How Will the US Election Affect Emerging Markets?

In the week leading up to the November 8th presidential election in the United States, Frontier Strategy Group will be publishing a series of analyses examining the potential impact on multinationals of a victory by either Donald Trump or Hillary Clinton. This post highlights the potential election outcomes and overall impact on the global business environment. The next several posts will evaluate specific effects on Latin America, emerging markets that are most strongly affected by potential changes in US policy post-election.

Although economic expert consensus indicates that Clinton is the favored candidate to win, we have seen this year that voting behavior can surprise experts and lead to results that were otherwise unforeseen, despite the predictions of national opinion polls in the weeks leading up to the election, such as with Brexit and Colombia’s rejection of the peace agreement with the FARC.

Therefore, it is crucial that multinationals operating in the United States and emerging markets are equipped with scenario and contingency plans that consider both a Trump and Clinton victory. As such, they should take into account the potential degree of the effect that could surround each candidate around five main areas of business impact: financial volatility, trade, immigration, foreign relations and domestic issues.

FSG’s Scenarios

The upcoming election will not only determine the next president of the United States; it will also determine the composition of the country’s House and Senate, which are both currently controlled by the Republican Party. As such, the composition of Congress will set the boundaries of policymaking regardless of the winning presidential candidate.

  • Frontier Strategy Group has created a scenario matrix for this election, where our base-case scenario for the election result (1 – Clinton in Gridlock), with 75% likelihood, is a Clinton victory with a Republican Congress. This scenario would be the least disruptive for doing business in Latin America, as most policymaking would remain under the status quo.
  • One alternative, less likely scenario for the election is Clinton in Charge (2), under which Clinton experiences little to no political gridlock and is able to successfully implement her policy agenda.
  • On the other hand, Trump in Charge (3) would create significant disruption to business in Latin America as Trump would have the liberty to execute his policy agenda, which is replete with uncertainties and threats that specifically involve LATAM.
  • One last alternative scenario is Trump in Conflict (4), under which a Republican Congress would serve as a check on Trump’s actions and limit policy implementation.

Regardless of which candidate wins, multinationals should expect changes to policymaking in the United States that will have inevitable ramifications on operations in Latin America and create challenges for annual strategic planning and long-term market prioritization for multinationals in the region.

In our series this week, we will explore each scenario as it applies to financial markets, trade, immigration, and foreign and domestic policy.

US election scenario likelihood

Please click the following links to access the rest of this blog series:

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