Donald Trump’s return to the White House. This report features 22 national chapters and one dedicated to the EU, analysing the evolution of Europe’s relations with Washington and Beijing, the range of approaches to dealing with the US-China rivalry, and how these are expected to evolve.
China Wants 115,000 Nvidia Chips to Power Data Centers in the Desert Bloomberg Technology
A Bloomberg News analysis of investment approvals, tender documents and company filings shows that Chinese firms aim to install more than 115,000 Nvidia Corp. AI chips in some three dozen data centers across the country’s western deserts. Operators in Xinjiang intend to house the lion’s share of those processors in a single compound — which, if they can pull it off, could be used to train foundational large-language models like those of Chinese AI startup DeepSeek. The complex as envisioned would still be dwarfed by the scale of AI infrastructure in the US, but it would significantly boost China’s computing prowess as President Xi Jinping pushes for technological breakthroughs. Such a project also would raise serious concerns for officials in Washington, who restricted leading-edge Nvidia chip sales to China in 2022 over worries that advanced AI could give Beijing a military edge.
Africa
Financial Flows: Thematic Future Institute for Security Studies (South Africa)/African Futures
This theme on Africa’s financial flows explores the key inward monetary flows shaping Africa’s development, namely official development assistance (aid), foreign direct investment (FDI) and remittances, while also assessing the scale and impact of illicit financial flows. The analysis considers the size and impact of these flows at the regional and country levels. A Financial Flows scenario is modeled subsequently to assess the potential impact of ambitious increases in aid, FDI, remittances, and portfolio investments to Africa and a reduction in illicit financial flows.
Geoeconomics & Trade
Modern Globalization and the Nation State – The Evolving International Political Economy European Centre for International Political Economy
Unresolved political economy contradictions are becoming more evident – between a national manufacturing narrative versus actual technology-led globalization, balancing open trade versus protection, old industries like steel against the new like AI, and whether governments or major corporates are primarily driving these developments. Leaders face the huge challenges to acknowledge today’s complex interdependent world, define essential national interests against special interest pleading, and work with others to deliver their objectives. Not doing so will only exacerbate uncertainty prevalent across countries.
From National Security to Strategic Leverage International Institute for Strategic Studies
As export controls evolve from national security tools to instruments of strategic leverage, the US–China strategic competition is entering a new, more transactional phase. The recent tit-for-tat over chip-design software and rare earths reveals a shifting geopolitical battleground defined by chokepoints, coalition-building, and the race to reduce dependencies.
Soft Landing or Stagnation? A Framework for Estimating the Probabilities of Macro Scenarios Federal Reserve Board Economic Research
Abstract: Amid ongoing trade policy shifts and geopolitical uncertainty, concerns about stagflation have reemerged as a key macroeconomic risk. This paper develops a probabilistic framework to estimate the likelihood of stagflation versus soft landing scenarios over a four-quarter horizon. Building on Bekaert, Engstrom, and Ermolov (2025), the model integrates survey forecasts, structural shock decomposition, and a non-Gaussian BEGE-GARCH approach to capture time-varying volatility and skewness. Results suggest that the probability of stagflation was elevated at around 30 percent in late 2022, while the chance of a soft landing was below 5 percent. As inflation moderated and growth remained strong through 2024, these probabilities reversed. However, by mid-2025, renewed tariff concerns drove stagflation risk back up and the probability of a soft landing lower. These shifts highlight the potential value of distributional forecasting for policymakers and market participants navigating uncertain macroeconomic conditions.