The outlook for Brazil's real has weakened for the first time since President Jair Bolsonaro took office at the start of the year as an eruption of political tension cast doubts on his pension reform drive, a Reuters poll showed.
The median estimate of 26 analysts surveyed April 1-4 for the Brazilian currency is 3.70 per dollar in 12 months. This projection is 4.7 percent stronger than its value on Thursday but ended three months of improving prospects.
"The pension reform will be approved only after being severely watered down, reducing its fiscal impact", Bruno Lavieri, an economist at the 4E consultancy, said. He pegged the real at 4.05 in one year, one of the most pessimistic views.
This week, officials sought to calm market fears sparked by Economy Minister Paulo Guedes' threat to quit if other government members and allied lawmakers did not support plans to drastically change Brazil's retirement system. Progress of any diluted version of the initiative to save over 1 trillion reais ($260 billion) over the next decade "should frustrate current expectations, leading to a devaluation of the real", Lavieri said.
In a sign of increasing bearish sentiment towards the currency, eight of 11 strategists that answered a separate question saw risks for the real skewed to the downside - the first negative balance in five months.
Benign external conditions should offset Brazil's homegrown problems. "We remain relatively optimistic on BRL ... along with EMFX as a whole, due to reducing global headwinds for emerging markets", said Simon Harvey, FX Analyst at Monex Europe.
A likely rate cut in the US may prompt a sell-off in the US dollar, he added. And "with Chinese authorities expected to intervene to maintain a high growth rate ... an increase in external demand suits Brazil's balance of trade".
In Mexico, a sense of delicate stability for the peso persisted among analysts. The median forecast for the peso in 12 months was 20.0750 per dollar, 4.3 percent weaker than its value on Thursday and not far from recent surveys.
Investors continue to see the country's hawkish central bank as a counterweight against worries arising from frictions with the US and populist overtures by President Andrés Manuel López Obrador, or AMLO as he is commonly known.
"The (peso) exchange rate is likely to remain stable as long as interest rates stay high and spending is kept under control", Leonardo Flores, FX director at Multiva, said. "We could still see some volatility due to outside factors".
Promising to end what he calls neoliberal projects in Latin America's second largest economy, López Obrador said this week he would pursue "a better distribution of wealth", while dismissing low growth estimates from his own team.
Doubts over future government moves were one of the reasons cited by Fitch Ratings behind the decision to slash its forecast for the expansion of Mexico's economy this year to 1.6 percent from 2.1 percent.
Analyst discontent with Mexico's administration is becoming more evident. There is "uncertainty caused by AMLO's chaotic and incoherent economic policies", said Harry Van Schaick, regional editor for Latin America at Oxford Business Group.
All 9 economists that answered a separate question saw risks for the Mexican peso tilted to the downside. After heavy losses during 2014-2016, it has been trading around 19.0 since 2017 with a range of approximately +/- 2.0 pesos.
The survey also reflected the usual firm expectations for the pesos of Chile and Colombia as well as the Peruvian sol. Even the Argentine peso got a respite, with strategists anticipating less depreciation for the beleaguered currency.