Latin America Equity Research

03 August 2018

Brazil Equity Strategy

Elections matter for performance . . . and show there
is upside for Brazil

One could link market performance around elections to specific global events that Latin America and Brazil Equity
happened at the time, thus dismissing the importance of the political story. To try Strategist
to isolate global events from local events, we look at all the 21st century elections Emy Shayo Cherman
AC

in Argentina, Brazil, Chile, Colombia, Mexico, and Peru and compare market (55-11) 4950-6684
performance to the MSCI EM. We found that it pays to be invested in LatAm emy.shayo@jpmorgan.com
during election cycles, and there is a great performance difference depending Bloomberg JPMA SHAYO <GO>
on whether the preferred market candidate wins or loses the race. For Brazil, Banco J.P. Morgan S.A.

we look at the relative performance to EM during the current electoral cycle Nur Cristiani, CFA
(defined as six months before and after the race) compared to past Brazilian (52-55) 5540-9374
nur.cristiani@jpmorgan.com
elections (since 1994), to Mexico in 2018, and to all LatAm races of the 21st
J.P. Morgan Casa de Bolsa, S.A. de C.V.,
century. Conclusion: Brazil is underperforming big (Figure 1). J.P. Morgan Grupo Financiero

 There is upside in Brazil, independent of the election result. In the current Diego Celedon
election cycle (April-July), Brazil is down by 10.3% relative to MSCI EM (-9% (56-22) 425-5245
diego.celedon@jpmorgan.com
YTD). This is worse than the period before past Brazilian elections since 1994
Inversiones J.P. Morgan Limitada
(-4.6%), a lot weaker than the pre-electoral period in Mexico (+5.6% relative to
MSCI EM and -1.8% in absolute terms), and also weaker than the average of all Jainik R Mody
(91-22) 6157-5114
25 LatAm elections of the 21st century (-0.2% relative to MSCI). Pages 4-6. jainik.mody@jpmorgan.com
 It pays to be invested during the full election cycle in LatAm, but not J.P. Morgan India Private Limited

before the race in Brazil. Average accumulated performance for LatAm Pedro Martins Junior, CFA
around election cycles (six months before and after the race) is 3.6% greater (55-11) 4950-4121
pedro.x.martins@jpmchase.com
than the average for MSCI EM during the same period. Most of the
Banco J.P. Morgan S.A.
outperformance happens after the election (+2.3%). On the other hand, average
performance for election cycles in Brazil (six months before and after the race)
is -2.9% relative to MSCI EM, with almost all of the underperformance taking
place before the race. See pages 3 and 5.
Figure 1: Performance Relative to MSCI
 There is a great discrepancy in performance depending on who wins the EM in the 6 months prior to elections
race in LatAm, but not in Brazil. Looking at LatAm elections, if the preferred
-0.2
market candidate loses the race, the market underperforms the MSCI EM on
average by 4.9%. On the other hand, if the preferred market candidate wins the -1.8
race, the market outperforms the MSCI EM by an average of 11.5% during the
election cycle. When the preferred market candidate wins the election, the -4.6
greater outperformance is observed after the race. When the non-preferred
market candidate loses the race, the greater underperformance is observed
before the race. In Brazil specifically, the market historically underperforms EM
(-2.9%) and does so in scenarios when the preferred market candidate wins -10.3
(-1.7%) or loses (-3.5%). Pages 3 to 5.
Brazil 2018 Brazil Mexico 2018 LatAm
 Polls and the Bovespa. We did not find a lot of correlation between polls and (Apr-Jul) average average
(1994 to from 2000
market performance. Still, the Bovespa tends to perform in the opposite 2014)
direction of the one of the non-preferred market candidate in the polls. Page 7.
 Strategy: We are OW Brazil in both our LatAm and EM portfolios. Source: Bloomberg; J.P. Morgan.

See page 10 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
www.jpmorganmarkets.com
This document is being provided for the exclusive use of gce_latam_sales@jpmorgan.com.
 Emy Shayo Cherman Latin America Equity Research
(55-11) 4950-6684 03 August 2018
emy.shayo@jpmorgan.com

One could link market performance around elections to specific global events that
happened at the time, thus dismissing the importance of the political story. For
example, in Brazil, a common argument is that the commodity super cycle was
responsible for the positive market reaction following the 2002 Lula election. Also,
the Europe/Greek crisis along with the US taper tantrum were the reasons behind the
market decline from 2011 onward, despite a change in economic policy direction that
led Brazil to lose investment grade status in 2015. By the same token, an easier Fed
stance allowed the market to recover from 2016 onward, despite the beginning of the
impeachment process. Similarly, the recent market sell-off was a response to a
hawkish Fed, stronger dollar, and trade wars, more than the commotion related to the
truckers’ strike, lower growth, and the uncertainty related to the upcoming general
elections. To try to isolate global events from local events, we look into all the 21st
century elections in Argentina, Brazil, Chile, Colombia, Mexico, and Peru and
compared market performance to the MSCI EM. We found that it pays to be
invested in LatAm during election cycles, and there is a great performance
difference depending on whether the preferred market candidate wins or loses
the race. For Brazil, we look at the relative performance to EM during the current
electoral cycle (defined as six months before and after the race) compared to past
Brazilian elections (since 1994), to Mexico in 2018, and to all LatAm races of the
21st century. The conclusion is that there is upside in Brazil pretty much in any
scenario, that is, independent on who wins the election.

