BGA Cable: Mexico Political Update

Situation

On May 18, the Trump administration gave notice that it would start the 90-day consultation period with US Congress required before initiating negotiations with Mexico and Canada to renegotiate the North America Free Trade Agreement (NAFTA). During that period, the US government will also seek Fast Track Authority which would gives it a freer hand in negotiations as any agreement would be subject only to an up or down vote in the US Congress. During the consultation period, the administration is also expected to clarify its negotiation priorities.

Throughout his Presidential campaign, Trump made much of his opposition to NAFTA, suggesting the possibility of a complete withdrawal from the treaty. More recently, his administration has suggested that it merely wants to improve upon the agreement. Both Mexico and Canada are committed to NAFTA, but have expressed support for modernizing the 23-year-old pact. On June 4,
gubernatorial elections will be held in the Estado de Mexico, the most populous state in Mexico and a traditional stronghold of the ruling PRI party of President Enrique Peña Nieto. Until recently it looked likely the PRI could lose the Governorship to the Morena, the party recently established Andres Manuel Lopez Obrador (AMLO). However, the most recent opinion poll published by the Reforma newspaper put the ruling PRI’s Alfredo del Mazo Maza neck and neck with Delfina Gomez

Alvarez, the Morena candidate at around 31% support. The same poll shows the PAN and PRD candidates lagging far behind. A loss by the PRI and, more important, a victory by Morena would be a strong indicator of AMLO’s viability in the June 2018 presidential elections.

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Our Associates are closely monitoring developments so we can keep you updated on the political situation in Mexico and their potential implications for financial markets. Contact us to schedule a call with our experts to hear our more detailed views.

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