NEW YORK (Reuters) – Buyers are bracing for a variety of scenarios, with former President Donald Trump likely to win re-election in white areas in November, with “America’s backyard” topping the list of markets.
The Trump leadership had close ties to much of Latin America, including during the distribution of COVID-19 vaccines and when the U.S. government withheld key financial backups in exchange for strict migration policies in Central America.
Below are identified flash issues buyers are anticipating how a potential second Trump leadership could impact the patch:
a good neighbor
Mexico has long been an emerging market hotbed for US policy and has implications for broader emerging markets, but beyond domestic factors this will further elevate the situation.
Trump’s 2016 election victory sent the peso ailing only 8%.
Although on the back foot, the peso is already down 6% this week and looks set to fall further in June after the ruling party closed in on a super-majority in the country’s election, sending markets reeling from constitutional changes and a lack of checks and balances. Was afraid of.
On members of the US-Mexico family, the business is expected to manage the timetable, according to analysts. Trump led the revival of US-Mexico-Canada (USMCA) trade and a scheduled evaluation is 2 years away. The then US President will get a chance to confirm whether his country will be in it or not.
“Trump is very unlikely to pull out of the USMCA, but he could threaten to do so in order to secure higher tariffs and more inward investment in American manufacturing,” said Hasnain Malik, head of fairness analysis at Telmar in Dubai.
“For Mexico, more broadly, relations will be less comfortable, with Trump’s focus on border control potentially harming long-term growth of remittances.”
The peso is expected to be riskier ahead of the US election as investors look to hedge or double down on Biden’s re-election hopes.
personal relationships
Two of America’s most flamboyant right-wing populists – President Nayib Bukele of El Salvador and President Javier Meili of Argentina – joined Trump at February’s Conservative Political Motion Convention, the most important gathering of American conservative activists and politicians. Both countries are seeking financial assistance from the Washington-based Global Financial Treasure (IMF).
Again in 2018, Trump openly supported Argentina’s then-President Mauricio Macri for IMF cash, which evolved into a larger $44 billion program. Miley, a public Trump-supporter, is largely expected to solicit the unsold money as soon as the stream event ends in December — if not sooner.
El Salvador’s Bukele can be expected to re-engage with the IMF in the upcoming US election with an attempt at a new program. El Salvador in April traded a bond whose returns could rise if the country did not receive a new IMF program or a significant credit rating hike within 18 months, which analysts called Bukele’s estimate. saw. Trump benefited the White House and set up a fair deal for them at the IMF.
“(Bukele) is in quite a tight spot with the Republicans,” said 90One’s portfolio supervisor Thys Louw, adding that he may look for new financing elsewhere, including El Salvador.
“The hope is that once you get the Trump administration, they will become more dependent on the IMF, and the IMF will become more lenient toward them.”
Venezuela bans possibilities
The way Venezuela conducts its presidential election on July 28 may decide whether it has any chance of rejoining the world nation or not. In his first term, Trump increased sanctions against the South American oil producer; Biden has attempted to reset ties with a view to ensuring fair elections.
The then-U.S. president will most likely decide whether a major debt restructuring will be carried out – Venezuela owes at least $60 billion on distant bonds – which calls for new bond issuance, a recent U.S. Forbidden due to restrictions.
“Venezuela is one of the countries most likely to see change under the Trump administration,” said Bradley Wickens, CEO of Large Achieve Funding Control. Background of a standoff between Washington and Caracas.
“Not sure this will continue under Trump.”
Relations with Cuba and Nicaragua, led by authoritarian governments, are also expected to escalate further under Trump.
china trade war escalation
Barriers and additional costs imposed on trade with China during the Trump administration have been kept in place by Biden, further turning up the heat on Beijing.
Some analysts are expecting that if the trade war with China intensifies, Beijing will likely decide to devalue its currency to more aggressively pursue exports. Such travel could be realized through commodity exporters in Latin America, with Brazil, Argentina, Mexico and Chile being Beijing’s largest regional trading partners.
(Reporting via Rodrigo Campos; Additional reporting via Libby George; Enhancements via Jamie Freed)
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