Latin American elections: the questions on investors' minds

What's going to happen politically in Brazil, Mexico, Colombia and Paraguay this year?

That's the million-dollar question being asked by the likes of potential investors and economists as the four nations prepare to choose a new president.

In terms of the latter two countries, at least, no major upheavals are expected, delegates heard during industry magazine LatinFinance's 15^th Annual IDB Breakfast, held in Mendoza, Argentina.

Colombia's finance minister, Mauricio Cárdnenas, cited the importance of his country's recent congressional elections, where the results indicate continuity in fiscal and pro-growth economic policy.

Colombians return to the polling booths in May to choose a new president.

Cárdenas said during a panel discussion: "The results of the congressional elections are reassuring because the parties that won the majority of seats are the parties that have supported the economic policies that Colombia has adopted over the past few years, which means conservative, prudent economic management.

"Compliance with fiscal rule, independence of the central bank ... even under a very pessimistic scenario of a populist platform at the executive level - polls indicate it is a relatively low probability event - congress would be a guarantor of the economic management of Colombia. I don't expect any dramatic change and I don't think Colombia will change its course in terms of economic policy. Investors are comfortable."

Cárdenas' Paraguayan counterpart, finance minister Lea Giménez, said no major changes in trajectory were expected in her country, either. Paraguay goes to the polls next month.

"The story that Mr Cárdenas was mentioning is very similar to that of Paraguay," said Giménez during the event, held before decision-makers from the world of finance and politics gathered for the second day of the IDB's annual meeting.

"We've managed to shield both fiscal and monetary policies from politics," she said. "We don't think that the elections hold any sort of high risk. In terms of the political offer that we're seeing, both parties are pretty much in line with what we're doing today."

Presidential frontrunner Mario Abdo has said Paraguay will continue to tap international capital markets to fund road and port projects, after a US$530mn bond issue earlier this month.

Paraguay's President Horacio Cartes has suggested he may step down from office a month before his term ends on August 15 in order to be potentially sworn in as a senator.

In Mexico and Brazil, bigger question marks hang over their future political trajectory.

In Brazil, which heads to the polls in October, centrist candidates advocating fiscal reforms and more market-friendly measures have so far failed to garner significant support.

"In Brazil, it is very uncertain what will happen, anyone could win," said Esteban Jadresic, chief economist at Chile-based firm Moneda Asset Management.

On Mexico, Jadresic said there was a similar level of uncertainty, and cited the potential risk posed by leftist candidate Andrés Manuel López Obrador (AMLO), who is leading the polls. AMLO has linked corruption - the fight against which is his major battle cry - to neoliberalism.

The consensus among observers is that an eventual AMLO government would adopt a certain degree of pragmatism and may avoid making decisions that heavily jolt the country and impact jobs and, in turn, its support base.

Jadresic called on pro-market parties in both countries to join forces and said Mexico should hold second-round votes, claiming it could, in some cases, force contenders to sit down to negotiate and form coalitions.

S&P's outlook on the debt rating it has assigned Mexico is stable. "We're making a big bet," said S&P sovereign ratings analyst Joydeep Mukherji, who added the agency believed the country, based on its track record, could "absorb" potential fallout from the elections and US protectionist policy.

Gorky Urquita, global co-head of emerging markets debt at US investment management firm Neuberger Berman, said that, while Latin American voters want change, they are generally unlikely to be so disenchanted that they lash out at established political players and vote in a wild card.

TRANSPARENCY, REGAINING TRUST, COMMUNICATION

Governments, delegates were told, should be more transparent about what they can achieve, what they have achieved and why certain policies are being drawn up. Chief among those calling for this change was Uruguay's finance minister, Danilo Astori.

Recent corruption investigations in the region were also viewed as positive developments in terms of boosting confidence among citizens and potential investors.