The SAI Report: Mexico & NAFTA (May 2017)

NAFTA

• The main roadblocks to officially begin NAFTA negotiations were lifted as Robert Lighthizer was approved as United States Trade Representative (USTR) on May 11, who will be the chief NAFTA negotiator, and on May 18, the U.S. administration notified to Congress its intention to renegotiate NAFTA.
• The Trade Promotion Authority process and rules establish important constraints to the U.S. administration in terms of the requirements and timeframe to follow and the objectives to pursue. Consequently, it is foreseeable that NAFTA 2.0 will not come into force before the 2018 electoral processes in Mexico and the U.S. In addition, under the current TPA trade negotiation objectives, the President must negotiate agreements that contribute to further liberalize trade, not restrict it.
• Canada also prepares for the start of negotiations, as it has appointed Steve Verheul as lead negotiator.
• The private sector in Canada, Mexico and the U.S. defend NAFTA. An important part is willing to support a modernization as long as it does “no harm”. This means leaving certain matters unmodified or with limited changes.
• Over 100 NGOs from Mexico, the U.S. and Canada have begun forming a unified strategy to participate in the NAFTA negotiation process.
• The Trump administration faces a political crisis as scandals related to links with Russia and the firing of FBI director James Comey bring his popularity to an all-time low and impeachment starts being considered even among some Republicans.
• Mexico continues taking actions to diversify its trade. Ildefonso Guajardo, Mexico’s Economy Secretary, has reaffirmed that NAFTA renegotiations will not paralyze the country.

Mexico- Macroeconomic conditions

• Economic growth for the first quarter of 2017 was higher than in the previous six quarters motivated by an upturn in agriculture and livestock activities.
• Economic activity continues to grow at moderate but steady pace.
• Private consumption continues to be the engine of the economy, contrary to investment that continues its slowdown. Consumer and business confidence recovered from their fall in previous months.
• The labor market keeps strengthening. So far this year, Morelos, San Luis Potosí and Yucatán are the states with the lowest unemployment rates. The increase in the number of jobs mainly responds to a recovery in the number of jobs in agriculture and livestock activities.
• Inflation keeps its hiking trend, but measures are being taken on the matter.
• Banxico raised again interest rates by 25 basis points to 6.75 percent to control the rise in inflation.
• The exchange rate continued to appreciate during May.
• Remittances grew steadily during March and April, surpassing 2016 levels, possibly motivated by mass deportation announcements.
• Export and import flows during the first four months of 2017 reached maximum levels.
• FDI in the first quarter of 2017 remains low, but expectations for 2017 were revised upwards.
• Beyond the protectionist measures that the U.S. might take, its trade imbalance might not be reduced since it goes hand in hand with other public policies.

Otras publicaciones

The SAI Report:
Mexico and NAFTA
July 2017

The SAI Report:
Mexico and NAFTA
June 2017

The SAI Report:
Mexico and NAFTA
April 2017

The SAI Report:
Mexico and NAFTA
March 2017