Many of you have asked me what will happen in Latin America now that Trump is in power. Well, we hardly know that will happen in the US, let alone south of the proposed wall. Although some of the impact across Latin American currencies has already been witnessed, what most of you are interested in is trade. We are not clairvoyants, so we’ve put together some preliminary analysis from reliable sources and our own experience in the region to give us a flavour of how things in our region could change as a result of Trump, and how that will affect you.
The Economist.
1- Mexico
Mexico will no doubt feel the consequences of Trump’s political and economic management much closer than the rest of the region. If you’re dealing with Mexico, which already has some problems of its own, expect some volatility. Those of you who set up a base in the US to tackle Mexico or vice versa, will be closely watching what’s next with NAFTA. We still think the US has a very strong influence on Mexico and I would personally be very surprised if suddenly US companies pull out of this attractive market and leave UK companies (who, at least until Brexit happens, benefit from a EU-Mexico FTA) to it.
2- Protectionism
A concern that protectionism can increase with Trump in power is not specific to Latin America. Most Latin American leaders have recently manifested a desire to open their economies and work together and they have not supported protectionist trends seen elsewhere. The US is a key trading partner of all Latin American countries and if the US does go for a much stronger protectionist stance, these countries will suffer. However, most have already diversified their export destinations (except for Mexico, which still exports 73% of its goods to the US) and have diminished their reliance on the US.
3- China
Some analysts have pointed out that breaking TPP negotiations has shifted power from North America to China. China is already monumentally influential in the whole of Latin America. I would expect that influence to increase (read this interesting article in The Economist for more). My concern is that infrastructure projects, for example, financed and built by the Chinese, leave fewer opportunities for UK products to be specified. But if we are talking about infrastructure in Latin America, I am currently more concerned about the Lava Jato scandal in Brazil and its regional repercussions in cases such as that of Odebrecht than about China.
4- Europe
Will the situation in the US bring Latin America closer to Europe? And to Britain? Well, Britain’s priority now is clearly not Latin America. Neither is Europe’s. Britain and Europe are already trading pretty freely with countries such as Mexico, Colombia, Peru and Chile. I can’t see why this would stop, even after Brexit, or as a result of Trump. I would personally love the UK and the EU becoming closer to the Mercosur (Brazil, Argentina, Uruguay, Paraguay) but I think this is a process very separate from what goes on in the US (and I have little hope for it…).
5- Colombia
The US has been a strong ally of the peace process in Colombia. Trump has recently confirmed support for further aid, but we need to watch this space in terms of how US-Colombian relationships will shape up under Trump.
6- Other impacts
We also have to consider Trump’s effect in Cuba, which can be pretty crucial for the Caribbean island. A lot has been said about Venezuela, but I think Venezuela has enough problems totally of its own making to blame Trump for their disastrous political, social and economic situation. This BBC article also points out that Trump’s immigration policy can have an effect on the amount of money sent home by immigrants from countries particularly in Central America, and on their unemployment rates. Similarly, the article points out that those countries in Latin America who have the USD as their national currency (Ecuador, Panama, El Salvador) could suffer if interest rates go up in the US.
In sum, the influence of Trump is still unclear, and uncertainty seems to be the word at the moment. Which for us working with projects in energy, infrastructure and mining, for example, is not good. However, I don’t think that Trump’s effect on our region will be catastrophic by any means. Trump took office in a time where most Latin American economies are soundly managed and more prepared than they used to be to manage tough rides.
Outstanding analysis!
Great analysis. I believe the TPP might just have a positive impact without the US. Chile is the up and coming country to do business with. Stable economy and government with a high focus on entrepreneurship and investment in Brain Gain.