Methodology: Our exercise compares the performance of the country’s MSCI index
with the MSCI EM before, during, and after the elections in all calculations. Thus, it
is a relative performance exercise. We consider the election cycle the period that
starts six months before the race and extends six months after the race. We take the
month of the election (first round) as a reference date (month zero), instead of the
exact date of the race to keep it simple. We look at all elections of the 21st century in
Argentina, Brazil, Chile, Colombia, Mexico, and Peru, or 25 races ex Brazil 2018.
We excluded from the data aggregation the 2018 Brazilian election on all
calculations. The qualification of the winner (preferred market candidate or not) is a
consideration made before the race, independently of the market’s impression of the
winner after the race. Our study shows that there is almost an even split between
outcomes: of the 25 races, 12 went to the non-preferred market candidate, while
13 went to the preferred market candidate.

LatAm performance during election cycles relative to MSCI

Emerging Markets
LatAm in general outperforms MSCI EM during election cycles: Looking at all
the elections in Argentina, Brazil, Chile, Colombia, Mexico, and Peru since the turn
of the century, we found that, on average, total performance around election cycles
(six months before and after the race) was 3.6% greater than the average
performance of the MSCI EM during the same period. Most of the
outperformance happened after the election (+2.3%). There was a slight
underperformance in the six months before the race (-0.2%).

This document is being provided for the exclusive use of gce_latam_sales@jpmorgan.com.

 Emy Shayo Cherman Latin America Equity Research
(55-11) 4950-6684 03 August 2018
emy.shayo@jpmorgan.com

Figure 2: Average market performance relative to MSCI EM in LatAm 21st century elections
3.6%

2.3%

1.6%

-0.2%

Total Before During After

Source: Bloomberg; MSCI; J.P. Morgan.

There is a great discrepancy in performance depending on who wins the race:

Historically, if the preferred market candidate loses the race, the market
underperforms the MSCI EM on average by 4.9%. On the other hand, if the preferred
market candidate wins the race, the market outperforms the MSCI EM by an average
of 11.5% during the election cycle.

 Preferred market candidate loses the race: If the candidate perceived as not
being the market favorite wins the election, the average underperformance is
4.9% below that of the MSCI EM for the 12-month period surrounding the
election. In that case, most of the underperformance happens before (-2.8%) and
during the election (-1.7%), with the market flattening somewhat in the six
months following the race. We believe that the relative underperformance before
the race happens because, as frequently seen in LatAm, the non-preferred
candidate turns out to adopt relatively orthodox economic policies initiatives.
Good examples are Lula in 2002 and Humala in 2011. The frequency of
negative results (underperformance) is 50% for the entire cycle but increases
to 75% before and 66.6% during the elections.
Figure 3: Average market performance relative to MSCI EM in scenarios when the preferred
market candidate loses the race: larger downside before and during elections
0.0% 80%
-1.0% 70%
-0.5%
60%
-2.0% 50%
-1.7%
-3.0% 40%
-2.8%
30%
-4.0%
20%
-5.0%
-4.9% 10%
-6.0% 0%
Total Before During After
Return (left) Frequency (right)

Source: Bloomberg; MSCI; J.P. Morgan.

 Preferred market candidate wins the race: On the other hand, if the candidate
perceived as being the preferred market candidate wins, the average market
outperformance is 11.5% greater than the MSCI EM for the 12-month
period surrounding the election. Note that there is a disparity of 16.4% in terms
of relative performance between the result coming from the victory or loss of the

This document is being provided for the exclusive use of gce_latam_sales@jpmorgan.com.

 Emy Shayo Cherman Latin America Equity Research
(55-11) 4950-6684 03 August 2018
emy.shayo@jpmorgan.com

preferred market candidate. Opposite to the scenarios when the preferred market
candidate loses the race, most of the outperformance takes place during
(+4.6%) and after the race (+4.8%). One could imply that in most cases the
victory might be tight, leading the market higher during the month of the race and
after the win, when policy implementation takes place. President Pinera’s
elections in Chile (especially the 2009 election) and most of the past Mexican
races are good example. The frequency of positive results (outperformance) is
93% for the entire cycle but is lower (54%) before the elections. In other words,
if market-friendly candidates win the race, investors have time to enter the market
closer to the race and still outperform the MSCI EM, as long as they stay invested
after the race (six months in our sample).
Figure 4: Average market performance relative to MSCI EM in scenarios when the preferred
market candidate wins the race: more upside during and after elections
14% 80%
11.5% 70%
12%
10% 60%
50%
8%
40%
6% 4.6% 4.8%
30%
4% 20%
2.1%
2% 10%
0% 0%
Total Before During After
Return (left) Frequency (right)

Source: Bloomberg; MSCI, J.P. Morgan.

Brazil specific performance in the current election cycle

relative to LatAm: room for upside
Taking the first four months of the current election cycle (April to July), the
Brazilian market is underperforming the MSCI EM by -10.3%, despite a +10%
outperformance in July. Looking at all LatAm races of the 20th century, the average
performance of markets relative to the MSCI EM in the first six months before
the race has been significantly better than the current Brazil
underperformance: -0.2% independently on who won the race. If the market
preferred candidate ended up winning the race, the performance was 2.1% ahead of
MSCI EM on average in the six months before the race; if the market’s preferred
candidate ended up losing the race, the average underperformance of all LatAm races
before the elections was -2.8%. The data indicates that the Brazilian
underperformance until this point is a lot larger than in the pre-election periods
in LatAm (six months prior), thus leaving room for upside, independent of who
the winner is.

