Marcos Troyjo, a former deputy economy minister for Brazil, has coined the term “Trumpulencia” — a mix of turbulence, opulence and incoherence — to describe how US President Donald Trump’s policies are disrupting the world. Latin America, while not immune, has a few edges on other regions, including a wealth of energy, food and minerals that the world needs, including for the emerging artificial intelligence boom. An economist and sociologist, Troyjo is a distinguished fellow at INSEAD, a higher-education business school, and a former president of the New Development Bank. The interview was edited for length and clarity.
LATINFINANCE: You coined the word “Trumpulencia.” Can you tell us what it means and how Trump’s presidency could affect Latin America?
MARCOS TROYJO: Trumpulencia is a mix of turbulence and opulence plus incoherence. There’s incoherence because on the one hand you have this liberalizing drive towards deregulation, cutting red tape, the cheap energy shock and bringing down taxes as a percentage of GDP. This goes one way, but then on the other hand you have these very restrictive trade policies and these very local content-oriented industrial policies. It’s incoherent.
But you also have a less attractive dollar in global markets, and that might be good for some Latin American countries, especially as far as inflation is concerned. A less robust dollar, for instance, helps to keep Brazil’s inflation at bay. That’s good news.
I also see Brazil as a big candidate for welcoming the foreign direct investment that’s being shifted away from China because of the risking sentiments that you have out there. But if all of a sudden you have the US as a competitor because it’s once again deregulating and it’s cutting bureaucracy and it’s cutting taxes as a percentage of GDP, the comparative appeal that Brazil projects vis-à-vis the US would not be that powerful, and I don’t think that’s good for Brazil. Brazil is doing the opposite of the US. It is making legislation more cumbersome and it’s raising taxes.
There are a few specific benefits of Trumpulencia. For example, from 2001 all the way to 2019, the top food exporter to China was the US. The US was the most important source of Chinese foreign purchases of food. But Brazil has overtaken the US over the past five years. And that’s interesting because one of the first battles in the so-called trade war 2.0 was that the Chinese decided to retaliate against the US in food exports. For example, the soybeans, corn, pork, beef and poultry that the US was selling to China were retaliated against by the Chinese. And then you ask the question, what is the only country in the world that has the agility and the scale to cater to China with exactly those kinds of food exports? It’s Brazil.
So, Brazil is going to benefit a lot from the trade conflict between the US and China when it comes to food. Some people say, “Well, but today or in the next few hours the US and China are going to sit down to try and reach a deal.” I don’t think the Chinese are going to play with their food security. So, there might be nominal purchases that they make from one or another sector from the US, but they’re not going to throw Brazil under the bus because they see Brazil as much more of a trustworthy supplier for something that is so crucial for China’s life, which is food.
I cannot think of another juncture when the US behaves more as an emerging market than as, say, the haven for risk aversion when the global economy turns sour
Marcos Troyjo
LF: What about the financial side? There is a big debt burden in the United States and a fiscal deficit. How could this affect Mexico and other countries in Latin America?
MT: This is something that I’ve never seen before. Whenever there’s an increase in risk in the world, you have an increase in the migration of investment towards the US, especially US debt. But this is not what we’ve seen, especially since the April 2 announcement of Trump’s tariffs. So, there’s a bigger aversion to the US stock market that is coming hand in hand with a less attractive scenario for US government bonds. I cannot think of another juncture when the US behaves more as an emerging market than as, say, the haven for risk aversion when the global economy turns sour. It’s very interesting.
But once again, this scenario is tough on most countries. [But] it’s easier on Brazil. Brazil can pick up on some exports to China, especially those that were coming from the US in agriculture and energy.
The US has become a major source of instability. So, this comparative attractiveness is enhanced. It’s funny because you go to the IMF, you go to the World Bank, you go to Davos, you go to these different forums, and you keep hearing about food security, energy security, green capex, and now there’s this upcoming notion of green artificial intelligence. This alternative energy supply that a country like Brazil can offer is not only about sustainability, but it’s also about the future of artificial intelligence, which is a big consumer of energy. So once again, I think there’s more of a glass-half-full picture that could be painted for Latin America, but more specifically for Brazil. LF