The shattering impact of “Brexit” affects the UK in the most direct and profound manner where uncertainty reigns; the pound sterling has already plummeted to a 30-year low, the UK Prime Minister has resigned (and half of the Labour shadow cabinet), and the country is left facing not only a painful and messy withdrawal from the EU, but also the real prospect of the break-up of the UK itself; this alongside the mammoth challenge of healing a society left deeply divided by the bitterness and vitriol that characterized the UK´s Remain/Leave campaign. Whatever else happens, the UK will never be the same again. Nor the EU, for the traumatic divorce from its second largest economic partner goes to the heart of Europe´s bold vision of integration and cohesion built on common economic, social and political interest. Not to mention its formidable achievement in building the most important single trade bloc the world, a pillar of the interconnected, interdependent global economy. Brexit signals a move towards greater global fragmentation. If Brexit at its heart signals a vote against a more integrated society, a vote against an open society and a return to a society bound by isolationism and protectionism fueled by populism, then what does the UK´s decision mean for the European Union, for the US and for the rest of the world?

Brexit is a step backwards for the “European dream” of greater integration and cooperation, the bright optimism and shared idealism replaced with more skepticism and dissent. A decade ago the EU embarked on the greatest and most ambitious expansion program of its history, and then came the Great Recession 2008-2009 from which economic recovery has been painfully slow and difficult. Austerity measures have taken their toll, the hangover of the Greek debt crisis remains, high levels of unemployment endure, the region is dealing with an unprecedented migrant crisis, plus a growing dissonance by EU citizens between national sovereignty and the EU bureaucratic focus on total integration.

Meanwhile, post Brexit global economic uncertainty is likely to set in, fueled by the constitutional issues facing the UK, the prospect for political contagion (or “Nexit”) in other EU states, increasing disintegration and isolationism and the impact in the US from the fall presidential elections. Old certainties are fading away and a new, uncertain global order is being established. Markets crave stability and important potential risks lurk in these unknowns. An enormous portion of the global map is now wrapped in uncertainty not least in Latin America.

Post Brexit, global financial markets responded swiftly and Latin America is not unaffected in the short-term, nor will it be immune to the potential secondary impacts of Brexit. The immediate reaction to the UK´s decision to leave the EU saw a sharp fall in the Mexican peso, which plunged 7.1% against the dollar to a record low of 19.50 to $1. Mexico´s Central Bank, Banco de México (Banixco) provided reassurances that Mexico has the necessary financial resources to defend the peso from speculators and will use them as required and that a decision on whether to increase Mexico´s key interest rate will be made at the June 30th board meeting following an analysis of the impact on inflation. Mexico´s Treasury Secretary announced a cut in federal spending by 31.7 billion pesos ($1.6 billion dollars) as a stability measure.

With an uncertain global context, a flight by investors from emerging markets to safer assets can be expected. In Latin America this means slower and scarcer inward investment flows and that affects our economic outlook. So Mexico will likely be affected by wider global financial market impacts, weaker foreign direct investment inflows from the UK, Europe and of course, the impact of Brexit on the US, Mexico´s key trading partner.

There are clear political parallels in the US with the UK; the same populist rhetoric has taken hold across important segments of the US population who undoubtedly feel isolated or believe they have been abandoned by the impact of globalization, whether in their jobs or prospects, benefits or wellbeing. US global disengagement, to a greater or lesser degree, is a key theme in the US presidential campaign discourse. The presumptive Republican nominee has made no secret of his plans to erect a border wall between Mexico and the US, impose high tariffs, rescind the NAFTA agreement along with other US trade alliances, withdraw from global military engagement and deport undocumented Mexicans in the US. The likely Democratic nominee has referred to the need for the renegotiation of agreements deals that are beneficial for the American people, and has opposed many aspects of the Trans Pacific Partnership agreement. Emboldened by the Brexit vote in the UK, the sentiment in the US towards a greater level of protectionism and self-interest may grow.

Mexico faces these fresh challenges as it deals with existing issues: the ongoing impact of currency devaluation, lower oil prices and sluggish economic growth, as well as heavy trade dependence on its near neighbor. It is a challenging scenario indeed, but it is an important moment to focus efforts. Taking advantage of the many trade agreements that Mexico already has legally instrumented is key to Mexico´s prosperity. The conditions to diversify its trade and address the productivity lag must be encouraged, so as to boost Mexico´s competitiveness.

