Mateo Fernandez, Americas region analyst at Worldwise Analytica

Mateo Fernandez

Unraveling the Threads of Americas' Geopolitics: Insight, Precision, Vision

Historic EU-Mercosur Deal and Economic Strains Reshape the Americas' Future

The Americas marked a milestone with the historic finalization of the EU-Mercosur free trade agreement after 25 years of negotiations. The agreement is set to open new markets for South American agricultural exports, including processed soy, beef, and corn. However, its implementation faces stiff opposition from France and other European countries concerned about environmental compliance and agricultural competition. For the Mercosur bloc, the deal presents an opportunity to counterbalance protectionist trends globally, but delays in tariff reductions and strict environmental clauses may dampen its immediate impact.

In Canada, rising unemployment poses significant economic challenges. November's jobless rate reached 6.8%, the highest in eight years outside the pandemic period. This downturn has increased expectations of a half-percentage point rate cut by the Bank of Canada, as sluggish growth and labor market weaknesses put pressure on policymakers. A prolonged economic slowdown could strain fiscal resources and dampen public confidence.

Brazil faces renewed inflationary pressures, prompting a likely interest rate hike by its central bank. The projected 75-basis-point increase reflects concerns about currency depreciation and unanchored inflation expectations. This highlights Brazil's broader struggle with maintaining economic stability amidst global financial volatility and domestic fiscal challenges.

Mexico grapples with migration challenges as President-elect Donald Trump's deportation proposals loom. Budget constraints in Mexico's migration agencies undermine the country's capacity to manage a potential influx of deportees. Meanwhile, President Claudia Sheinbaum seeks a bilateral agreement to avoid receiving third-country migrants, reflecting growing regional tensions over U.S. immigration policies.

The Arctic has become a focus for Canada's security strategy in response to Russian aggression. Canada's announcement of new consulates in Greenland and Alaska and the appointment of an Arctic ambassador underscore the region's growing geopolitical significance. Increased cooperation with the United States will be critical in securing this frontier amidst global warming and intensified competition.

Short-term risks include trade disruptions from tariff policies and regional economic slowdowns. Over the long term, the successful implementation of the EU-Mercosur deal and strategic regional partnerships will shape the Americas' geopolitical and economic trajectory.

Geopolitical Risk Assessment for the Americas
(07-12-2024)

The Americas face a mixed geopolitical outlook with advancements in trade, challenges in economic stability, and rising migration pressures. The finalization of the EU-Mercosur trade deal is a major milestone, though its full impact will hinge on European ratification and adherence to environmental clauses.

Geopolitical Risk Index

Developments to Follow for the Americas (See All Global)