As the world absorbs the shock of Donald Trump’s victory, no country is likely to be as directly affected as Mexico, whose economy and population are intimately linked to the U.S.’s and against which Trump directed exceptional hostility.
His pledges to build a wall between the two countries and make Mexico pay for it, end or overhaul their free-trade agreement, stop U.S. factories from moving there and deport millions of undocumented immigrants south of the border spell deep trouble for the Mexican economy. The peso extended its losses Thursday Nov. 10 to a record low against the dollar, Bloomberg News reported.
“Without a doubt, everything he has said is very bad for Mexico,” Gerardo Rodriguez, a former deputy finance minister who now manages emerging-market funds for BlackRock Inc. in New York, said before Tuesday’s vote. “There are questions about what he will be able to do when faced with the institutional counterweights in the U.S. and what he’s actually willing to do. It’s very unclear.”
Trump embarrassed President Enrique Pena Nieto in August when he repeated his promise to make the nation pay for a $10 billion wall hours after visiting him. But Pena Nieto understood better than many that a Trump victory was not a fantasy and the earlier he began building a relationship with him the better. On Wednesday, he congratulated him in a telephone conversation and said they may meet before the January inauguration.
Trump had singled out Mexico and Mexicans for verbal assault, calling some Mexican immigrants criminals and rapists. He said the U.S. is getting the short end of the North American Free Trade Agreement and that he could find a way to block remittances — cash sent to Mexican families by relatives in the U.S. — to make Mexico go along with his wall proposal.
Mexico’s economy could slow or even contract as soon as next year if Trump renegotiates or withdraws from Nafta, said Carlos Capistran, Bank of America Corp.’s chief Mexico economist. Even tariffs as low as 3 percent could cause exports to fall 10 percent from the previous year, depending on when such taxes are applied, he added.
Mexico’s top officials expressed confidence in the nation’s economic strength and financial stability on Wednesday, refraining from announcing immediate measures to calm markets and bolster the peso. Mexico’s currency commission will monitor market behavior and take measures as needed to avoid erratic exchange rate movements, Finance Minister Jose Antonio Meade said at a joint news conference in Mexico City with central bank Governor Agustin Carstens.
Carstens, who has called Trump a “hurricane” for Mexico’s economy, said the central bank will take the steps needed to meet its inflation stability goal. The bank’s monetary policy decision is scheduled for Nov. 17.
Mexico plans to pursue more free-trade agreements to diversify its exports and make it less dependent on the U.S., said Marcela Guerra, a senator from Pena Nieto’s Institutional Revolutionary Party who heads the chamber’s committee on North American relations. The Senate is set to begin hearings this week on the Trans-Pacific Partnership deal, which Economy Minister Ildefonso Guajardo said will bring benefits. Trump railed against the agreement during the campaign.
Gabriela Cuevas, the head of Mexico’s Senate foreign relations committee and a member of the opposition National Action Party, said that with Trump as president, it’s more important than ever that Mexico use its consular network to defend the rights of Mexicans in the U.S. About 12 million Mexicans live in the U.S. and almost half lack legal status, according to a study released last year by the Pew Research Center.
Pena Nieto said Trump’s failure to understand the value of the U.S.-Mexico relationship prompted him to invite the candidate to his official residence in August. The meeting, widely criticized by Mexicans, contributed to the president’s drop to record-low approval levels and the departure of Finance Minister Luis Videgaray, who had helped arrange it.
Andres Rozental, a Mexico deputy foreign minister under President Carlos Salinas, who negotiated Nafta with the U.S. and Canada, summed it up.
“I think and hope he understands the importance that Mexico plays for the U.S.”
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