Table 1: Brazil 2018: Relative Performance until now versus all LatAm elections before the race
-6m -5m -4m -3m -2m -1m Total

Brazil 2018 (Apr-Jul) -3.6% -12.8% -3.9% 10.0% n/a n/a -10.3%
LatAm av erage Before the Elections -0.4% -0.6% 0.5% -0.9% 2.1% -0.9% -0.2%
Winner: market candidate (before) -1.4% 0.0% 0.9% 0.2% 1.3% 0.9% 2.1%
Winner: non-market candidate (before) 0.5% -1.2% 0.0% -2.1% 3.0% -3.0% -2.8%
Source: Bloomberg; J.P. Morgan

This document is being provided for the exclusive use of gce_latam_sales@jpmorgan.com.

 Emy Shayo Cherman Latin America Equity Research
(55-11) 4950-6684 03 August 2018
emy.shayo@jpmorgan.com

Brazil Current Cycle Relative to Past Brazilian Elections:

Room for Upside
During the current election cycle, Brazil is underperforming MSCI EM
by -10.3%. This is worse than the average performance of all Brazilian elections
before the race (-4.6%, Figure 7), thus allowing again for the argument that
there is room for Brazilian markets to pick up from current levels. In all the
Brazilian elections starting in 1994, the market did a lot better before the election
than the current cycle, with the exception of 2002, when the market had a
performance of -38% (!) relative to MSCI EM.

However, the good news stops here. The data for the past six elections in Brazil
(1994, 1998, 2002, 2006, 2010 and 2014) indicate that it doesn’t pay to be invested
in Brazil during the entire election cycle (-6 months to +6 months). This is
because Brazil historically underperforms MSCI EM by an average of 2.9%
during election cycles. The attenuating factor for this conclusion is that investors
can still enter the market during the election month and make some money. It is also
important to mention that there is great disparity between each of the elections, each
being a particular case. All in all, the MSCI Brazil has underperformed EM before
the race (-4.6%), outperformed during the race (1.9%), and been flat after (-0.2%).

Figure 5: MSCI Brazil Relative Performance to MSCI EM in the First 6 Figure 6: MSCI Brazil Relative Performance to MSCI EM During All
Months of the Election Cycle Brazilian Elections
24.0%
1.9%

-4.4% -2.8% -3.8% -2.7%

-10.3%
-0.2%

-37.9% -2.9%
1994 1998 2002 2006 2010 2014 2018*
-4.6%
Total Before During After
Source: Bloomberg; MSCI; J.P. Morgan. * For 2018 we considered the first four months of the
election cycle (April to July 2018). Source: Bloomberg; MSCI; J.P. Morgan. Excludes 2018 cycle.

Table 2: Brazil current performance to MSCI EM versus Brazil average in past elections since 1994
Brazilian elections -6m -5m -4m -3m -2m -1m 0 +1m +2m +3m +4m +5m +6m Total Before During After
1994 -19.2% -3.7% 5.1% 11.8% 23.2% 6.8% -5.5% 1.3% 2.4% 2.0% -12.4% -13.9% 15.1% 13.1% 24.0% -5.5% -5.4%
1998 -3.1% -1.8% 6.8% 5.8% -9.7% -2.4% -6.5% 9.1% -17.1% -26.9% 6.2% 23.6% -0.6% -16.6% -4.4% -6.5% -5.7%
2002 -1.9% -5.8% -10.8% -21.3% 21.3% -19.3% 22.0% -6.7% 12.6% -3.6% -0.9% 16.0% 11.5% 13.0% -37.9% 22.0% 29.0%
2006 1.9% -5.5% 6.6% -0.2% -3.0% -2.6% 3.7% -2.1% 3.6% 1.9% -2.2% 4.1% 1% 7.5% -2.8% 3.7% 6.6%
2010 -2.3% -1.7% -3.6% 5.7% -1.4% -0.4% -1.6% -2.2% -0.4% -1.5% 4.0% -2.1% -4% -11.7% -3.8% -1.6% -6.3%
2014 2.6% -5.3% 2.8% 0.3% 8.7% -11.8% -1.0% -3.7% -6.5% -7.2% -0.7% -9.9% 9% -23.0% -2.7% -1.0% -19.3%
2018* -3.6% -12.8% -3.9% 10.0% -- -- -- -- -- -- -- -- -- -10.3% -10.3% -- --
Average Brazil (ex-2018) -3.7% -4.0% 1.2% 0.3% 6.5% -5.0% 1.9% -0.7% -0.9% -5.9% -1.0% 3.0% 5.3% -2.9% -4.6% 1.9% -0.2%
1994 and 1998 -11.1% -2.8% 6.0% 8.8% 6.8% 2.2% -6.0% 5.2% -7.3% -12.4% -3.1% 4.9% 7.2% -1.7% 9.8% -6.0% -5.6%
2002 to 2014 0.1% -4.6% -1.2% -3.9% 6.4% -8.5% 5.8% -3.7% 2.3% -2.6% 0.0% 2.0% 4.4% -3.5% -11.8% 5.8% 2.5%
Source: Bloomberg, J.P. Morgan.
-3.1%
ex 2002

