Page 66 - Bloomberg Businessweek - November 19, 2018

Bloomberg Businessweek The Year Ahead 2019 Global Economics

Hot Seat Mark Carney

▷ The Bank of England governor will be among the
first responders if there’s a Brexit-induced calamity

There is no precedent for the situation The 53-year-old Canadian is operating
Bank of England Governor Mark Carney in a politically toxic environment in which
may find himself in next year. If the U.K. anything he says about the consequences
crashes out of the European Union in of an ungraceful exit becomes fodder
March without a deal, he’ll be on the front for public debate. His comments tend to
line of efforts to repair the damage. incense pro-Brexit lawmakers, including
A swift drop in the pound would likely Jacob Rees-Mogg, who’s dubbed Carney
be the most immediate reaction, as it “the high priest of ‘Project Fear.’ ”
was in the aftermath of the Brexit refer- Of course, there’s always the chance
endum in 2016. But the dislocation of the that Brexit goes smoothly. In that case,
British financial system and the poten- the BoE may have to swiftly pivot from a
tial disruption to transport and supply stance of crisis-fighting to one of more
chains may inflict more lasting harm. The conventional tightening. For Carney
The 53-year-old BoE’s response could include emergency at least, the problem won’t last much
Canadian is operating interest-rate cuts to bolster growth—or beyond next year: After two extensions
in a politically toxic even increases to support the currency— of his term, he’s pledged to leave his post
environment plus a flood of liquidity to banks. in 2020. �Craig Stirling 17

Mexico

▷ Business is braced for big changes when a leftist government takes office

Mexico’s Andrés Manuel López Obrador won’t and pledged an orderly transition. The airport
be sworn in as president until Dec. 1, but his decision shattered that calm, triggering a sell-off
honeymoon with investors came to an abrupt in the nation’s currency, stocks, and bonds.
end in late October. That’s when he announced The project’s termination sends a troubling
his administration would cancel construction message to investors: Existing contracts can be
of a $13 billion airport near the capital that’s pulled at a moment’s notice. Today it’s an air-
already one-third complete—a move he justified port, tomorrow perhaps it’s oil contracts, the
on the basis of a controversial referendum. next day maybe mining concessions. “We can-
MATTHEW LLOYD/BLOOMBERG long been wary of the left-wing politician, precedent is,” wrote XP Investimentos analysts
While investors in Mexico and abroad have
not stress how bearish the Mexico City airport
Mexican assets rallied following the presidential
in a report. “In the blink of an eye, Mexico has
election in July as AMLO (the acronym by which
been all but downgraded to Banana Republic sta-
tus by the international financial community.”
he’s widely known) met with local businessmen