Politics takes centre stage (again)

The economic data from Latin America have continued to improve over the past month, but this has been overshadowed by developments on the political front. The scandal that has engulfed Brazil’s government has taken centre stage and, while there are still many ways that events could play out, most signs suggest that President Temer’s administration is on its last legs. The encouraging news is that, so far at least, the latest political turmoil does not appear to have triggered a sharp tightening of financial conditions – meaning that Brazil’s economy may yet emerge relatively unscathed. Political developments elsewhere have been less explosive, but are still worth keeping an eye on. Presidential elections are scheduled to take place in Chile in November, and the race is heating up ahead of primaries in July. In Mexico, state elections on 4th June will be a useful bellwether of the political mood in the country ahead of presidential elections due next year. A victory for the left-leaning Morena party could weigh on the peso and bond markets.