The SAI Report: Mexico & NAFTA (June 2017)

NAFTA

• The expectation of concluding negotiations in 2017 has decreased, as Secretary of Commerce, Wilbur Ross, and U.S. Trade Representative (USTR), Robert Lighthizer, have stated that they do not have any artificial deadline to complete talks.
• The USTR received written public comments and conducted public hearings in June 2017 with the objective of obtaining the needed feedback to develop Trump Administration’s negotiating objectives and positions. Although an important number of key stakeholders hold a pro-free trade stance, there is meaningful opposition to the Agreement from labor unions and Trump supporters that demand more radical changes.
• The associations that represent the leading companies of North America met and issued a statement that is totally aligned with that delivered by the largest business organizations of the NAFTA countries that launched the North American Economic Alliance.
• Other trilateral efforts include the invitation of governors from Mexico and Canada to the U.S. National Governors Association’s annual summer meeting on July 14 and the issuance of joint recommendations from the Steel Industries.
• NAFTA’s renegotiation process has been accompanied by trade remedy measures and the use of trade restrictive procedures that have created tension in the bilateral and trilateral relationship.
• Mexico continues its efforts in the trade diversification front.
• The U.S. loses leadership in the world after withdrawing from the Paris Climate Agreement and due to its controversial participation at the Organization for Economic Co-operation and Development (OECD), among other negative signals sent to the international community.

Mexico- Macroeconomic conditions

• Specialists’ growth expectations continue to increase. The economic outlook for the Mexican economy is more optimistic than it was at the beginning of the year and is more favorable than that of other Latin American countries.
• Industrial production decreased slightly during the month of April, mainly motivated by the poor performance of mining and construction activities. On the contrary, manufacturing activities are as dynamic as ever.
• Exports and consumption were the main components that drove the growth of aggregate demand in the first quarter of 2017. However, exports will likely be the main driver of the Mexican economy in future periods.
• Private consumption showed less dynamism than at the end of 2016. Inflationary pressures could intensify the slowdown.
• So far this year, both exports and imports have grown significantly confirming that they will be the most dynamic engine of economic activity in future months.
• Efforts to diversify exports to countries other than the U.S. are observed in the automotive sector.
• The Mexican agricultural sector has also mobilized to buy products to a greater number of countries, especially in South America.
• Inflation keeps its hiking trend, reaching its maximum level since December 2008.
• Employment remains strong but unit labor costs are in risk of increasing due to a decrease in productivity and an increase in inflation levels.
• The Bank of Mexico raised again interest rates by 25 basis points to 7.0 percent, most likely ending the cycle of interest rates hikes.
• The peso strengthened considerably in the past months due to a more optimistic speech of the Trump Administration, reaching levels that had not been seen since before the U.S. presidential elections.
• The fall in oil prices may have adverse effects on the Mexican economy as a whole, including the peso exchange rate.
• During the first five months of the year, the Public Sector reduced its net spending in 6.4%, the largest decrease for a similar period since 1992.

Otras publicaciones

The SAI Report:
Mexico and NAFTA
July 2017

The SAI Report:
Mexico and NAFTA
May 2017

The SAI Report:
Mexico and NAFTA
April 2017

The SAI Report:
Mexico and NAFTA
March 2017