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 Emy Shayo Cherman Latin America Equity Research
(55-11) 4950-6684 03 August 2018
emy.shayo@jpmorgan.com

Comparing Mexico 2018 and Brazil 2018: again room for

upside
MSCI Mexico performance in the accumulated six months before elections was only
slightly negative in absolute terms (-1.8%) and very positive in relative terms (+5.6%
relative to MSCI EM). This happened even though the non-preferred market
candidate was ahead of the polls at all times. Not only that, but AMLO’s Morena
conquered what is soon to be an absolute majority in both houses of Congress,
something that the market didn’t even considered as a possibility beforehand. On the
other hand, in Brazil there is great uncertainty about the election outcome, with
a possibility of a market friendly result, and still the market is in very negative
territory during the current election, both in absolute terms during the election
cycle (MSCI Brazil at -17.5% between Abril and July) and relative to MSCI EM
(-10.3% during the electoral cycle, -9% YTD). Clearly, the more vulnerable stance of
the Brazilian economy relative to Mexico might explain some of the
underperformance, but still, we find the gap too large. Once more, this comparison
gives us evidence that there is significant room for upside in Brazilian markets,
almost independent of the election outcome.

Figure 7: Brazil is performing a lot worse than Mexico, even though there is still a chance for a market-friendly outcome
Brazil x Mexico -6m -5m -4m -3m -2m -1m 0 +1m +2m +3m +4m +5m +6m Total Before During After

Mexico election 2018 7.8% -7.3% 0.7% 2.1% -13.9% 8.8% 8.5% -- -- -- -- -- -- 6.7% -1.8% 8.5% --
Performance
Absolute

Brazi election 2018 -4.2% -16.5% -8.4% 11.7% -- -- -- -- -- -- -- -- -17.5% -17.5% -- --

Brazil over/under performance -12.0% -9.3% -9.1% 9.6% -- -- -- -- -- -- -- -- -24.1% -15.7% -- --

Mexico election 2018 -0.5% -2.5% 2.7% 2.7% -10.2% 13.4% 6.8% -- -- -- -- -- -- 12.3% 5.6% 6.8% --
Performance
Relative

Brazi election 2018 -3.6% -12.8% -3.9% 10.0% -- -- -- -- -- -- -- -- -- -10.3% -10.3% -- --

Brazil over/under performance -3.1% -10.2% -6.6% 7.3% -- -- -- -- -- -- -- -- -- -22.6% -15.8% -- --

Source: Bloomberg; MSCI; J.P. Morgan.

Polls and Bovespa performance

Considering the uncertainty of the elections, we thought it would be interesting to
enter the tunnel of time and see how the Bovespa has responded to presidential polls.
The exercise is useful because we believe that from mid-August onward, not only
will there be more polls, but they will vary significantly more. This is because the
population is going to start to get a lot more aware about the elections, considering
the myriad of debates and interviews already scheduled with the candidates,
especially after the official beginning of the campaign on August 16. In addition,
recall that the daily mandatory TV and radio program will start on August 31, with
the election de facto taking center stage.

Looking at past elections, we did not find a very close correlation between polls and
market performance, but the Bovespa does tend to react in the direction opposite
of where the non-preferred market candidate is moving on polls. This is more
evident in 2002 and 2014.

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 Emy Shayo Cherman Latin America Equity Research
(55-11) 4950-6684 03 August 2018
emy.shayo@jpmorgan.com

Figure 8: Elections 2002 Figure 9: Elections 2006

50 14000 60 40000
13000 50 39000
40
12000 40 38000
30 11000 30 37000
10000 20 36000
20
9000 10 35000
10 8000 0 34000
02-Apr 02-May 01-Jun 01-Jul 31-Jul 30-Aug 29-Sep 06-Apr 01-May 26-May 20-Jun 15-Jul 09-Aug 03-Sep 28-Sep
Lula (PT) Jose Serra (PSDB) IBOV Lula (PT) Geraldo Alckmin (PSDB) IBOV

Source: Bloomberg; Datafolha; J.P. Morgan.

Source: Bloomberg; Datafolha; J.P. Morgan.

Figure 10: Elections 2010 Figure 11: Elections 2014

60 72000 45 62000

50 70000 35 60000

40 68000 58000
25
30 66000 56000
15
20 64000 54000

10 62000 5 52000

0 60000 -5 50000
16-Apr 06-May 26-May 15-Jun 05-Jul 25-Jul 14-Aug 03-Sep 23-Sep 07-Apr 02-May 27-May 21-Jun 16-Jul 10-Aug 04-Sep 29-Sep

Dilma (PT) José Serra (PSDB) IBOV Dilma (PT) Eduardo Campos / Marina Aécio (PSDB) IBOV

Source: Bloomberg; Datafolha; J.P. Morgan. Source: Bloomberg; Datafolha; J.P. Morgan.

This document is being provided for the exclusive use of gce_latam_sales@jpmorgan.com.

