2018/2019 Edition of the Global Regulatory Update

Global Regulatory Update  | Corporates Edition 59 LATIN AMERICA 1) A year of elections and implications on regulatory reform 2018 has been dubbed the year of elections in Latin America, with over 75% of the region’s voters electing new governments. This includes the large markets of Colombia, Mexico, and Brazil, where policy making has slowed due to campaign cycles and transition periods. In Colombia, centre-right Ivan Duque won the presidential election, and is expected to continue with market-oriented reforms and an emphasis on diversification and modernization of the economy. In Mexico and Brazil in particular, the direction of policymaking is highly uncertain. a) Colombia President-Elect Ivan Duque (assumes office 7 August 2018) is in a good position to govern and should be able to create coalitions and working majorities in congress. While he has promised to build a fresh cabinet, he is expected to select experienced, orthodox economists for his economic team. One of his campaign promises was a reduction in corporate taxes, but fiscal constraints may affect his ability to pay for cuts. He will also focus on reforming the pension system, incentivizing investment in infrastructure, and increasing formalization of the economy, all of which will have implications for the financial sector. Regulators will continue to make progress aligning with international financial standards and implementing the financial conglomerates law that was passed late last year. This law, a core component of Colombia’s recent OECD accession, seeks to create a more robust supervisory regime and bring capital levels in line with Basel III requirements. Other financial reforms in progress or expected include debate on the electronic securities bill and a bill to eliminate three zeros from the Colombian peso, and the creation of a comprehensive FinTech regulatory framework. b) Mexico Leftist President-Elect Andres Manuel Lopez Obrador (AMLO) (assumes office 1 December 2018) won Mexico’s president election by a landslide, and his MORENA party coalition secured majorities in both chambers of Congress, and performed better than expected at the state and local level. AMLO’s and MORENA’s success was largely driven by strong anti-establishment sentiment and deep voter anger on security and corruption issues.