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A fair and orderly renegotiation in NAFTA is becoming increasingly difficult, experts warn, according to a El Financiero survey among experts, who see a possible dropping of the table by the US delegation likely.
The minds of specialists to see a fair and orderly renegotiation of the North American Free Trade Agreement ( NAFTA ) fade away, while negotiators from the three countries see wide differences in their positions.
According to a survey conducted by El Financiero to more than 15 economists of the country’s main financial institutions and universities, the consensus sees a 50 percent chance that the US delegation will lift itself from the negotiating table .

Ernesto O’Farrill, president of the Bursamétrica Group, is the most pessimistic economist regarding the departure of the United States from the agreement, when estimating a probability of 95 percent, which to happen, would be this month.

Among the results of the survey highlights that the consensus sees a one percent probability to the scenario of a NAFTA without changes , while a 20 percentit foresees that the agreement undergoes only minor changes .

Some 10 percent of those surveyed expect the talks to extend beyond the 2018 presidential election and 28 percent to a bilateral agreement between Mexico and the United States .

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Definitely, the fifth round

Germán Rojas, director of ITAM’s economics career, gives him a 75 percent chance that the world’s largest economy will exit the treaty, which he estimates, would occur in December this year.

Marco Oviedo, head of economic research for Latin America at Barclays, sees a 75 percent probability that this scenario will be fulfilled, and would be after the fifth round of negotiations.

“Trump is not going to be left to tone down their proposals or have to decide to leave. In the fifth round you will see if Trump lowers the pressure level or maintains it, “he said.

The eventual termination of the agreement, although it will not be positive for Mexico, would not be catastrophic, since only about 3 percent of exports to that country would have a higher tariff, said Gabriel Casillas, chief economist at Grupo Financiero Banorte. In his view, the US private sector will negotiate and prevent them from leaving NAFTA, but failing to do so “will not end the world.”

2% increase
In poverty in Mexico, it would happen if NAFTA is canceled, said Paul Krugman, Nobel laureate in economics.

Impact would be like Brexit

The immediate effects for the Mexican economy of a breakdown of NAFTA could be similar to those in the United Kingdom following the announcement of its departure from the European Union (the so-called “Brexit”) in 2016.

Joel Martínez, economist at financial brokerage firm SIF ICAP, said that the effects on Mexico’s currency, inflation and economic growth would be virtually comparable to those in the UK.

“The first effect of Brexit was received by the British pound, devaluing against the euro 13.5 percent, but then depreciated much more. After the devaluation came inflation. Then there was the fall in investment and consumption, which affected the Gross Domestic Product (GDP), “Martinez said.

He acknowledged that there are large differences between Mexico and its NAFTA with the United Kingdom and the European Union, so the magnitude of the impact would be proportional.

This information can be found originally in El Financiero.


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