CEO Executive Summary

As we go to press, the fate of the NAFTA re-negotiations is looking quite grim. Despite being faced with a Congressionally-imposed May 17 deadline to meet the requirements of the Trade Promotion Authority guidelines and the U.S. congressional calendar, the U.S. has, according to our sources, shown a remarkable lack of flexibility in getting to a final deal. Several contentious issues remain outstanding. Despite solid work at the technical level, as of this writing, no deal appears to be imminent. Our analysis of what happened can be found below.

In the broader bilateral relationship, another rhetorical scuffle over Central American migrants set off last month by President Trump was defused, but there are also clear signs that the President’s rhetorical excesses are having a negative impact on bilateral cooperation.

In Mexican politics, Ricardo Anaya, the candidate of the PAN/PRD alliance, clearly won the first presidential debate on April 22. This enabled him to inch closer in the polls to Andrés Manuel López Obrador (AMLO), but post-debate polls still give AMLO an average lead of 16 points. Following the debate, PRI candidate José Antonio Meade has been relegated to a distant third place, motivating a revamp of the PRI party leadership to reinforce party unity and strengthen Meade’s position. In early May, sparks flew between AMLO and some of Mexico’s leading businessmen, members of the Mexican Business Council, when the Council published a newspaper ad condemning AMLO for his sharp campaign critiques of them. AMLO initially returned the favor by doubling down on his charges that they are backing Anaya in order to block his election before literally waving a white handkerchief and toning down his rhetoric. Meanwhile, the Mexican legislature closed its spring session unable to address key pieces of pending legislation due to electoral politics.

The Mexican economy continues to grow faster than expected with falling inflation, which convinced Moody’s to upgrade its outlook for Mexico. Peso volatility persisted, but market participants still expect the Mexican currency to finish the year at 18.3, well below where it is currently trading. Events in the energy, telecommunications, and infrastructure sectors also caught our attention this month, but the most notable event was AMLO’s public statement on May 7 that he would be willing to consider a concession model for Mexico’s new international airport rather than cancel the project.

Full Newsletter: Monarch News – May 2018