Ricardo Ávila, special contribution for FLAR
March 12th, 2021
Biden means returning to normalcy: Andy Blocker
There are still several weeks to go before Joe Biden reaches the first hundred days as President, at which point, as usual, analysts will come forward with a first review of the beginning of his administration. However, it may already be said that the new tenant of the White House has begun to leave an imprint by turning into reality some of the commitments stated in his inauguration speech, delivered on January 20.
To discuss about this and other topics, the Latin American Reserve Fund arranged its most recent session of the "Cartagena Talks” series with Andy Blocker, Head of Government Affairs for the United States at Invesco, an Atlanta-based investment management firm, which manages a portfolio of USD $1.35 trillion in assets.
With a long career in the private and public sectors, this Harvard University economist with an MBA from Georgetown University is recognized as a particularly acute analyst of the political and economic reality in his country. This was made clear in his dialogue with Iker Zubizarreta, FLAR’s Chief Financial Officer, this past February 25th.
Blocker's presentation began with a look at the approval level of the Democrat president, whose figures resemble those of Barack Obama, George W. Bush, or Bill Clinton, at the beginning of their respective terms. The contrast with Donald Trump, whose overwhelming disapproval was the norm, is evident.
In that sense, "we are back to normalcy," the analyst said, though he noted that public opinion is still divided. Nevertheless, surveys show that an important number of the proposed policies are popular among the people.
That is the case with the response to the pandemic, which includes not only an effort to speed up the pace of vaccination, but also a USD $1.9 trillion stimulus plan, which got its final approval in Congress on March 10. Particularly symbolic is the United States’ return to the World Health Organization, which confirms that multilateralism is back.
An additional ratification of the intention to build bridges was the determination to return to the Paris agreement on climate change. The commitment to work toward stopping global warming was accompanied by the revocation of the permit for the Keystone pipeline, which was not well received by the public.
Another Biden break with his predecessor was seen on the treatment given to immigration and human rights issues. The most conspicuous symbol was the suspension of the border wall works, on the border with Mexico, although the end of the travel bans for nationals from several Muslim countries or the announcement about the strengthening of the program that benefits youngsters who do not have their legal documentation formalized but have excelled in fields such as academics also stood out.
And in terms of the Federal Government, most of the last-minute decisions made by the Trump administration were repealed. New rules on ethics in public administration were also released and the principle of racial equality in the recruitment of civil servants, among other provisions, were announced.
According to the polls, the best ratings for the new Government’s actions are clearly related to the management of the public health emergency or the assistance for specific groups affected by the economy’s decline, as well as returning to multilateral arenas. By contrast, measures regarding immigrants or limiting the development of the hydrocarbons sector are the least popular.
There is no doubt, however, that Biden is taking advantage of the Democratic Party's majority in both chambers of Congress. While in the Senate it is of just one vote, it ended up being enough to ensure his first major legislative success that comes with additional support to the USD $3.8 trillion reliefs package approved during 2020.
This initial step should be followed by the comprehensive infrastructure package whose discussion is to begin soon, focused on resilience and on reducing greenhouse gas emissions. In this case, what remains to be seen is whether there are bipartisan agreements in place, as well as the magnitude of the proposal involving expenditures that should exceed one billion dollars, according to Blocker.
As the White House once said, this program would be funded in part with taxes that would raise the corporate rate to 28 percent, and the marginal rate for individuals earning more than USD $1 million a year to 39.6 percent. There are other ideas in the inkwell, but we will have to wait until the initiative is submitted to analyze its implications.
On the other hand, the attitude of the Chairman of the Federal Reserve and the Treasury Secretary of the Treasury are worth noting, in terms of maintaining a great deal of the stimulus adopted regarding interest rates and the liquidity of the financial system. Having an experienced team is a trust-building factor, which is reflected in the behavior of the markets.
Current priorities could impact a number of activities. Sectors such as fossil fuels, pharmaceutical industry, construction, and technology, will experience either favorable or unfavorable winds.
Part of the explanation is found in geopolitics. While foreign policy went from volatility to predictability and multilateralism, Blocker points out that the direction is not necessarily different. This is the case with China, which still is and will remain subject to trade sanctions, unless important understandings are reached with Beijing.
With Europe, in turn, there will be more collaboration following recent antagonism, while towards Latin America the attitude should be more open. "I believe the United States is moving towards diversifying its supplier sources, which should benefit the region," Blocker says. This does neglect the fact that China will try to maintain its influence in this part of the world, and that emulation is positive for the countries south of the Rio Grande.
For the future, several unknowns are yet to be solved. Some are related to domestic politics, such as the possibility that Biden will remain in power only four years, or what may happen with the 2022 legislative elections where the majority in Congress is at stake.
In this regard, FLAR’s guest speaker believes that, to avoid risks, this administration will try to enact most of its initiatives over the first year. Whatever the answer may be, clearly, in addition to the uncertainties, "there will also be opportunities," as Zubizarreta pointed out.
And that new horizon, which opens on account of Joe Biden’s arrival to the White House, is not a minor issue. Not in the United States, nor in the rest of the world.
To watch the Cartagena Talks event with Andy Blocker, visit: https://bit.ly/3qKJMvb