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Mexico: where to from here?

 

The essential

The optimism surrounding Pena Nieto’s 2013 all-encompassing reform agenda has now given way to pessimism about Mexico, especially, since the election of Donald Trump as the next US president. While Mexico’s strong trade and economic ties with the US are well known, what the future US president may do, particularly in the trade relations area, relative to what he said before the election remains to be seen.

 

During this period of uncertainty, negative investor confidence may continue to weigh on Mexican assets, the currency, domestic investment, FDI, and GDP growth. In the meantime, it is essential that Mexico continue on the path of fiscal consolidation and energy sector reforms in order to gain market confidence, and avoid rating agency downgrades.

CROSS ASSET (Download)

Flag-UK
January 2017

 

Flag-FR
Janvier 2017

 

The Article

L'Article

 

Some facts

  • The US president has almost unlimited constitutional powers over foreign affairs to impose trade restrictions or withdraw from existing treaties without congressional approval via various exiting Acts.
  • A trade war (with Mexico or China), would be negative for US growth and employment since most Mexican exports to the US are intermediate goods (such as inputs to the auto industry).
  • Mexican exports to the US represent annually around 20% of GDP or 80% of exports, and the sector most impacted by trade protectionism would be the high value-added manufacturing sector.
  • Remittances from the US represent 2% of Mexican GDP, but not all of those come from illegal Mexican immigrants.

For the time being, a lot of uncertainty remains regarding future US policy and the potential impact of the measures. Even if the US were to withdraw from NAFTA, impose tariffs or other trade restrictions or limit the flow of remittances, the exact impact of such measures on the Mexican economy would need to be calculated.

 

VARTANESYAN Sosi , Strategy and Economic Research – Paris
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Mexico: where to from here?
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