Financial Markets and Politics: The Confidence Game in Latin American Emerging Economies

Abstract

This article focuses on the interactions between politics and financial markets in emerging economies. More precisely, it examines how Wall Street reacts to major Latin American political events. The case study focuses on the 2002 Brazilian presidential elections. The first section of the article provides a critical review of the available literature. The second section presents an empirical study of Wall Street analysts' perceptions of the 2002 presidential elections in Brazil, based on reports produced by leading Wall Street investment firms. The final section uses polling and financial data from previous Brazilian elections to place the events of 2002 in comparative historical perspective.

Keywords: Emerging economies, financial markets, international political economy, Latin America

JEL Classification: P16