Donald Trump may not be good news for Brazil. The country is just beginning to see signs of political stability after the impeachment and ouster of Dilma Rousseff.
The reaction of the country’s equity markets and ETFs tell the mood in the country. The Brazilian stock market has seen an excellent run in the wake of anticipated and actual change at the helm of the government. Hopes of a better future after witnessing recession for several quarters has also helped stocks rise.
However, after the election of Donald Trump, the iShares MSCI Brazil Capped ETF (EWZ) slipped. It fell 3.3% on November 9 and followed that up with a nosedive by 7.9% the next day.
For a country that hopes to erase the recessionary trend in 2017, a hardliner is not good news, especially when President Michel Temer is expected to tighten the government’s purse strings in order to improve government finances.
Trade is another issue
Going by Trump’s views on trade deals, Brazil may be threatened on the exports front. Though China is the largest export destination for Brazilian goods, the US remains in the top three, and restrictions on Brazilian exports (BRFS) (FBR) in the form of duties or tax levies would further hurt the already broken Brazilian economy.
This is true for Latin America (ILF) in general and Mexico in particular. Trump has taken a tough stance on NAFTA (North American Free Trade Agreement), which would impact trade with Canada and Mexico. Mexican equities have been hit harder than Brazilian ones with the iShares MSCI Mexico Capped ETF (EWW) falling 8.5% on both November 9 and 10. The Mexican peso has tanked as well. However, the iShares MSCI Canada ETF (EWC) has not been hurt too much. It actually posted a small rise on November 9.
Next, let’s look at how Trump’s presidency could affect Russia.