On the day of the opening ceremony of the Rio Olympics, UK trade minister Lord Price issued a rallying cry. “The Rio Games reminds us that sport unites everyone as equals. And business can unite us too,” he told an audience at British House at the foot of the statue of Christ the Redeemer. Lord Price wanted Brazilian investors to know that, post-Brexit, the UK was “open for business”. In May, before the referendum result was known, he led the UK’s first trade mission to Argentina in 10 years, saying: “The growing economies of Latin America offer huge opportunity for British business.”

The charm offensive is a sign of the Government’s willingness to look at new regions for British trade, especially Latin America. The UK exported £7bn in goods and services to South America in 2015, down somewhat from its peak of £8.8bn in 2013. Can Britain push that number higher once again? And can Latin America make up for any economic shortfall as the UK disentangles itself from the European Union?

David Fuller's view

Here is a PDF copy of The Telegraph article.

The short answer to the headline above is yes, and it is a welcome challenge in terms of governance to achieve trade ties with a great many countries following Brexit. 

Moreover, the timing is propitious in terms of Central and South America.  Governance has often been a challenge within the region but is certainly on an upswing following recent changes in government for Brazil and Argentina. 

This is reflected in market performance, shown by the Brazil IBovespa Index.  It is temporarily overstretched following this year’s second strong rally and some consolidation is due before long.  However, this is the best recovery since the 2010 peak near the earlier 2000 high, and it has also broken the progression of lower rally highs.  Consequently, a pullback is likely to be a buying opportunity for the medium to longer term.  Another sign of this potential is the improvement in the Brazilian Real which slumped to a low in 2015 but has subsequently seen a significant recovery, indicating that international investment is returning to the country.

The Argentine Peso had been one of the world’s weakest currencies for several years prior to reaching a climactic low in February.  Given improved governance, this should be at least a lengthy medium-term period of stability for the Peso.  Moreover, the Argentine Merval Index has ranged higher during this period and is currently in a reaction and consolidation phase.  I would give the upside the benefit of the doubt while the progression of higher reaction lows is maintained.