 Emy Shayo Cherman Latin America Equity Research
(55-11) 4950-6684 03 August 2018
emy.shayo@jpmorgan.com

ANNEX: Performance Around Elections of All Races in

Argentina, Brazil, Chile, Colombia, Mexico, and Peru in the
21st century
Table 3: Performance around Elections (-6 months, + 6 months)
-6m -5m -4m -3m -2m -1m 0 +1m +2m +3m +4m +5m +6m Total Before During After

MSCI Brazil -1.5% -7.7% -18.5% -29.1% 22.8% -30.3% 28.4% 0.1% 9.2% -4.1% -4.1% 12.8% 20.0% -2.2% -64.4% 28.4% 33.8%
Brazil 2002 MSCI EM 0.4% -1.9% -7.7% -7.9% 1.4% -11.0% 6.4% 6.8% -3.4% -0.6% -3.2% -3.2% 8.4% -15.2% -26.5% 6.4% 4.9%
Ov er/under performance -2% -6% -11% -21% 21% -19% 22% -7% 13% -4% -1% 16% 12% 13% -37.9% 22.0% 29.0%
MSCI Brazil 8.8% -16.3% 6.1% 0.9% -0.7% -2.0% 8.3% 5.2% 8.0% 0.7% -2.8% 7.8% 5.7% 29.8% -3.1% 8.3% 24.6%
Brazil 2006 MSCI EM 6.8% -10.8% -0.5% 1.1% 2.3% 0.7% 4.7% 7.3% 4.4% -1.2% -0.7% 3.7% 4.4% 22.3% -0.3% 4.7% 18.0%
Ov er/under performance 1.9% -5.5% 6.6% -0.2% -3.0% -2.6% 3.7% -2.1% 3.6% 1.9% -2.2% 4.1% 1% 7% -2.8% 3.7% 6.6%
MSCI Brazil -1.3% -10.9% -4.5% 13.7% -3.6% 10.4% 1.2% -4.9% 6.6% -4.4% 2.9% 3.6% -1.1% 7.8% 3.8% 1.2% 2.7%
Brazil 2010 MSCI EM 1.0% -9.2% -0.9% 8.0% -2.2% 10.9% 2.8% -2.7% 7.0% -2.8% -1.0% 5.7% 2.8% 19.4% 7.6% 2.8% 9.0%
Ov er/under performance -2.3% -1.7% -3.6% 5.7% -1.4% -0.4% -1.6% -2.2% -0.4% -1.5% 4.0% -2.1% -4% -12% -3.8% -1.6% -6.3%
MSCI Brazil 2.7% -2.0% 5.1% 1.7% 10.8% -19.4% 0.1% -4.8% -11.4% -6.6% 2.2% -11.5% 16.3% -16.9% -1.2% 0.1% -15.8%
Brazil 2014 MSCI EM 0.1% 3.3% 2.2% 1.4% 2.1% -7.6% 1.1% -1.1% -4.8% 0.6% 3.0% -1.6% 7.5% 6.1% 1.5% 1.1% 3.5%
Ov er/under performance 2.6% -5.3% 2.8% 0.3% 8.7% -11.8% -1.0% -3.7% -6.5% -7.2% -0.7% -9.9% 9% -23% -2.7% -1.0% -19.3%
MSCI Brazil -4.2% -16.5% -8.4% 11.7% - - - - - - - - - -17.5% -17.5% 0.0% 0.0%

Brazil 2018 MSCI EM -0.6% -3.8% -4.6% 1.7% - - - - - - - - - -7.2% -7.2% 0.0% 0.0%

Ov er/under performance -3.6% -12.8% -3.9% 10.0% - - - - - - - - - -10.3% -10.3% 0.0% 0.0%

MSCI Mex ico -10.2% 13.7% 2.3% -11.0% -10.5% 12.2% -2.4% 4.0% -7.3% 2.1% -10.2% -2.6% 15.1% -4.8% -3.5% -2.4% 1.1%
Mexico 2000 MSCI EM 0.4% 1.3% 0.3% -9.6% -4.4% 3.2% -5.3% 0.4% -8.9% -7.3% -8.8% 2.3% 13.6% -22.8% -8.7% -5.3% -8.8%

Ov er/under performance -10.6% 12.4% 2.0% -1.4% -6.1% 9.0% 2.9% 3.6% 1.6% 9.4% -1.4% -4.9% 2% 18% 5.3% 2.9% 9.9%

