3 octubre, 2016 by Investa Trust News

Brexit : The impact on Latin America

On the 23th June, United Kingdom, underwent a referendum by which 52% of British citizens voted for the “Brexit option, i.e., to withdraw from the European Union. However, the United Kingdom must follow the procedure set in article 50 of the Lisbon Treaty, which sets a term of two years to negotiate the exit of a member from the European Union to formalize its exit, reason why said withdrawal does not occur automatically.

On the days following the victory of Brexit, the First Minister, David Cameron, announced his resignation from office; and the local its currency the pound Sterling, as well as the Euro suffered strong depreciations.

Although the Brexit has generated a worldwide uncertainty scenario, given that the commercial relations between Latin America and the British nation are limited, for Latin America the implications seem to be less severe than for countries having greater commercial relations with the United Kingdom.

In this sense, the consequences of Brexit for Latin America would be:

  • Countries from the Pacific Alliance (Mexico, Peru, Chile and Colombia) have free trade agreements with the European Union, therefore exit of the United Kingdom from it would leave without effect said treaties regarding said jurisdiction. This would imply the need to negotiate new commercial treaties between the mentioned countries and the United Kingdom.
  • Countries such as Brazil, Argentina and Uruguay have not entered into free trade agreements with the European Union; therefore, the commercial relations with the United Kingdom would not be affected.
  • Investment of British companies in Latin-American could become much more dynamic when freeing itself from the bureaucratic procedures of the European Union. However, a possible devaluation of the sterling pound could affect investment capacity in foreign companies.
  • Tourism from the United Kingdom to Latin American countries could be affected due to a possible devaluation of the pound, which would affect the purchasing power.
  • In the case of citizens having double nationality, i.e., that hold the Latin American nationality as well as the European one, they could lose the right to live or work in the United Kingdom without need to make prior immigration formalities.

 

Image: David Dibert – Unsplash

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