These Elections Could Reshape Latin America

Latin America’s two largest economies will hold presidential elections in 2018. That’s a nerve-racking prospect for investors who’ve become used to decades of policy continuity and could see Mexico and Brazil take radical turns. After 36 years of free-market technocrats, Mexicans could anoint a leftist firebrand who’s threatened to take on Donald Trump. In Brazil, where the populist Workers’ Party held sway for 13 years until 2016, a scandal-fatigued electorate is flirting with a former army captain nostalgic for military rule. “You will have a lot of investor angst” during the elections, says Daniel Kerner, an analyst at risk consulting firm Eurasia Group Ltd. “You will have in both cases capital flight, pressures on the currency from investors getting scared—in Mexico’s case that there will be a reversal of reforms, and in Brazil’s case, low commitment to reforms.”

What’s driving voters’ yearning for change? For starters, neither President Enrique Peña Nieto in Mexico nor his counterpart in Brazil, Michel Temer, will stand for reelection, and their approval ratings are so dismal that their endorsements would hardly help a hand-picked successor. Their administrations have been dogged by endless corruption allegations, and neither has been able to spur the economy to grow fast enough to satisfy the middle class.