The Daily Update - NAFTA and AMLO's letter

Andrés Manuel López Obrador (AMLO), will not be officially inaugurated as Mexico’s next President until December but already looks to be taking a proactive role on issues such as NAFTA. Since his Presidential election victory on 1 July, he has written to Trump advocating that the US and Mexico work together on the key issues of ‘trade, migration, development, and security’. AMLO thinks ‘it is worthwhile making an effort to conclude the renegotiation of’ NAFTA as ‘uncertainty could slow down investments’.

Trump stated on July 18, ‘We have had very good sessions with Mexico and with the new president of Mexico, who won overwhelmingly, and we’re doing very well on our trade agreement,’ and ‘So we’ll see what happens. We may do a deal separately with Mexico and we’ll negotiate with Canada at a later time. But we’re having very good discussions with Mexico.’ AMLO has made clear that he wants a constructive relationship with the US and his transition team will be participating in NAFTA talks which resume today in Washington.  Jesus Seade has been named as AMLO’s chief NAFTA negotiator and will be participating.

On the thorny issue of migration AMLO looks to be taking a slightly different tack aiming (as per his letter) ‘to ensure that Mexicans do not have to migrate because of poverty or violence. We will try to make emigration optional and not necessary. We will strive to ensure that people find work and wellbeing in their places of origin, where their families, their customs, and their cultures are. To achieve this fundamental purpose, the incoming government will carry out the greatest effort ever undertaken in Mexico.’ To help achieve this AMLO calls for a development fund that includes Central American countries to help tackle the cause of migration and improve border control.

Donald Trump has responded to the letter urging a swift renegotiation of NAFTA and stating: ‘Like you, I believe that meeting the challenge of illegal immigration involves more than just strong border security. We are prepared to further address the economic development and security issues that drive migration from Central America, but we must also increase cooperation to protect the rule of law and the sovereignty of both our countries.’

While an element of caution is probably warranted, Mexico’s constructive dialog with US is positive for investor sentiment, particularly following yesterday’s agreement between the US and EU to ‘work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods’: the Mexican peso has performed well vs the US dollar gaining 6.6% since end of June (spot return at the time of writing).

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