On a recent windy afternoon at the Oval, I found myself among a group of South African financial executives who had moved their headquarters from Johannesburg to London.
When the first results came in from Africa’s most sophisticated nation showing that the post-Mandela era of African National Congress rule was in danger, there was enormous anxiety about what that would mean for the country’s fragile economy.
If the ANC were to align itself with left-wing progressive parties, then free markets, including trading on the vibrant Johannesburg Stock Exchange, could be threatened. A better option was considered to be a coalition or working agreement with the centrist Democratic Alliance, successor to the anti-apartheid Progressive Party.
Elections in three of the world’s largest emerging markets – India, South Africa and Mexico – have each produced, in their own way, unexpected results.
They have shown that democracy is alive and well on three continents. They also offer the prospect of reviving investment opportunities in a world torn by conflict, geopolitics, fragmented trade and declining purchasing opportunities.
Mexican wave: Claudia Sheinbaum hopes to increase exports to the US
India has long offered the most intriguing possibilities. China’s fall from grace in Western foreign ministries has revived interest in South Asia. One frustration for the United Kingdom has been the failure to achieve a free trade agreement between Britain and India.
The Hindu nationalist BJP, led by Narendra Modi, dramatically failed to secure the majority of 273 votes that would allow it to govern alone.
The BJP’s loss of control led to a £1.2bn sell-off when the results came out. In fact, some £3.4bn of value has been wiped out in the last month. But some analysts see a positive side.
In a government that is more inclusive of opposition voices, there may be less focus on nationalism and more scope to spread the benefits of a dynamic 7 percent growth rate. However, the Indian market premium, achieved as a result of government stability, is dissipating. Global fund managers are likely to abstain and the heads of the world’s major financial groups, who have flocked to Mumbai in recent times, could take a breather.
But many remain underweight in Indian investments. And it is possible that – in an effort to shore up confidence – restrictions on foreign funds could be eased.
Unlike in South Africa and India, the result in Mexico has, if anything, strengthened the control of the ruling party. The landslide victory of Nobel Prize-winning scientist Claudia Sheinbaum, the country’s first female president, produced optimistic headlines and images in the Western press. She promises an “honest government, without influence or corruption.”
Markets were less happy and the peso plummeted and the main stock index fell 5 percent.
With a population of 130 million and membership in the United States, Mexico and Canada trade group, the country is the second largest economy in Latin America after Brazil and the 15th largest in the world. Sheinbaum wants to continue President Andrés Manuel López Obrador’s pro-worker populist policies. But as the right-wing US Heritage Foundation noted, it will take more than good words to end a “dangerous course that has strengthened drug cartels and led to skyrocketing overdoses and uncontrolled migration to the United States.”
Mexico should be well positioned to benefit from its proximity to the United States and from the efforts of American multinationals to unlink production from China.
Last year, Mexico overtook China as the largest exporter to the United States, selling $593 billion (£474 billion). But insiders are cautious, aware of the strength of the cartels and widespread extortion and protection rackets. Overcoming such deep-seated obstacles will be difficult.
Amid the furor of Britain’s own election campaign and this weekend’s elections to the European Parliament, with fears of a right-wing sweep, attention to the results of South Africa, India and Mexico has been scant and the reaction of the largely negative market.
In the long term, the triumph of moderation in India and South Africa should be a force for economic stability and expansion, and a net advantage for domestic investment. Mexico’s fight against violence makes its future an enigma.
But the importance of three of the new world powers for global production and investment should not be ignored.