One of the key aspects of a possible return of Trump to the White House is the impact it could have on trade relations with Mexico. The Trump administration had a significant focus on border controls, which could potentially hurt the longer-term growth of remittances for Mexico. The relationship between Mexico and the U.S. will be less comfortable under a second Trump administration, with potential threats of higher tariffs and more inward investment in U.S. manufacturing. This could lead to volatility in the peso ahead of the U.S. election, as traders hedge their bets on the outcome.
The personal relationships between U.S. politicians and Latin American leaders could also play a significant role in the region’s markets. Figures like El Salvador’s President Nayib Bukele and Argentina’s President Javier Milei have aligned themselves with Trump in the past, seeking financial support from the IMF. These leaders are expected to reengage with the IMF after the U.S. election, hoping for new programs or financial assistance. Bukele’s ties with the Republicans could potentially lead to leniency from the IMF, should Trump win a second term.
Venezuela’s economic outlook could greatly depend on the outcome of the U.S. election. Trump’s previous term saw increased sanctions on the oil-producing country, while Biden has aimed to reestablish ties with hopes of fair elections. The next U.S. president will likely determine the fate of Venezuela’s massive debt restructuring efforts, as the country’s ability to issue new bonds is currently restricted by U.S. sanctions. The potential for a detente between Washington and Caracas could impact the distressed prices of Venezuelan bonds, making them attractive to investors.
Cuba and Nicaragua, both led by authoritarian governments, are also likely to experience further strains under a second Trump administration. Trump’s policies towards these countries could exacerbate already tense relationships, leading to potential economic repercussions in the region. This could impact trade and financial ties with these nations, as the U.S. government’s stance on authoritarian regimes influences its foreign policies.
The ongoing trade war with China, initiated by the Trump administration and continued by Biden, could also have significant implications for Latin America. If the trade war intensifies, China might consider devaluing its currency to make exports more competitive, impacting commodity exporters in the region. Countries like Brazil, Argentina, Mexico, and Chile, which have strong trade ties with Beijing, could feel the effects of such a move on their economies.
The possible return of Trump to the White House could bring about significant changes in Latin America’s markets and economies. Trade relations, personal relationships, and geopolitical dynamics are all factors that investors and policymakers will need to carefully consider as they navigate the uncertainties of a second Trump administration. The region’s resilience and adaptability will be crucial in responding to any potential shifts in U.S. policies and global economic dynamics.