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Brazil could take back Mexican flows

Concerns over president-elect Amlo could see investors rethink their Mexico exposure.


Battle cry: Mexico's president-elect Andrés Manuel López Obrador

“We created Mexico between 2012 and 2014, because Brazil was uninvestable and, as the second largest market in Latin America, investors went to Mexico instead.”

So says Fábio Nazari, head of ECM at BTG Pactual.

He concedes that Mexico helped the relative attraction during this period, by enacting many structural reforms, but his point about investors seeking an alternative market is valid.

Now that trade could unwind quite spectacularly.

Should Brazil enact pensions reform, the country will be the new regional darling. And just to compound Mexico’s challenge, its president-elect Andrés Manuel López Obrador (Amlo) appears to be willing to end the entente he had created with the markets immediately after his election victory. 

Now we have a double whammy – because we have expectations that Brazil will be in good shape while Mexico’s [outlook] is deteriorating - Fábio Nazari, BTG Pactual

If investors and bankers had been caught off-guard by Amlo’s decision to hold and then abide by a referendum on the fate of the half-built Mexico City airport – and many were – they were bowled over by his performance at the press conference.

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