Monday - Jun 24, 2019

Mexico gearing up for NAFTA talks


Briefing by Jordana Timerman

NAFTA is vital for Mexico. And U.S. President Donald Trumps threats to upend the free trade agreement seeking better terms for the U.S. threw Mexico’s economy into a tizzy. But now the uncertainty is dragging on — affecting foreign investment and other key indicators. So Mexican leaders are focusing energies in getting their U.S. counterparts to move on with the promised renegotiation, reports the New York Times.

Already administration officials have set down some limitations – saying discussion of Mexican payment for a proposed border wall, for example, would be a deal breaker. Last week Mexican Foreign Minister Luis Videgaray said Mexico will pull out of the deal if the new terms offered are not beneficial to the country, reports Bloomberg.

And on the U.S. side, analysts say Trump’s administration might be overwhelmed with other political conflicts to dwell on Mexican trade. Nonetheless, U.S. commerce secretary Wilbur Ross is expected to formally notify Congress of the Trump administration’s plans to renegotiate, which will trigger a 90-day consultation period with Congress, after which formal negotiations can begin, according to Bloomberg.

The U.S. proposal could be further hindered by the delicate situation Mexican President Enrique Peña Nieto finds himself in, according to the NYT piece: delays could further hit the country’s economy, driving down his already low popularity ratings and robbing him of political capital to make concessions to the U.S.
Counter to the NYT piece, last week the Financial Times argued that Mexico’s economy has learned to deal with the Trump era. “Uncertainty is the new normal,” argues the piece which points to indications that the U.S. will seek a sensible deal, and Mexican officials’ successful hedging of the peso.

And U.S. farmers are lobbying hard on both sides of the border, concerned that their exports are going to be collateral damage in the upcoming NAFTA renegotiation, reports the Wall Street Journal. Mexico is the primary market for many U.S. grain, meat and dairy products, and agricultural groups have been seeking to strengthen ties with Mexican clients and government officials in order to avoid potential retaliatory tariffs.

Hurting Mexico will only favor China, a poor decision for the Trump administration, argues Larry Summers in the Financial Times. On the one hand, economically it would eliminate the edge Mexican products have over Chinese. And as many Mexican exports to the U.S. are inputs to further U.S. production, it would affect U.S. manufacturing competition with China.

But, he notes, it would also give China diplomatic leverage by creating a potential anti-U.S. ally.

“As illustrated by the more than $60bn China has poured into Hugo Chávez’s Venezuela, Beijing would regard opportunities to ally with a hard left anti-American government as strategic windfalls. What better than a country of 130 million people with a 2,000-mile border with the US? Every Mexican with whom I spoke said that the risk of their country electing a Chávez-like government had gone way up in recent months on account of American disrespect and truculence.”

Is Summers referring to presidential frontrunner Andrés Manuel López Obrador? Maybe, as he was at an Acapulco banking conference this weekend in which Mexican financiers and politicians blasted populism in an apparently thinly veiled criticism of AMLO, as he is called, according to Reuters.

López Obrador, a serious presidential contender in the 2018 Mexican election, who has ran two time already, was in San Francisco on Monday, March 20, where he spoke to approximately 200 people at the Mission District’s Grand Theater, now Gray Area. He promised to end corruption in Mexico if he won the presidency.