Monarch News – December 2017

CEO Executive Summary

The 2018 Mexican presidential election is finally coming into clearer focus, as President Peña Nieto announced his decision to back his finance minister, José Antonio Meade, as the PRI’s presidential candidate. The party publicly fell in line behind this decision, ensuring that Meade will face Andrés Manuel López Obrador, likely Ricardo Anaya for the PAN-PRD alliance, and a handful of independent and small-party candidates in the July 1, 2018, election. Meanwhile, the fifth round of NAFTA modernization talks achieved some tangible advances, but they were overshadowed by the sharp opposition from Mexico and Canada to so-called “poison pill” demands the United States tabled in round four. Canada and Mexico appear to be taking slightly different approaches to the U.S. intransigence, but both parties are united in their firm commitment not to allow for a worse outcome than the status quo.

Despite a productive recent visit to Washington by Secretary of the Economy Guajardo, Mexico continues its efforts to prepare for a world without NAFTA. This included significant movement toward a TPP without the United States, an update of the EU-Mexico free trade agreement expected by the end of the year, and progress in trade talks with Brazil and Uruguay.

Due to the impact of hurricanes and earthquakes, the Mexican economy contracted in the third quarter as expected and is on pace to finish the year with about 2% growth. The inflation story is a bit more troubling, but the new Bank of Mexico governor, Alejandro Díaz de León, should continue with a monetary policy designed to bring down inflation. The Chamber of Deputies completed the budget process, approving a relatively austere spending plan that is in line with the predilections of the new finance minister, José Antonio González Anaya. And the new CEO of Pemex, Carlos Treviño, is expected to continue his predecessor’s approach to cutting expenditures and increasing production, as government auctions of petroleum tracts continue apace.

Full Newsletter: Monarch News – December 2017