2018/2019 Edition of the Global Regulatory Update

Treasury and Trade Solutions 60 AMLO’s prudent actions after the election suggest that, at least for now, he is committed with sending the right signals to markets and avoiding uncertainty. The key policy priorities of the next administration will be the restructuring of public finances, where the main idea is the centralization of all government procurement through an online platform/store managed by the Ministry of Finance; the expansion of social programs, mainly focused on two big programs to help the elderly and the youth; and the boost of public investment. With respect to the latter, they are proposing Public-Private Partnerships (PPPs) to crowd-in private investment in specific projects and regions (for example, the construction of a train to connect the Gulf of Mexico with the Pacific Ocean, the construction of a train to connect the southern touristic corridor, and the construction of two new oil refineries). On financial policy, the new government wants more credit options for Micro, Small and Medium Enterprises (MSMEs) to increase productivity. They argue that MSMEs create around 70% of jobs in Mexico and only 30% of them receive credit from the formal sector. In order to do so, they propose to use development banks as a tool to help entrepreneurs and to boost credit (another idea is to merge the two state-owned development banks Bancomext and NAFIN). On financial regulation, the Mexican Banking Association (ABM), at least in the short- term, does not see signs of any sudden threat or imminent change in banking and financial regulation. Therefore, the intention is to communicate effectively to the new administration the sector’s priorities to ensure the continuity of work in relevant areas such as cyber security, AML, identity theft, etc. c) Brazil The political and policy outlook for Brazil remains unpredictable. Citizens, like those in Mexico, are deeply frustrated with the political establishment and corruption, which is heavily influencing the electoral cycle this year. Elections will take place in October 2018, and are currently characterized by strong preferences for populist politicians on the right and left. Centrists candidates who would most likely advance the pro- market agenda of President Michel Temer’s administration remain uncompetitive due to party liabilities and ongoing scandals. As such, economic policy post-election is highly uncertain at this stage, and the existing reform agenda has largely stalled (dim prospects for the outstanding and much needed pension reform this year). However, some analysts predict that whoever wins the election will be forced to continue the reform agenda given severe fiscal/budgetary constraints.