Charges, pledges and tweets Donald trump has shattered the Mexican economy. After the decree on the construction of a protective wall on the border of the United States and Mexico and in anticipation of the imminent revision of the Treaty on free trade in North America (NAFTA) fell the Mexican peso exchange rate and the situation has changed in the stock market. Director of the Mexican stock exchange (BMV) Jose Oriol Bosch believes that Mexico has now developed the most favorable conditions for export diversification, strengthening the domestic market and reduce dependence on the United States.
— What is the impact on the Mexican economy the volatility, triggered by Donald trump?
— Now there is a negative trend, and soon we will see the corresponding results. Over the past 30 years, economic growth in the country averaged about 2.5%, and now analysts are predicting that it will not be above 1.5% (in 2017). This will affect the companies whose business is associated with the free trade agreement (NAFTA) and those that export primarily to industrial companies and manufacturers of auto parts. You can consider it a fait accompli.
The world end with it? No. I work in this field for 30 years, and I have experienced the situation worse, for example, in 1987 (when world stock markets collapsed during the day). Now, in spite of trump, the index of the Mexican stock exchange is almost a historical high. On a number of assets and markets trump has a greater influence, for example, the rate of the national currency. Over the past few years the peso not only reflected the state of Affairs in the country, but also played the role of so-called proxy-currency [currency pair] to reduce the risks in another country. Peso experienced good times and bad, and its course was down significantly before the election.
However, we have heard a lot of bad news. Trump is not going to change horses in midstream on the first day and keeps his promises. We know that protectionism is not going anywhere that the free trade agreement will be revised, but just as we depend on US, for them, Mexico is of great importance. We must continue to go about their business, to use the opportunities provided by the existing treaties, to consider the possibilities of cooperation with Asia, Europe and Latin America.
— The impact of the revision of NAFTA?
— In the worst case it will be thrown in the trash, cancelled. You will need to negotiate, like any other commercial contract, which should be reviewed after a certain period of time. This is the most likely scenario, as it suits all parties. Maybe, of course, the new document would be less favorable than the contract which we have used for the last 20 years.
— Mexicans benefit most from the NAFTA agreement?
— No, but after a series of changes, we can assume that it became more profitable for one of the parties in some areas.
— What measures can be taken to combat protectionism of the United States?
— Donald trump has changed somewhat after the conclusion of the campaign, but he was always consistent in their actions in the field of Commerce and protectionism. It would be a mistake to expect that he (trump) will change. But also we should look to other countries. The recent reform of the energy sector have shown that we are interested not only US, but also, for example, China or Australia. With this in mind and the peso it turns out that Mexico is a cheap and attractive (to investors). That’s what we see on the exchange. There are companies that trump has had a negative impact, but now there is a positive trend.
— Exchange has not yet recovered from the collapse that occurred after the election of trump. The country is so fragile that it may collapse under the pressure of the tweets?
— Effect (trump) will come to naught. We lived eight years with another President (Barack Obama) who had a different relationship with the media. Now came one who uses Twitter and is creating volatility, but investors will get used to it. Now the market is already more calmly accepts the titles of the trump and not react so emotionally.
— Mexican stock exchange begins to diverge from the new York. Whether or Mexico to start again to develop the national industry?
— Relationship with the US will remain, independence is not acquired instantly. But it would be right to diversify, as is happening increasingly in other countries.
— What industries are most promising this year in the situation that has developed now?
The situation is heterogeneous. In the industry and among manufacturers of auto parts, there are companies emerging from difficult times, but now they are more competitive. Many of them are already exporting their products to other countries and on other continents. We see a reaction that has affected a number of sectors in a greater degree, but many have reached the bottom and now rise to the surface. Also have the opportunity to pay attention to the domestic market, where imported goods are quite expensive. And this is very important.