LatAm Viva For 1 July, 2016

Brexit dust-up By John Paul Rathbone  July 1, 2016 Britain voted “out”, sterling collapsed, the dollar rose, gold rocketed, stocks lost $3trn…and emerging markets? After a sharp hit, most ended the week much where they had begun.  Why? Not because nothing had happened on an island far far away. Rather, because of the premise that the extraordinary uncertainty generated by Britons voting to leave the European Union means the Fed may now keep US rates lower for longer. Perhaps it will. Either way, Mexico is taking no chances that the Fed will stay pat. On Wednesday, it hiked its benchmark interest rate by 50 basis points to 4.25 per cent to shore up the peso. That makes it the first central bank to act in such a way in the post-Brexit volatility and, so far, the approach seems to be working. The peso recovered slightly, although it is still on the floor. Remarkably, in real terms the Mexican peso has not been this weak since the Tequila crisis of the mid-90s. What other effects might Brexit have on Latin America? The honest answer is: nobody knows. Nobody in Britain knows what is going to happen in Britain:  there is no government, no opposition and no plan. So one can speculate endlessly. (Will it help or hinder the rising number of Brazilian debt workouts, following Oi’s bankruptcy? Hmm. Will it prompt the Colombian government to reassess the risks of its own peace process referendum?  Perhaps. Will it fire up Donald Trump even more, putting pressure on the Mexican peso? It already has. More gratuitously, what does it say about the British political class generally? Que se vayan todos!) Usefully, Chris Sabatini lays out some immediate concrete Brexit impacts on Latin America. In essence: some English Commonwealth countries in the Caribbean may lose their special access to the EU market; Mercosur’s trade renewed trade talks with the EU will get pushed way down Brussels’s list of priorities; and the prospect of John Bull puffing out his chest will surely knock Argentine claims to the Falklands/Malvinas islands into “fugedaboutit” territory, at least for now. Quote of the week “Over the next year to 18 months we will probably see filings of the same size as Oi if not even bigger” - Fábio Rosas, a specialist in debt restructuring at Brazilian law firm Souza, Cescon, Barrieu & Flesch Advogados Other views Beyondbrics Latin America’s trillion-dollar opportunity for climate-smart investing Graph of the week Mexican peso, adjusted for inflation The week in review Mexico raises interest rates to shore up peso   Currency has taken a hammering since Britain voted to leave EU     Colombia gets it right: hard work, ceasefire, then referendum   Two plebiscites — one a divorce, one a marriage     Brazilian bankruptcies create opportunities for debt investors   Deepest recession yields record individual and corporate defaults     ‘Three amigos’ reinforce commitment to more integrated N America   Heads of US, Mexico and Canada eye greater trade co-operation as populist criticism of deals grow     Luis Curi of Chery wants Brazil and Lebanon to deepen their ties   The businessman says Brazil’s auto market crisis is an ‘embarrassment’ to be overcome     Chilled-out Brazilians wake up to Olympics terror threat   From taxi drivers to police, locals are being trained to spot trouble in a nation unused to attack     Political losses from Brexit will be deep and enduring   Decision to hold referendum will go down as one of history’s great blunders, writes Richard Haass     Rio de Janeiro’s favelas braced for Olympics violence   Brazilian cities have a history of police killings ahead of major events