The SAI Report: Mexico & NAFTA (April 2017)

NAFTA

• Since Donald Trump’s 100-day balance failed to meet the expectations, he has hardened his stance on NAFTA. Five trade-related Executive Orders were signed.
• The news of the existence of a draft Executive Order to notify U.S. intention to withdraw from NAFTA triggered its vehement defense, also damaging the trilateral relationship.
• Trump and several other members of the U.S. administration reiterated during the month that the wall will be built and that Mexico will eventually pay for it.
• The U.S. Administration revealed a scant outline of its tax reform proposal. Given its deep tax cuts, it appears far from being revenue neutral, more so since the worldwide feared Border Adjustment Tax is absent.
• The recent Tuna-Dolphin WTO panel decision, determined Mexico may impose retaliatory measures, such as tariffs, to U.S. imports for up to $163.23 million USD.
• Rising tensions between U.S. and Canada regarding softwood lumber, dairy, aviation and aluminum is strengthening a Mexico-Canada alliance.
• Mexico takes actions to diversify its trade by strengthening commercial relations with several countries.
• Certain members of the U.S. administration become more aware of Mexico’s 2018 political year and that their actions may affect the outcome of the presidential election.
• The capturing of Javier Duarte and Tomás Yarrington, former governors of Veracruz and Tamaulipas, respectively, and scandals within López Obrador’s party highlight the importance of negotiating an Anticorruption Practices Chapter under NAFTA.
• In agriculture, the reopening of the market access provisions in the revision of NAFTA (e.g. tariffs) could put at risk the Agreement itself. Americans call for no changes, while in Mexico some producers want to remove the chapter from NAFTA.

Mexico- Macroeconomic conditions

• The GDP annual growth rate during the first quarter of 2017 is encouraging despite the uncertainty generated by the U.S. Administration.
• Economic activity continues to grow at moderate but steady pace.
• Dynamism of retail sales and private consumption suggests that domestic demand is more resilient than expected.
• Employment indicators are moving at a very strong pace, which represents good news for the economy.
• Investment remains at low levels. This could slow down the growth of the economy in the following months and years.
• Inflation continues to rise, implying significant pressure to slowdown consumption.
• Both exports and imports have been recovering significantly.
• Moody’s maintained the global A3 credit rating for Mexico (national Aaa.mx), as well as the negative economic outlook.
• Even though overall budgetary revenues increased in March with respect to last year, tax revenues declined.

Otras publicaciones

The SAI Report:
Mexico and NAFTA
July 2017

The SAI Report:
Mexico and NAFTA
June 2017

The SAI Report:
Mexico and NAFTA
May 2017

The SAI Report:
Mexico and NAFTA
March 2017