The shattering impact of “Brexit” affects the UK in the most direct and profound manner where uncertainty reigns; the pound sterling has already plummeted to a 30-year low, the UK Prime Minister has resigned (and half of the Labour shadow cabinet), and the country is left facing not only a painful and messy withdrawal from the EU, but also the real prospect of the break-up of the UK itself; this alongside the mammoth challenge of healing a society left deeply divided by the bitterness and vitriol that characterized the UK´s Remain/Leave campaign. Whatever else happens, the UK will never be the same again. Nor the EU, for the traumatic divorce from its second largest economic partner goes to the heart of Europe´s bold vision of integration and cohesion built on common economic, social and political interest. Not to mention its formidable achievement in building the most important single trade bloc the world, a pillar of the interconnected, interdependent global economy. Brexit signals a move towards greater global fragmentation. If Brexit at its heart signals a vote against a more integrated society, a vote against an open society and a return to a society bound by isolationism and protectionism fueled by populism, then what does the UK´s decision mean for the European Union, for the US and for the rest of the world?

Brexit is a step backwards for the “European dream” of greater integration and cooperation, the bright optimism and shared idealism replaced with more skepticism and dissent. A decade ago the EU embarked on the greatest and most ambitious expansion program of its history, and then came the Great Recession 2008-2009 from which economic recovery has been painfully slow and difficult. Austerity measures have taken their toll, the hangover of the Greek debt crisis remains, high levels of unemployment endure, the region is dealing with an unprecedented migrant crisis, plus a growing dissonance by EU citizens between national sovereignty and the EU bureaucratic focus on total integration.

Meanwhile, post Brexit global economic uncertainty is likely to set in, fueled by the constitutional issues facing the UK, the prospect for political contagion (or “Nexit”) in other EU states, increasing disintegration and isolationism and the impact in the US from the fall presidential elections. Old certainties are fading away and a new, uncertain global order is being established. Markets crave stability and important potential risks lurk in these unknowns. An enormous portion of the global map is now wrapped in uncertainty not least in Latin America.

Post Brexit, global financial markets responded swiftly and Latin America is not unaffected in the short-term, nor will it be immune to the potential secondary impacts of Brexit. The immediate reaction to the UK´s decision to leave the EU saw a sharp fall in the Mexican peso, which plunged 7.1% against the dollar to a record low of 19.50 to $1. Mexico´s Central Bank, Banco de México (Banixco) provided reassurances that Mexico has the necessary financial resources to defend the peso from speculators and will use them as required and that a decision on whether to increase Mexico´s key interest rate will be made at the June 30th board meeting following an analysis of the impact on inflation. Mexico´s Treasury Secretary announced a cut in federal spending by 31.7 billion pesos ($1.6 billion dollars) as a stability measure.

With an uncertain global context, a flight by investors from emerging markets to safer assets can be expected. In Latin America this means slower and scarcer inward investment flows and that affects our economic outlook. So Mexico will likely be affected by wider global financial market impacts, weaker foreign direct investment inflows from the UK, Europe and of course, the impact of Brexit on the US, Mexico´s key trading partner.

There are clear political parallels in the US with the UK; the same populist rhetoric has taken hold across important segments of the US population who undoubtedly feel isolated or believe they have been abandoned by the impact of globalization, whether in their jobs or prospects, benefits or wellbeing. US global disengagement, to a greater or lesser degree, is a key theme in the US presidential campaign discourse. The presumptive Republican nominee has made no secret of his plans to erect a border wall between Mexico and the US, impose high tariffs, rescind the NAFTA agreement along with other US trade alliances, withdraw from global military engagement and deport undocumented Mexicans in the US. The likely Democratic nominee has referred to the need for the renegotiation of agreements deals that are beneficial for the American people, and has opposed many aspects of the Trans Pacific Partnership agreement. Emboldened by the Brexit vote in the UK, the sentiment in the US towards a greater level of protectionism and self-interest may grow.

Mexico faces these fresh challenges as it deals with existing issues: the ongoing impact of currency devaluation, lower oil prices and sluggish economic growth, as well as heavy trade dependence on its near neighbor. It is a challenging scenario indeed, but it is an important moment to focus efforts. Taking advantage of the many trade agreements that Mexico already has legally instrumented is key to Mexico´s prosperity. The conditions to diversify its trade and address the productivity lag must be encouraged, so as to boost Mexico´s competitiveness.