MSCI Mex ico 8.3% -1.5% 0.2% 5.1% -11.5% 2.4% 6.6% 3.5% 4.8% 6.8% 4.4% 5.8% 2.5% 37.5% 3.0% 6.6% 27.9%
Mexico 2006 MSCI EM 10.9% -0.2% 0.7% 6.8% -10.8% -0.5% 1.1% 2.3% 0.7% 4.7% 7.3% 4.4% -1.2% 26.3% 7.1% 1.1% 18.1%
Ov er/under performance -2.6% -1.3% -0.6% -1.7% -0.7% 2.8% 5.5% 1.2% 4.2% 2.1% -2.9% 1.4% 4% 11% -4.0% 5.5% 9.8%
MSCI Mex ico 7.4% 2.9% 4.4% -0.9% -12.1% 12.8% 2.1% -2.3% 6.8% -0.3% 1.6% 4.1% 5.5% 31.8% 14.4% 2.1% 15.3%
Mexico 2012 MSCI EM 11.2% 5.9% -3.5% -1.5% -11.7% 3.4% 1.6% -0.5% 5.8% -0.7% 1.2% 4.8% 1.3% 17.3% 3.9% 1.6% 11.8%
Ov er/under performance -3.9% -3.0% 7.9% 0.6% -0.5% 9.3% 0.5% -1.8% 1.0% 0.4% 0.4% -0.7% 4% 14% 10.5% 0.5% 3.5%
MSCI Mex ico 7.8% -7.3% 0.7% 2.1% -13.9% 8.8% 8.5% - - - - - - 6.7% -1.8% 8.5% 0.0%
Mexico 2018 MSCI EM 8.3% -4.7% -2.0% -0.6% -3.8% -4.6% 1.7% - - - - - - -5.7% -7.3% 1.7% 0.0%
Ov er/under performance -0.5% -2.5% 2.7% 2.7% -10.2% 13.4% 6.8% - - - - - 12% 5.6% 6.8% 0.0%
MSCI Chile 5.8% 8.4% 0.1% 7.8% -7.1% 3.1% -2.3% 3.6% 4.2% -0.9% 1.5% -7.3% -1.6% 15.4% 18.1% -2.3% -0.5%
Chile 2005 MSCI EM 3.1% 6.6% 0.6% 9.1% -6.6% 8.2% 5.8% 10.9% -0.2% 0.7% 6.8% -10.8% -0.5% 33.8% 21.0% 5.8% 7.1%
Ov er/under performance 2.7% 1.8% -0.5% -1.3% -0.5% -5.1% -8.0% -7.4% 4.4% -1.6% -5.3% 3.4% -1.2% -18.4% -2.8% -8.0% -7.6%
MSCI Chile 4.9% 2.8% -4.5% 7.4% 0.6% 5.6% 8.0% 3.1% -1.0% -2.0% 2.8% -2.2% 1.0% 26.6% 16.9% 8.0% 1.7%
Chile 2009 MSCI EM -1.5% 10.9% -0.5% 8.9% 0.0% 4.3% 3.8% -5.6% 0.3% 7.9% 1.0% -9.2% -0.9% 19.2% 22.0% 3.8% -6.6%
Ov er/under performance 6.4% -8.1% -3.9% -1.4% 0.6% 1.4% 4.2% 8.7% -1.2% -9.9% 1.8% 6.9% 1.9% 7.4% -5.0% 4.2% 8.2%
MSCI Chile -8.6% -4.2% -9.2% -1.8% 5.8% 0.8% -6.4% -1.8% -12.6% 8.4% 2.5% 1.2% 1.1% -24.7% -17.2% -6.4% -1.2%
Chile 2013 MSCI EM -2.9% -6.8% 0.8% -1.9% 6.2% 4.8% -1.6% -1.5% -6.6% 3.2% 2.9% 0.1% 3.3% -0.1% 0.1% -1.6% 1.3%
Ov er/under performance -5.7% 2.6% -9.9% 0.1% -0.4% -4.0% -4.8% -0.3% -6.0% 5.2% -0.4% 1.1% -2.1% -24.6% -17.3% -4.8% -2.5%
MSCI Chile -0.4% -1.4% 8.9% 5.4% 1.8% 5.0% -11.8% 15.6% 7.1% -3.8% -1.9% 1.4% -9.0% 16.8% 19.3% -11.8% 9.4%
Chile 2017 MSCI EM 2.8% 0.5% 5.5% 2.0% -0.5% 3.5% 0.2% 3.4% 8.3% -4.7% -2.0% -0.6% -3.8% 14.5% 13.7% 0.2% 0.6%
Ov er/under performance -3.2% -1.9% 3.4% 3.4% 2.3% 1.5% -12.0% 12.2% -1.2% 1.0% 0.1% 1.9% -5.2% 2.4% 5.5% -12.0% 8.8%
MSCI Argentina 8.4% 4.4% 14.8% 8.4% 11.2% -1.3% 12.2% -0.7% 12.2% -4.9% -2.0% 12.4% 5.2% 80.5% 46.1% 12.2% 22.2%
Argentina 2003 MSCI EM 6.4% 6.8% -3.4% -0.6% -3.2% -3.2% 8.4% 6.9% 5.5% 6.0% 6.5% 0.6% 8.3% 45.0% 2.9% 8.4% 33.7%
Ov er/under performance 2.0% -2.3% 18.2% 9.0% 14.4% 1.9% 3.8% -7.6% 6.7% -10.9% -8.5% 11.8% -3.1% 35.5% 43.2% 3.8% -11.5%
MSCI Argentina 2.7% 7.4% -4.1% -0.9% -3.2% 7.4% 3.8% -10.0% -4.9% -7.8% 9.6% 5.8% 2.3% 8.1% 9.3% 3.8% -5.0%
Argentina 2007 MSCI EM 4.4% 4.6% 4.4% 5.0% -2.3% 10.8% 11.0% -7.1% 0.3% -12.6% 7.3% -5.4% 7.9% 28.3% 27.0% 11.0% -9.7%
Ov er/under performance -1.7% 2.8% -8.6% -5.9% -0.9% -3.4% -7.2% -2.8% -5.1% 4.8% 2.3% 11.2% -5.6% -20.2% -17.7% -7.2% 4.8%
MSCI Argentina -3.3% -1.3% 4.8% -3.6% -11.9% -19.7% 1.8% -2.5% -3.9% 13.2% -17.4% 0.3% -29.7% -73.1% -34.8% 1.8% -40.1%
Argentina 2011 MSCI EM 2.8% -3.0% -1.9% -0.7% -9.2% -14.8% 13.0% -6.7% -1.3% 11.2% 5.9% -3.5% -1.5% -9.6% -26.7% 13.0% 4.1%
Ov er/under performance -6.1% 1.7% 6.7% -2.8% -2.7% -4.9% -11.2% 4.2% -2.6% 2.0% -23.3% 3.8% -28.2% -63.5% -8.1% -11.2% -44.2%
MSCI Argentina -1.3% -9.0% -4.3% -10.2% -1.3% -17.4% 44.9% -9.9% -3.8% 3.6% 8.3% -3.6% 4.0% 0.1% -43.5% 44.9% -1.3%
Argentina 2015 MSCI EM 7.5% -4.2% -3.2% -7.3% -9.2% -3.3% 7.0% -4.0% -2.5% -6.5% -0.3% 13.0% 0.4% -12.3% -19.5% 7.0% 0.2%
Ov er/under performance -8.8% -4.8% -1.1% -3.0% 7.9% -14.1% 37.9% -5.9% -1.3% 10.1% 8.6% -16.6% 3.6% 12.4% -24.0% 37.9% -1.6%

