Brazil to the far-right, Mexico to the left. At first glance, this is the most evident political shift Latin America’s largest economies opted for in 2018 when they elected, respectively, Jair Bolsonaro and Andrés Manuel López Obrador. The political rupture also brings a new economic dawn for both countries and naturally, financial markets have reacted to it. While the new administrations in each country have only just begun, moves in asset pricing suggest a shift in how investors perceive each country — with gleaming perspectives for Brazil and gloomy ones for Mexico.
“Regarding Brazil, there is hope about what needs to be done, while in Mexico there is fear about what can be done,” says Luciano Sobral, an economist at Santander Brasil. His assessment is backed by a survey carried out by the bank during a conference with senior management of 129 companies and more than 300 institutional investors earlier this month.
When asked which market they expected to be the best-performing in the region this year, 68 percent of respondents picked Brazil, up from 22 percent in 2018. Meanwhile, only 5 percent chose Mexico. According to Mr. Sobral, this shows the high expectations regarding Brazil’s business-friendly reform agenda — and the concerns about the contentious approach the Mexican president has shown towards financial markets so far.