Trump’s initial threats against Mexico seem to be in stand-by. Meanwhile, it’s time for the country to strengthen its institutions.
As with almost every promise he made during his campaign, Donald Trump has not carried out the threats he made against Mexico. As a result of Trump’s inaction, it seems that Mexican economy has found new strength and, surprisingly, is having one of the best starts of the year since 2014. Not only has the Mexican peso recovered from the devaluation it suffered after Trump’s election, but also the manufacturing and agriculture sectors have had months of growth.
Aside from Trump’s inaction, what has ignited this resurge of optimism in Mexican economy? Representatives from the automotive industry, such as Maurizio Rosa – Chief Executive of Codan Rubber Mexico–, said that U.S. clients helped to renew trust on foreign market. Despite Trump’s statements, Rosa says that clients in the U.S. reaffirmed the importance of Mexico. However dominant the U.S. may seem, they also have a dependence on the low costs of materials produced in Mexico.
The current situation, where Trump’s executive orders keep getting delayed or completely overturned, has encouraged Mexico to not only carry on with the trades they had before the U.S. elections but to look for more productive markets. The Trans-Pacific Partnership –a trade agreement between countries such as Australia, Canada, Chile, Japan and Mexico– is a new commercial outlet that Mexico should explore more in depth. This type of actions would make less dangerous any measures the U.S. takes in regard to NAFTA. Clearly, this keeps being the biggest concern of Mexicans, who have seen its growth predictions reduced by what could NAFTA changes do.
So far, even if concerns about NAFTA have damaged potential and future investment in Mexican companies, recent months call for a promising year in Mexican economy.
However, as analysts from The Economist and Financial Times have said, there still are lots of risks, mainly due to the dependency of Mexico to U.S. commerce. Trump’s whims and sudden changes of mind can still hurt –and greatly– Mexican economy. Although businessmen and consumers are at ease due to the conciliatory tone of recent U.S. statements, analysts suggest that Mexico should take advantage of this sudden prosperity and take further actions to raise productivity, improve infrastructure and deal with criminality. If done properly, that could lessen the damage Trump has done to investment.