Renegotiation Status

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Mexico is doubling its efforts to reach a NAFTA agreement in late August to increase certainty for investors and not pass the responsibility on to the virtual president-elect, Andrés Manuel López Obrador, according to people familiar with the negotiations.

An agreement negotiated during the next month would allow López Obrador to focus on his priority for national development, while protecting himself from any possible criticism that implies the outcome of the negotiations reasons for which his team supports the current efforts.

This deadline would also allow US President Donald Trump to fulfill his 2016 presidential campaign promise to fix or abandon the trade pact before the midterm elections to be held in November.
Experts warned that while the technical talks are progressing, an agreement depends on the willingness of the United States to reject some proposals opposed by Mexico, Canada and US business groups, such as the “sunset clause” and the modifications to dispute settlements mechanisms.

The USTR, Robert Lighthizer, has not shown openness to do that.
After a two-month recess, negotiators at the highest level of NAFTA will meet this week.
Canadian Foreign Affairs Minister, Chrystia Freeland, is scheduled to travel to Mexico City on Wednesday to meet with current and incoming Mexican administration officials, including López Obrador.
The Secretary of Economy of Mexico, Ildefonso Guajardo, detailed last week that he and his team plan to travel to Washington on Thursday to meet with Lighthizer.

“We are restarting the ministerial meeting between Mexico and the US, on Wednesday we will be talking with Minister Freeland and there is clearly a window of opportunity to close a series of issues that are left open, fortunately there are not too many, but they are very complex” said Guajardo. The Mexican Secretariat of Foreign Affairs announced on Saturday that Jesus Seade, who is set to be the main NAFTA negotiator in the Lopez Obrador administration, will join the team on his trip to Washington.

Seade commented in an interview last month that he sees a possible agreement before the November elections in the United States, and that the team of the virtual president-elect is in agreement with the country’s current negotiating positions.

“We are going to measure the temperature (in Washington), and more than that, to see what the attitudes are. We received a very nice visit from Secretary Pompeo and other ministers with him, the signals were excellent, so we hope that these signals will translate into a matter of progress and we can only wait and see, it is premature to go beyond this, we are working together, the voice of course is led by the current Government and in particular the secretary Guajardo”, said Seade. The Mexican currency achieved a marginal appreciation against the dollar in part-time operations on Monday, amid a reduction in dollar gains internationally.
The interbank dollar traded at 19,0089 units, at 12:00 hours Mexico time, after touching earlier the 19.14 units, its highest level since last July 9. At the bank window, the dollar was sold at 19.30 units, a figure equal to the one reported on Friday as closing by Citibanamex.

To consider:

The main European stock markets declined on Monday due to the concern generated by the impact of a trade war on world economic growth in the short term, as well as the fall in Fiat shares after news of a change in the CEO.
Investors are also evaluating President Donald Trump’s accusations that China is “manipulating” its currency, raising fears that a trade war will spread to the currency markets, while assets linked to commodities rose after the president launched a new wave of warnings to Iran, indicating that there will be unspecified “consequences” if Hassan Rouhani continues to threaten the United States

The tweet comes immediately after Rouhani’s own warning about the consequences of pursuing hostile policies against Tehran.

Investors were cautious during the start of a week plagued by corporate reports, such as the low-cost airline Ryanair Holdings, which on Monday reported a 20 percent drop in first-quarter earnings and warned that union strikes, added to the regional traffic control, make customers afraid to book trips.
Also, the financial leaders of the 20 largest economies in the world called on Sunday in Buenos Aires to “intensify” the dialogue and actions to “mitigate the risks” to the economy and “strengthen confidence”, given that the leaders admitted a “increase in commercial tensions”.

The finance ministers explained that short and medium term economic risks have increased, which they exemplified with “growing financial vulnerabilities, increased commercial and geopolitical tensions” and “structurally weak growth, particularly in some advanced economies,” among others.

This week, the President of the European Commission, Jean-Claude Juncker, and the EU Trade Commissioner, Cecilia Mastrom, will travel to Washington to meet with President Trump, and try to reduce trade tensions.
In Puerto Vallarta, Jalisco, the XIII Pacific Alliance Summit is taking place. The combined GDP of Chile, Mexico, Colombia and Peru, the countries that comprise it, was more than 17.1 billion dollars in 2016; and those nations attracted 41 percent of total Foreign Direct Investment in Latin America in the same year. In addition, members of AMLO’s transition cabinet are present at the summit; he excused himself due to the fact that his appointment as president elect of Mexico has not been made official.

Sources: Politico, WSJ, El Financiero, IQOM, Reforma,

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