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-6m -5m -4m -3m -2m -1m 0 +1m +2m +3m +4m +5m +6m Total Before During After
MSCI Colombia 13.8% 8.7% 9.4% -12.7% 3.8% 3.2% 2.9% 1.8% -10.7% 1.2% 3.0% 15.1% 1.8% 41.3% 26.2% 2.9% 12.2%
Colombia 2002 MSCI EM 10.3% 7.8% 3.3% 1.5% 5.6% 0.4% -1.9% -7.7% -7.9% 1.4% -11.0% 6.4% 6.8% 15.2% 28.9% -1.9% -11.9%
Ov er/under performance 3.5% 0.9% 6.1% -14.3% -1.9% 2.8% 4.8% 9.5% -2.8% -0.2% 13.9% 8.7% -5.0% 26.1% -2.8% 4.8% 24.1%
MSCI Colombia 19.2% 14.1% 12.2% 4.0% 0.4% -2.4% -19.3% -13.5% 14.1% 7.0% -2.5% 8.4% -3.1% 38.6% 47.5% -19.3% 10.5%
Colombia 2006 MSCI EM 8.2% 5.8% 10.9% -0.2% 0.7% 6.8% -10.8% -0.5% 1.1% 2.3% 0.7% 4.7% 7.3% 37.0% 32.2% -10.8% 15.6%
Ov er/under performance 11.0% 8.4% 1.2% 4.2% -0.3% -9.2% -8.6% -13.1% 13.0% 4.8% -3.1% 3.8% -10.4% 1.6% 15.3% -8.6% -5.1%
MSCI Colombia 4.6% 3.0% 2.2% 4.5% 3.0% 0.2% -1.7% 4.5% 13.2% 8.8% 6.9% 5.9% -13.3% 41.8% 17.6% -1.7% 25.9%
Colombia 2010 MSCI EM 4.3% 3.8% -5.6% 0.3% 7.9% 1.0% -9.2% -0.9% 8.0% -2.2% 10.9% 2.8% -2.7% 18.3% 11.6% -9.2% 15.9%
Ov er/under performance 0.3% -0.8% 7.9% 4.3% -4.9% -0.7% 7.5% 5.4% 5.2% 11.0% -4.0% 3.1% -10.6% 23.5% 6.0% 7.5% 10.0%
MSCI Colombia -9.3% -2.4% -12.6% 3.8% 15.4% 1.0% 0.0% 4.6% -0.1% 2.1% -10.4% -3.9% -13.2% -25.1% -4.1% 0.0% -20.9%
Colombia 2014 MSCI EM -1.6% -1.5% -6.6% 3.2% 2.9% 0.1% 3.3% 2.2% 1.4% 2.1% -7.6% 1.1% -1.1% -2.1% -3.5% 3.3% -1.9%
Ov er/under performance -7.8% -0.9% -6.0% 0.6% 12.5% 0.9% -3.3% 2.4% -1.5% 0.0% -2.9% -4.9% -12.1% -22.9% -0.6% -3.3% -19.0%
MSCI Colombia 2.6% 7.4% 11.2% -7.2% 1.1% 9.4% -4.3% 0.9% -2.1% - - - - 19.1% 24.6% -4.3% -1.2%
Colombia 2018 MSCI EM 0.2% 3.4% 8.3% -4.7% -2.0% -0.6% -3.8% -4.6% 1.7% - - - - -2.2% 4.5% -3.8% -2.9%
Ov er/under performance 2.5% 4.0% 2.9% -2.4% 3.1% 10.0% -0.5% 5.4% -3.7% - - - - 21.3% 20.1% -0.5% 1.7%
MSCI Peru -5.9% -7.5% 1.4% 11.8% 0.3% -0.8% -9.0% 6.9% 7.2% -3.0% 5.1% -2.4% -5.0% -0.8% -0.7% -9.0% 8.9%
Peru 2001 MSCI EM -7.3% -8.8% 2.3% 13.6% -7.9% -10.3% 4.7% 0.9% -2.3% -6.6% -1.2% -15.7% 6.1% -32.5% -18.5% 4.7% -18.7%
Ov er/under performance 1.4% 1.3% -0.9% -1.7% 8.2% 9.5% -13.6% 6.0% 9.6% 3.6% 6.3% 13.3% -11.1% 31.8% 17.7% -13.6% 27.7%
MSCI Peru -9.8% 8.2% 0.1% 17.1% -3.7% -2.9% 16.1% -11.7% 9.7% 6.2% 0.7% 3.0% 4.9% 37.9% 9.0% 16.1% 12.8%
Peru 2006 MSCI EM -6.6% 8.2% 5.8% 10.9% -0.2% 0.7% 6.8% -10.8% -0.5% 1.1% 2.3% 0.7% 4.7% 23.1% 18.8% 6.8% -2.5%
Ov er/under performance -3.2% 0.0% -5.7% 6.2% -3.5% -3.6% 9.3% -0.9% 10.2% 5.1% -1.6% 2.3% 0.3% 14.8% -9.7% 9.3% 15.3%
MSCI Peru 16.6% -3.8% 4.0% -12.0% 1.2% -3.4% -5.9% 0.8% -11.8% 8.4% 5.9% -17.4% 15.3% -2.3% 2.5% -5.9% 1.1%
