South America has been a special part of my life for four decades. I have lived many years in Brasil and Peru. I am married to an incredible lady from Argentina. I want to share South America with you.
Some Mexicans are hoping that Donald Trump will prove conciliatory to them once in office. But the president-elect handily disabused them of that notion in his long-awaited first press conference this week. The peso collapsed even before he opened his mouth and once he did - with predictions of “big, big factories” built in the US rather than in Mexico - it sank to (yet another) all-time low. It fluctuated further as Mr Trump promised a hefty border tax for companies manufacturing in Mexico and construction of a border wall (not fence) for which Mexico would pay eventually. A metaphor for the choppy times that Mexico can expect with a looming Big Brother north of the border, no doubt.
Mexico’s President Enrique Peña Nieto hit back at Mr Trump with tough rhetoric and vowed to put the entire US-Mexican relationship on the table for discussion. Mexico is tipped to appoint a new US ambassador today as the next plank in its defence. From Mr Trump’s perspective, though, things are working well: Fiat Chrysler said it may have to pull production from Mexico. Ford, which has already cancelled a $1.6bn plant in Mexico, is now discussing compensation with suppliers.
Donald Trump is not the only problem facing Mexico, however. The country is digesting a gasolinazo, or brutal New Year’s day petrol price rise that threatens to fuel inflation already running at a two-year high. The government rightly admits it cannot continue subsidising the cost of fuel – Mexico imports half of its gasoline at international prices – but was unprepared for the popular fury it unleashed. Already, the increase is threatening to push up the price of staple goods like tortillas. Prepare for more pain.
Brazilians know all about economic pain but is hoping their own poor start to the year – marred by prison riots – will not overshadow the green shoots of economic recovery. The central bank threw in a surprisingly large 75 basis point cut in interest rates to help things along.
Finally, in Argentina, President Mauricio Macri has announced a “new era” for the country’s shale gas sector with a range of incentives to boost production. Such grand claims have been heard before ... Let’s see how it goes this time.
Quote of the week
“You saw yesterday Fiat Chrysler; big, big factories are going to be built in this country as opposed to another country. Ford just announced that they stopped plans for a billion dollar plant in Mexico and they’re going to be moving into Michigan and expanding, very substantially, an existing plant.... I hope that General Motors will be following and I think they will be ... I think a lot of industries are going to be coming back” - Donald Trump.
Chart of the week
Brazil’s central bank makes bold move to kick-start economy
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