Polarising elections have brought Mexico
outsider presidents implementing radical agendas with big implications for business. Meanwhile, in the United States
, the outcome of a special counsel investigation looks set to define the presidency of Donald Trump.
The Americas New governments take power
' Latin America's two biggest economies ' started the year with radical new presidents following polarising elections. In the United States
, domestic pressure will build on President Donald Trump as a special counsel investigation into Russian electoral interference reveals damaging information on the 2016 campaign and Trump's business dealings. In Venezuela
, there will be no end in sight for the country's economic, humanitarian and migration crisis as President Nicol's Maduro entrenches his power. Finally, incumbent governments in Argentina
will turn their attention to upcoming general elections, set to take place in autumn.
Latin America & the Caribbean'
, new leftist president Andr's Manuel L'pez Obrador, or Amlo
, will use his majority in Congress to roll back the previous administration's opening up of the energy sector, heightening concerns for extractives companies and investors. Following a 16 percent increase in the minimum wage and reductions in civil servants' salaries, Amlo will look to re-orient other government spending
towards the working class. Increased public spending and political uncertainty will likely lead the Mexican peso
(MXN) to decline further vis-'-vis
the U.S. dollar (USD).
Moves to formalise public consultations
and a recall referendum allowing voters to remove the president will heighten medium- and long-term political risks. In security policy, an active participation of the military in public security tasks as part of a new National Guard
will be put to a referendum in March. It is likely to be approved. Measures to tackle the root causes of organised crime and drug trafficking ' such as through expanding access to education ' are much-needed, however unlikely to result in an immediate fall in homicides or crime. After the United States-Mexico-Canada-Agreement (USMCA or Nafta2.0) is ratified, Amlo is likely to have a cordial but largely distant relationship with U.S. counterpart Donald Trump.
Also read: Mexico: How will doing business change under Amlo?
Jair Bolsonaro, Brazil's
new president, will use his first year in office to enact sweeping reform of the country's public finances. Bolsonaro
' a far-right figure elected on a law and order and anti-corruption platform ' will seek to overhaul the unsustainably expensive pension system
through an increase to the minimum retirement age and a reduction in pension benefits. While necessary, the pension overhaul will likely damage Bolsonaro's approval ratings and relations with coalition partners, depleting his political capital. The pro-business administration will move to reduce corporation tax, introduce a simplified tax code, shrink the budget deficit
, and privatise non-strategic assets of state energy giants Petrobras and Eletrobras.
Bolsonaro's government will grant the police greater licence to use lethal force and move to reduce restrictions on gun ownership.
The moves will be welcomed by foreign investors. Justice minister Sergio Moro
, previously the head judge on the investigation into the Operation Car Wash
corruption scandal, is likely to redouble efforts to detect and punish corruption. Bolsonaro's government will grant the police greater licence to use lethal force and move to reduce restrictions on gun ownership, both heightening public insecurity
in the one-year outlook. In foreign policy, the government will prioritise political and economic ties with the U.S.
over competitors such as China, Japan and the European Union.
The humanitarian, political and economic crisis of Venezuela
will likely worsen, as President Maduro's grip on the security services and the country's institutions tightens. Ongoing regional political isolation, especially with a hostile Brazil under right-wing Bolsonaro, will be partially offset by important bilateral ties
, including with China, Russia and Turkey. Oil production will continue to fall due to lack of investment, labour shortages, ill-maintained facilities and low oil prices. Venezuela will continue defaulting on loans and bonds
, posing significant risks to creditors and bondholders. The exodus of Venezuelans fleeing the crisis will remain a major political topic in neighbouring countries and beyond, while also leading to continued friction at South America's borders.
Also read: Venezuela: Oil sector decline illustrative of wider economic collapse
Important elections will take place throughout the region. In Argentina
, President Mauricio Macri is set to seek re-election in October amid an IMF bailout and a recession. The economic difficulties point to a likely victory for a moderate opposition candidate. Given corruption scandals surrounding former president Cristina Fern'ndez Kirchner, who will likely stand as the candidate for Peronism's leftist wing, prominent moderate Peronist hopefuls are set to benefit, such as Sergio Massa and Juan Manuel Urtubey. Presidential races will also be held in Bolivia, El Salvador, Guatemala, Panama and Uruguay.
In the United States
, President Trump will face mounting political and judicial pressure as the special counsel investigation into alleged Russian interference in the 2016 presidential election unearths damaging information about his campaign's contacts with Russia and his business dealings
. While Trump and administration officials will move to limit and denigrate the investigation and its special counsel Robert Mueller
, it will receive important financial and political backing from the Democrat-controlled House of Representatives and moderate Republican lawmakers. The lower house will initiate impeachment proceedings against Trump if the special counsel's investigation finds that he ordered co-operation with Russia. However, these would likely be blocked by the Republican-held Senate. Congress's composition will impede efforts to repeal Obamacare and raise funds for a southern border wall, reducing Trump's capacity to deliver key election pledges
The race to become the Democratic Party's presidential candidate in the 2020 election
will also begin in earnest. This will pit senior party figures, such as Joe Biden and Bernie Sanders, against upcoming names, including Texas' Robert 'Beto' O'Rourke and California's Kamala Harris, who largely favour greater government intervention in the economy.
Also read:'United States: Developments in Mueller investigation likely to prompt political upheaval
, Prime Minister Justin Trudeau's Liberal Party will face the Conservative Party, led by Andrew Scheer, in what is likely to be a close general election race in October. A narrow victory for Trudeau's Liberals is the most likely outcome.