Peru 2011 MSCI EM 2.8% -2.7% 7.0% -2.8% -1.0% 5.7% 2.8% -3.0% -1.9% -0.7% -9.2% -14.8% 13.0% -4.7% 9.0% 2.8% -16.6%
Ov er/under performance 13.8% -1.1% -3.0% -9.2% 2.2% -9.1% -8.8% 3.8% -9.9% 9.2% 15.1% -2.6% 2.2% 2.5% -6.5% -8.8% 17.7%
MSCI Peru 5.7% -8.7% -4.8% 1.6% 8.4% 15.2% 12.4% -6.3% 11.0% 5.6% -4.4% 0.1% -1.1% 34.8% 17.5% 12.4% 4.9%
Peru 2016 MSCI EM 7.0% -4.0% -2.5% -6.5% -0.3% 13.0% 0.4% -3.9% 3.3% 4.7% 2.3% 1.1% 0.2% 15.0% 6.8% 0.4% 7.7%
Ov er/under performance -1.4% -4.7% -2.4% 8.1% 8.7% 2.2% 12.0% -2.4% 7.7% 0.8% -6.7% -1.0% -1.3% 19.8% 10.6% 12.0% -2.8%
LatAm Average -0.4% -0.6% 0.5% -0.9% 2.1% -0.9% 1.6% 0.2% 1.6% 1.6% -0.5% 2.2% -2.7% 3.6% -0.2% 1.6% 2.3%
Winner is not the preferred market candidate 0.5% -1.2% 0.0% -2.1% 3.0% -3.0% -1.7% -1.7% 0.6% 0.2% -1.3% 4.6% -2.9% -4.9% -2.8% -1.7% -0.5%
Frequency of underperformance - - - - - - - - - - - - - 50.0% 75.0% 66.6% 50.0%
Winner is the preferred market candidate -1.4% 0.0% 0.9% 0.2% 1.3% 0.9% 4.6% 1.9% 2.4% 2.9% 0.2% 0.0% -2.5% 11.5% 2.1% 4.6% 4.8%
Frequency of overperformance - - - - - - - - - - - - - 92.3% 53.8% 69.2% 69.2%
Brazil Average -0.7% -6.2% -1.8% -1.1% 6.4% -8.5% 5.8% -3.7% 2.3% -2.6% 0.0% 2.0% 4.4% -4.9% -11.5% 4.6% 2.0%
Mexico Average -4.4% 1.4% 3.0% 0.0% -4.4% 8.6% 3.9% 1.0% 2.2% 4.0% -1.3% -1.4% 3.1% 14.0% 4.3% 3.9% 5.8%
Chile Average 0.1% -1.4% -2.7% 0.2% 0.5% -1.5% -5.1% 3.3% -1.0% -1.3% -1.0% 3.4% -1.7% -8.3% -4.9% -5.1% 1.7%
Argentina Average -3.6% -0.7% 3.8% -0.7% 4.7% -5.1% 5.8% -3.0% -0.6% 1.5% -5.2% 2.6% -8.3% -9.0% -1.6% 5.8% -13.1%
Colombia Average 1.9% 2.3% 2.4% -1.5% 1.7% 0.8% 0.0% 1.9% 2.0% 3.9% 1.0% 2.6% -9.5% 9.9% 7.6% 0.0% 2.3%
Peru Average 2.7% -1.1% -3.0% 0.8% 3.9% -0.3% -0.3% 1.6% 4.4% 4.7% 3.2% 3.0% -2.5% 17.2% 3.0% -0.3% 14.5%

Source: Bloomberg; MSCI; J.P. Morgan. Note: Orange is when the preferred market candidate doesn't win the election; green is when the preferred market candidate wins the election.

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10

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 Emy Shayo Cherman Latin America Equity Research
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emy.shayo@jpmorgan.com

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"Other Disclosures" last revised June 30, 2018.

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 Emy Shayo Cherman Latin America Equity Research
(55-11) 4950-6684 03 August 2018
emy.shayo@jpmorgan.com

Copyright 2018 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or
redistributed without the written consent of J.P. Morgan. #$J&098$#*P

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