The peso, already down 6% this year, could face more volatility with Trump\u2019s potential return
\n Washington
\nThe possibility of former President Donald Trump winning back the White House in November has investors preparing for various scenarios, with \u201cAmerica\u2019s backyard\u201d high on the list of markets to look out for.
\nThe Trump administration had terse relations with much of Latin America, including during the distribution of COVID-19 vaccines and when the U.S. government withheld key financial aid in exchange for stricter migration policies in Central America.
\nBelow are flash points identified by investors anticipating how a possible second Trump administration could impact the region:
\nA Good Neighbor
\nMexico has long been an emerging markets weather vane for U.S. policy and its impact on wider emerging markets, but this time domestic factors would make the situation more complex.
\nTrump\u2019s 2016 election win sent the peso down nearly 8% in a week.
\nBut this time around, the peso is already down 6% this year after slumping in June when the ruling party in the country\u2019s election closed in on a super-majority, with markets fearing constitutional changes and diminished checks and balances.
\nOn U.S.-Mexico relations, trade is expected to top the agenda, according to analysts. Trump spearheaded the revamp of the U.S.-Mexico-Canada (USMCA) trade deal and a scheduled review is two years away. The next U.S. president gets a chance to confirm whether his country will stay in it.
\n\u201cTrump is very unlikely to exit USMCA, but he might threaten to do so in order to extract higher tariffs and more inward investment in U.S. manufacturing,\u201d said Hasnain Malik, head of equity research at Tellimer in Dubai.
\n\u201cFor Mexico, more broadly, the relationship will be less comfortable, with Trump\u2019s focus on border controls potentially hurting longer-term growth of remittances.\u201d
\nThe peso is expected to be volatile ahead of the U.S. election as traders use it to hedge or to double down on the probability of Biden being reelected.
\nPersonal Relationships
\nTwo of Latin America\u2019s most flamboyant right-wing populists – El Salvador\u2019s President Nayib Bukele and Argentina\u2019s President Javier Milei – featured with Trump in February\u2019s Conservative Political Action Conference, which is the largest meeting of U.S. conservative activists and politicians. Both countries are looking for financial support from the Washington-based International Monetary Fund (IMF).
\nBack in 2018, Trump outspokenly supported Argentina\u2019s then-president Mauricio Macri in his push for IMF money, which developed into a massive $44 billion program. Milei, a public Trump-backer, is widely expected to ask for fresh cash once the current program ends in December – if not before.
\nEl Salvador\u2019s Bukele is also expected to reengage with the IMF after the U.S. election with the aim of getting a new program. An El Salvador offer in April of a bond that would bump up returns if the country failed to get either a new IMF program or a significant credit rating lift in the next 18 months was seen by analysts as a Bukele bet on Trump winning the White House and putting in a good word for him at the IMF.
\n\u201c(Bukele) is pretty tight with the Republicans,\u201d said Thys Louw, portfolio manager with Ninety One, adding El Salvador is also trying to find new financing elsewhere.
\n\u201cThe hope is that once you get a Trump administration, they\u2019ll lean on the IMF, and the IMF will be much more lenient towards them.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
The peso, already down 6% this year, could face more volatility with Trump\u2019s potential return Washington The possibility of former President Donald Trump winning back the White House in November has investors preparing for various scenarios, with \u201cAmerica\u2019s backyard\u201d high on the list of markets to look out for. The Trump administration had terse relations […]<\/p>\n","protected":false},"author":2,"featured_media":417365,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":{"0":"post-417338","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-world"},"yoast_head":"\n