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Weekly Report - 30 June 2016 (WR-16-25)

Assessing the impact of Brexit on Latin America

At first blush the impact on Latin America of the decision by voters in the United Kingdom (UK) to leave the European Union (EU) in a referendum on 23 June would seem to be small. Trade flows are not large even if investment by the UK, in certain countries in the region, is more significant. But even if the UK definitively leaves the EU at some stage in the next few years, trade and investment might not dip. There is a concern that, with international markets reeling, access to crucial credit could become more difficult for Latin American countries, and borrowing more expensive. But the real fear for the region is the impact of Brexit on the EU, its second-largest trading partner and first investor, which could become more inward-looking or in the worst-case scenario start to implode, falling prey to resurgent nationalist forces with protectionist agendas, with a concomitant effect on globalisation. Not knowing whether to expect ripples or huge tsunamis from Brexit seriously complicates policymaking.

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