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Mexico prepares for the worst ahead of a Trump presidency

The Peña Nieto administration will strengthen consular assistance and avoid talks on NAFTA

Mexico is readying itself for the worst in the wake of US President-elect Donald Trump’s comments over the weekend that he intends to deport up to three million undocumented people, most of them Mexicans, as well as to renegotiate the North American Free Trade Agreement (NAFTA).

Freight trains at the border crossing of El Paso, in Texas.
Freight trains at the border crossing of El Paso, in Texas.

The Mexican government fears the Trump presidency’s economic impact most of all. The value of the Mexican peso has fallen by 15% against the dollar since November 9, while Ildefonso Guajardo, Mexico’s economy minister, has said that now is not the time to discuss NAFTA, which among other things lifted import tariffs with its two northern neighbors.

Signed in 1993 by the United States, Canada and Mexico, NAFTA has seen Mexican exports to the United States rise by 80%, with a wide range of industries, many of them in high-tech sectors such as aviation and the automotive industries, developing throughout the country. Guajardo has not said whether Mexico has put together a team of negotiators to respond to any imminent move by Trump to restructure the trade deal. Should Washington push for changes, Mexico may bring the matter before the World Trade Organization.

We will have to work  to achieve what is best for Mexico and for North America

President Enrique Peña Nieto

In the meantime, Guajardo says the United States and Mexico face common challenges. “We cannot waste time discussing a return to the old import tariffs while the technological revolution is taking jobs away,” he said at a business forum this past weekend.

Analysts say that the Bank of Mexico will likely raise interest rates this week, for the fourth time this year, in a bid to ease inflationary pressure caused by the depreciation of the Mexican peso. Economist Samuel García says a hike to 5.5% is likely.

He argues that rather than focusing on trade with the United States and monetary policy, Mexico needs to look at its finances first. Mexico’s public debt is more than 50% of its GDP and its tax base, which comes mainly from business, could be at risk if Trump meets his promise to lower taxes in the United States. Such a move would force Mexico to do the same if it wants to continue attracting foreign capital, a luxury it could ill afford. “The Mexican government has to undertake specific measures and send signals to the markets that its risk level is not increasing due to uncertainty about Trump,” says García.

If Trump pushes the NAFTA issue, Mexico may take the matter to the WTO

Responding to Trump’s threat of mass deportations of undocumented migrants, Mexico says it will be boosting staff and resources at its 50 consulates throughout the United States. On Wednesday, the Foreign Ministry launched a campaign aimed at calming the fears of Mexicans living in the United States. Mexico has more diplomats there than in any other country.

President Enrique Peña Nieto, who met with Trump during the election campaign, has promised to defend his country’s interests in the face of what will likely be a fast-moving political and economic scenario in the coming months. “We will have to work with enormous pragmatism to achieve what is best for Mexico and for North America; always in defense of basic principles that are not negotiable, such as our sovereignty, the national interest, and the protection of our co-nationals,” he said earlier this week.

English version by Nick Lyne.

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