Plan B. That was the recurring theme in Latin America this week as Mexico tries to prepare for whatever a Donald Trump presidency will bring; China tries to recalibrate Asia-Pacific trade; and Colombia and Farc rebels try another stab at peace.
Mexico, the country most impacted by the US election shock, went into full “Keep Calm and Carry On” mode. José Antonio Meade sought to reassure investors that the economy is Trump-proof. But both he and the Bank of Mexico had to admit there is still a lot of wait-and-see going on. That’s a polite way of saying “things could get plenty worse yet”.
The peso currency, pulped since the election, has steadied a bit in recent sessions, which gave Banxico pause to raise rates by “just” another 50 basis points, to 5.25 per cent. To put that in context, some analysts had been recommending a 100-200bp increase after the election. But the central bank has still jacked up the cost of borrowing by a whopping 200bp this year, including this latest move as the peso’s inexorable slide has deepened.
And with so little yet known about who Mr Trump plans to appoint to key jobs or what his policies will end up being, Banxico took the prudent step of warning the markets more raises may be needed. Mark your calendars for December 15, the next monetary policy meeting, and a day after the US Fed’s decision that is expected to deliver a 25bp increase.
So could this be the calm before the storm? Mr Trump has toned down some of his rhetoric but still seems wedded to deporting as many as 3m criminal immigrants, building at least sections of his “beautiful” border wall (for which this Israeli company is already gearing up) and renegotiating the North American Free Trade Agreement. Mexico is hoping that won’t end up killing Nafta and slapping 35 per cent tariffs on manufactured goods, another idea he has flirted with. There have been earnest messages from Claudia Ruiz Massieu, the foreign minister, telling compatriots north of the border that “we’re with you”. But no concrete Plan B yet.
Another country needing an urgent Plan B is Venezuela. Spare a thought for the shoppers elated at seeing powdered milk back on shelves, but unable to buy it because it costs a fifth of the minimum wage - and more than half the price of a subsidised bag of 14kg of basic goods.
Colombia’s government and FARC rebels tried their own Plan B, signing a new and “better” peace deal after their last one was rejected in a referendum.
Brazil, meanwhile, scored another high-profile head on a spike for alleged corruption: the former governor of Rio de Janeiro state was arrested for allegedly extracting bribes for the $500m renovation of the Maracanã stadium for the 2014 Fifa World Cup, and other projects.
Quote of the week
“Mexico is so cheap now. As soon as people realise [Trump] is not going to drop a nuclear bomb on Mexico, that’s a pretty good buy” – Jan Dehn, head of research at Ashmore Investment Management.
Chart of the week
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