Mexico: Finding Its Place in the World amid Trump
06 Mar 2017
We can all accept it at this point: we live in uncertain times. To be sure, all countries, whether emerging or developed, experience a certain grade of incertitude – but some do more than others.
Mexico is coexisting with the biggest uncertainty hurricane of its recent history, particularly since the North American Free Trade Agreement (NAFTA), the 23-year-old treaty with the US and Canada, was sentenced to death by US President Donald Trump.
This is only one of the many clouds that have appeared over Mexico´s blue sky since Trump took over as president a month ago. What will the country do once NAFTA is annulled and tariffs of up to 20% are imposed? Could any other country become Mexico´s new major partner? How can Mexico remain competitive?
The international community has been working on these questions for some time and has not agreed on one simple response. The short term looks challenging for Mexico, but we continue to see a bright future for it. In December, we published our last Business Barometer in Mexico, and we realized that it was not only us who keep a positive outlook for the Mexican economy. It is now time for the local business network to speak and take the first steps towards the future.
To that end, Oxford Business Group organized, in partnership with Deloitte, a conference on how Mexico should generate new economic opportunities. In front of an audience of top-tier CEOs, we shared our views and listened to key business people. The goal was to develop a better perspective of what decision makers expect for Mexico´s economy in the coming years.
Some participants, including Deloitte´s foreign trade agreement (FTA) expert and partner Ricardo González Orta, admitted, contrary to what some say, that a reform of NAFTA could even benefit Mexico. González Orta suggested a revision of Mexico’s costs scheme in order to make the most of what he considers a “wide-reaching export platform”. A strong statement was made: Mexico could survive without the levels of dependence on the US that have persisted for more than two decades.
Fernando Turner, one of our invitees to the conference and Secretary of Economy and Labour for Nuevo Leon – Mexico´s third-richest state, which is highly dependent on exports to the US – highlighted the importance of strengthening Mexico's domestic market. All speakers agreed that an essential first step for Mexico is limiting its dependence levels on North American demand. Turner was critical of the lack of incentives offered to Mexican entrepreneurs and made a link between this and what he considered “low levels of investment” in the country. As a businessman who is now involved in public affairs, Turner raised his voice against monopolies and requested the federal government work with excessive red tape.
Several speakers cited inequality as one of the main issues affecting Mexico in this new context. Frederic García, CEO of the CEEG (an association that represents the top 50 multinational companies in Mexico), said the country must address the imbalance in production levels across its 32 states: southern states, for example, will have to match the productivity of northern ones. He also insisted on the importance of investing in research and development (R&D), and suggested Mexico turn its focus to South Korea, which invests more than 4.5% of GDP in R&D against Mexican paltry 0.5%. Inequality could be also fought through better access to finance and improved financial education, José Oriol Bosch, CEO of the Mexican Stock Exchange, added.
If anyone does not see clouds in the Mexican sky these days, he or she may be blind. However, the business community can at least agree on something: the new challenges, including those that arise from the passion of the US president, are to be overcome.