CEO Executive Summary

The NAFTA renegotiation dominated the bilateral agenda in August, and the participants’ opening statements set the tone for the talks. The United States came out swinging, demanding major changes in rules of origin, dispute resolution, and labor rules to eliminate the U.S. trade deficit with Mexico. Mexico and Canada responded diplomatically but firmly, defending NAFTA and the benefits it has provided North America. President Trump dialed up the tension by threatening to pull the United States out of the agreement if Mexico and Canada did not negotiate fairly, a tactic that motivated Mexico to announce it would cease negotiations should the U.S. initiate its withdrawal. In the actual negotiations, the first two rounds registered progress, but the most contentious issues will not be formally presented until the third round to be held in Ottawa, September 23-27.

August was a largely good news economic story for Mexico. Growth exceeded expectations, unemployment fell, consumer confidence improved, and the peso held steady. This story was marred by high inflation and further reductions in petroleum production. But these bits of bad news were tempered by the Bank of Mexico’s estimate that inflation is peaking, a government estimate that the collapse in petroleum production is bottoming out, Pemex’s return to profitability, and the continued advance of energy reform in both the hydrocarbon and power sectors. Mexican politics revolved around partisan maneuvering in advance of the 2018 Presidential campaign and the President’s annual state of the union address, the greatest applause line of which was a promise to protect Mexican sovereignty and dignity in its relations with the United States.

Full Newsletter: Monarch News – September 2017