Neither NAFTA nor AMLO worry S&P. Neither NAFTA nor AMLO worry S&P.

Stability with AMLO, without NAFTA: S&P

Standard & Poor's sees economic stability should AMLO win or NAFTA lose

Mexico will maintain a stable economic outlook in 2018 even if the North American Free Trade Agreement (NAFTA) is dismantled or Andrés Manuel López Obrador wins the presidency.

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That’s the assessment of global ratings agency Standard & Poor’s (S&P), which said in New York yesterday that it expected Mexico would maintain its BBB+ rating next year.

The company’s sector specialist for sovereign ratings in Latin America and the Caribbean said that he didn’t foresee either of the eventualities having a considerable effect on Mexico.

“We have a stable outlook for Mexico despite the threats that appear every day around potential changes to NAFTA and other factors that could affect trade or foreign investment,” Joydeep Mukherji said.

“The fundamental pillars that maintain the rating in Mexico will continue no matter who wins the election. The Bank of México will remain autonomous and continue the flexible exchange rate and credible monetary policy,” he added.

Critics of the leftist, third-time presidential aspirant commonly known as AMLO argue that he could take Mexico down a similar economic path to that trodden by Venezuela’s Hugo Chávez and Nicolás Maduro should he win next year’s election.

But López Obrador has sought to dispel concerns that the party he leads is anti-business, and did so when he presented Morena’s political platform last month.

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S&P raised its outlook on Mexico’s credit rating in July from negative to stable, saying at the time that it didn’t expect debt levels to worsen and also praising the government’s “prompt reaction . . . to recent negative shocks.”

President Enrique Peña Nieto’s administration has continued to strengthen monetary policy first implemented by that of his predecessor, Felipe Calderón.

The Mexican economy has now grown for the last 31 consecutive quarters, with the trend continuing despite concerns arising after the election of United States President Donald Trump and his hardline rhetoric about the future of the two countries’ trade relationship.

Economy Secretary and Mexico’s chief NAFTA negotiator Ildefonso Guajardo last month rejected that a U.S. withdrawal from the 23-year-old trilateral agreement would be devastating for the Mexican economy although he did concede there could be a “short-term impact.”

Mukherji believes that even if NAFTA is dismantled, production chains and capital flows that are already established in the common North American market will continue for at least a year after any possible termination of the deal.

“Our scenario is that whether NAFTA is renegotiated soon or the negotiations extend or even if the treaty is canceled and not replaced by another agreement, we expect that this relationship will be maintained,” he said.

Only an alteration of production chains, trade and investment “would change the baseline scenario of S&P,” and trigger a revision of its outlook, Mukherji explained, but added “that scenario is not the most probable.”

The sovereign ratings specialist also said that the Bank of México had responded in a “timely manner” to inflationary pressures caused by the devaluation of the peso and had raised interest rates to a level that is consistent with its goal of keeping inflation to 3%.

Source: Milenio (sp)

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  • From South of the Border

    Is this the same S&P that dismissed the economic downturn that was forecast for 2008? Is this the same S & P who rated the Toxic mortgages that brought on the great recession as A plus? Then of course those so called A plus mortgages took down the entire world economy! I take what S & P has to say with a grain of salt! As far as NAFTA it would be a minor blip either way! AMLO is a different story completely companies have already told the Mexican people and the Mexican government what would happen, if AMLO won the presidency. In Venezuela Chavez first Maduro later nationalized companies and stole money and other forms of wealth then ran these companies into the ground! Unlike in Venezuela the international companies see the writing on the wall, if AMLO wins. They won’t wait to have their factories nationalized again , instead the companies are laying the ground work now to close their factories in Mexico and move their money out of Mexico, before AMLO came to power, In about 6 months from the election to his taking office in December of 2018 the companies would layoff the workers and then move the money overseas. If AMLO takes office the industrial parks and zones in various Mexican cities will have, become Ghost Towns! The people will be gone along with factories and the jobs!

    • Perhaps you would like to share your sources for the claims you make. Those of us that actually work in the Maquiladora Industry have heard no talk of leaving Mexico because of AMLO. In fact at most of the Industry associations, they are all saying the same thing. The Maquiladora industry had a much better deal with Mexico before NAFTA. No certificate of origins, no sectoral programs. Nafta like all trade agreements established mechanisms to offer more legal certainty and dispute resolution – they do not encourage companies to relocate jobs. AMLO has the same objections to NAFTA that most of us in the industry said would happen. The fear was that Mexico would become a provider of cheap labor and wages would be suppressed in order to encourage foreign investment. That is exactly what has happened and will change under AMLO. Many foreign factories left Mexico to move to China because of cheaper labor only to have quality problems and intellectual property disputes. Some of them have moved back to Mexico, like Mattel. Many of us have had serious reservations about opening the energy sector to foreign investment. This did not work in the past and led to the expropriation of the sector by President Lazaro Cardenas which was financed by selling bonds to the public and paid off over years. Many people made sacrifices to eliminate foreign exploitation in that sector, and many are not in favor of this reform. AMLO says he will put it to a referendum. It appears that this time, no one is paying attention to the lies and scare tactics. It is again time for a populist President in Mexico.

  • Why not look at Lopez Obrador’s rexord instead of insulting with Chavez comparisons. Amlo did an incredible job as jefe of Mexico City which has a population larger than many countries.He is a populist yes but he is also a brilliant leader. He had my vote in 2012 and will have it again.

    • cooncats

      What Glenn said. Why keep electing the same bunch of PRI and PAN corruptos? How much theft of public money is enough to convince the Mexican people to try something different? The fact is when this guy was mayor, as noted of a city whose population equals many countries, the results were positive. Do you think the results from PRI electees over the last 6 years have been positive? If you do, you obviously haven’t been following the endless reports of their big time theft here.

  • Güerito
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