Latin America braces for Trump on trade, energy
Because of its close commercial ties with its northern neighbor, ties that feature a growing reliance on US natural gas and refined oil products, Mexico is the most exposed to any about-face over trade policy in Washington.
The value of the Mexican peso plummeted in the immediate aftermath of the 8 November US presidential election.
Trump has indicated he wants to renegotiate the North American Free Trade Agreement (Nafta) between the US, Canada and Mexico, and scrap the ambitious Trans-Pacific Partnership (TPP) promoted by President Barack Obama's administration. And he has advocated the use of trade tariffs to try to preserve US jobs.
Mexican officials privately fear a Trump administration would impose duties on US gasoline or gas exports to Mexico to finance a wall he has vowed to build along the border to halt illegal immigration.
"Mexico needs access to our markets much more than the reverse, so we have all the leverage," Trump said in a March 2016 memo entitled "Compelling Mexico to pay for the wall."
But after his 20 January inauguration, Trump may be inclined to tread more gingerly to avoid retaliation, as US oil companies such as ExxonMobil, Chevron and Sempra vie to participate in the historic opening of Mexico's oil and gas industry, from vast Gulf of Mexico acreage to logistics to an under-served fuel market.
Similarly, US companies have an interest in ensuring that US commercial policies help, rather than hinder, their presence in Brazil's sub-salt and Argentina's shale gas formations, even if some could be drawn back home on Trump's pledge to cut US corporate taxes and ease environmental regulations.
Mexico's Pacific Alliance partners, Colombia, Peru and Chile, also are concerned about the durability of trade deals with the US, the main supplier of refined oil products to Latin America. US Gulf coast refiners will want to ensure that US policies do not dampen overseas appetite for their products, as Washington's new administration rethinks renewable fuel initiatives that have vexed regional importers.
In Chile, a leading importer of US gasoline, diesel and more recently LNG, foreign minister Heraldo Munoz said yesterday the US president could unilaterally tear up its trade agreement with a 180-day notice, but implementing legislation would require congressional action.
"Clearly we cannot predict what Trump will do, but we need to have a dialogue with him to safeguard our interests," Munoz said.
He added that Trump could alter Washington?s approach to Cuba and fragile peace talks in Colombia. Both have implications for US energy investment.
Peru's official response to Trump's unexpected victory was muted. But Mexico's preoccupation with the US could delay Lima's effort to renegotiate a money-losing LNG supply agreement with Mexican state-owned utility CFE.
Buenos Aires was forced to backtrack after President Mauricio Macri and foreign minister Susana Malcorra openly expressed their preference for Trump rival Hillary Clinton before the election. "We will have to adapt to the new scenario," Malcorra said. Macri wants to boost US relations after years of tension under his predecessors.
Latin American countries with cooler US relations have much at stake as well. Although Ecuador has no free trade agreement with Washington, the oil-producing country's dollarized economy needs an open trade environment. "If Ecuador cannot have access to the US market for its non-oil exports, I am afraid there will be a serious shortage of dollars, because right now our only sources of fresh money are loans and (revenue from) exports," says Ecuador's former ambassador to the US Luis Gallegos.
Some are predicting a re-energizing of leftist movements in the region. Trump "is so simple minded that he is going to provoke a strong reaction in Latin America, which will gather more support for progressive governments here, as it happened when (the younger George) Bush was in office," Ecuador's president Rafael Correa said in July.
An early test of Trump's approach to the region could be Venezuela, where the government regularly blames Washington for a severe economic and political crisis. Aside from targeted sanctions on Venezuelan officials for corruption and human rights abuses, and some diplomatic initiatives, the US government has kept a distance. But a Trump administration could be forced to take a stance if the crisis deepens or spills over into Colombia.
Ironically, Caracas could actually find an ally in Trump, who has espoused closer relations with Russia, one of Venezuela's key political patrons. Geopolitical tensions that would resurface if the US scuttles a nuclear accord with Iran and Trump follows through on controversial rhetoric toward other Middle East countries could drive up the oil price, boosting revenue for the Venezuelan regime.
But there is no clear path for commodity prices. Trump's plan to dismantle regulations, open more US acreage to drilling, and revive the coal industry could have a bearish impact, a trend that would benefit the region's energy importers.