Donald Trump reached the White House by bringing out the worst in the United States’ electorate. Will his administration now bring on the worst – both economically and politically – for Latin Americans?
The initial signs are nothing if not ominous. Not since the days of gunboat diplomacy a century ago has a yanqui leader treated the countries south of the US border and their citizens so badly. Trump infamously branded Mexican migrants rapists and murderers. Guatemalans, Ecuadoreans, and Colombians, though not explicitly mentioned, did not feel particularly reassured.
With US participation in the 12-country Trans-Pacific Partnership (TPP) dead in the water, the next question is whether Trump will make good on his vow to renegotiate the rules governing the North American Free Trade Area, or even to pull out of NAFTA altogether. Trade agreements with Central America, Colombia, Chile, and Peru could also be at risk.
No one (perhaps not even Trump) knows what the new administration will do in this regard. A US president can renounce these pacts unilaterally. But the volumes and volumes of implementing legislation were enacted by Congress, and can be modified only by a congressional vote. The US economy (and businesses) would not benefit from an overnight and wholesale abandonment of the rules governing not only trade in goods and services, but also investment, intellectual property, and government procurement across much of the Western Hemisphere. The Republicans may no longer be the party of free trade, but it is hard to imagine a Republican-controlled Congress willingly jumping off that cliff.
For Mexico and the Caribbean basin, trade with the US is crucial. For the countries of South America, which trade as much or more with Asia – especially China – and the European Union, macroeconomics and finance are far more important.
The expectation of a surge in infrastructure spending in the US under Trump has caused a number of commodity prices to soar (overall uncertainty has also sent investors packing into metals such as gold and copper, which function as safe-haven assets). So, in the short run, mineral exporters like Peru and Chile are benefiting. But the run-up in prices may turn out to be short-lived, especially if Chinese growth continues to slow.
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