The world is being turned upside down, writes Brian Caplen. US banks used to worry about Latin American risk but now the region's banks are concerned about US risk and the next Trump tweet.

Potential trade wars, interest rates and populist politics will dominate discussions at this year's annual meeting of the Inter-American Development Bank (IDB) in Mendoza, Argentina. 

But for the most part the concern will not be about developments within Latin America. The major worry will centre around US trade policy under Donald Trump, along with rises in US interest rates as the Federal Reserve negotiates a return to more normal monetary conditions following years of quantitative easing. 

Even with key elections in Brazil, Mexico and Colombia this year, and with hardline populist candidates riding high in the polls, it is the populist politics of US president Donald Trump that have analysts worried. Any volatility in the region's financial markets is more likely due to a provocative Trump tweet than political developments locally. 

For the first time ever, investors need to price US risk into their calculations on the outlook for Latin America. A secondary consideration could be economic slowdown in China, as there is so much business now done between China and Latin America. As for Latin America, the view is that populist political candidates will likely moderate their positions once in office and that orthodox fiscal and monetary policies will prevail. 

In fact, Mr Trump's pronouncements on steel tariffs are being received as a wake-up call for Latin America to pursue with more vigour improved trade links with other parts of the world and within the region. Brazil's finance minister, Henrique Meirelles, speaking at the World Economic Forum on Latin America, said that there was now a stronger motivation to advance trade negotiations with Europe and other regions. "We are in advanced discussions with the EU for a trade agreement, we are already talking to the UK about a future trade agreement after Brexit," he said.

Chile's former finance minister, Andres Velasco, goes further. Noting the progress in a newly formatted Trans-Pacific Partnership without the US (signed in Santiago by 11 countries on March 8), and adding that George HW Bush once proposed a Free Trade of the Americas agreement, he said: "Donald Trump is not going to propose it but let's do a Free Trade of the Americas without the US." 

It's a bold idea and the IDB meeting in Mendoza is the perfect forum in which to start the discussion.

Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen

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