Monarch News – November 2017

CEO Executive Summary

NAFTA renegotiation talks again dominated U.S.-Mexico relations in October. The fourth round was particularly contentious as the United States tabled a series of controversial proposals, most notably on dispute resolution, rules of origin and a sunset clause that would end the agreement in five years unless all three parties agreed to extend it. Mexico and Canada rejected these proposals outright but also committed themselves to continuing the talks, now scheduled to last through March 2018. In our assessment, the overall outlook for the negotiations has turned palpably pessimistic as many interested parties now openly discuss their expectations that the discussions could soon fall apart unless things change quickly.

Through all of the uncertainty around NAFTA and despite dislocations caused by the September earthquakes, the Mexican economy held up surprisingly well in October. Estimates of future growth, however, vary widely depending on the outcome of the NAFTA renegotiation.

Meanwhile, continued good news on the energy reform front was punctuated in early November by the largest onshore oil find in 15 years. This Pemex discovery came none too soon for a firm whose September production hit a 37 year low. In telecommunications, following a recent Mexican Supreme Court ruling, the federal regulatory agency (IFT) reestablished interconnection fees for América Móvil’s competitors, albeit at a low and asymmetric rate. And in Mexican domestic politics, the Citizen’s Front for Mexico alliance ran into difficulties in the candidate selection process, a close political ally of AMLO was charged with corruption, and Finance Minister José Antonio Meade appears to have become the front-runner for the PRI presidential nomination.

Full Newsletter: Monarch News – November 2017