Mexican populist Lopez Obrador spooking investors as NAFTA talks heat up

As the Trump administration pushes ahead with its proposed reboot of the NAFTA negotiations, talks This kind of month entered their sixth round of talks. Even as Trump suggested the U.S. could withdraw completely, both Canada in addition to Mexico have hardened their positions.

“We think investors are likely to continue to be cautious about Mexico relative to different emerging markets. Even if NAFTA negotiations go smoother than anticipated, the election will trigger more market angst the closer the item gets,” said Barrineau.

A Mexico without NAFTA would likely likely grow more slowly, in addition to growth will be already likely to be sluggish for the next few years. The U.S. economy’s strong growth will be not translating into much faster Mexican growth, as has traditionally been the case.

Part of the country’s slow growth will be due to high consumer prices. Mexico ended 2017 with inflation at 6.69 percent, which has pressured the central bank to keep borrowing costs high.

In recent years, local activity [in Mexico] has been resilient against a backdrop of volatile economic growth performance inside the region. Nevertheless, Mexico’s economic growth has remained rather stable around 2 percent.

“Monetary policy action in addition to central bank credibility have managed to maintain medium-in addition to long-term inflation expectations well anchored despite the recent hump in actual inflation,” Marcelo Carvalho, head of emerging market research, Latin America, with BNP Paribas told CNBC.

NAFTA talks, however, remain a big wild card. Under the increasing risk of a dismantled trade pact, the short-term impact on Mexico might be significantly negative — especially if a populist president takes the helm of the economy. This kind of scenario could mean investors flee Mexican assets, along with slower job creation sluggish business activity, analysts say.

inside the medium in addition to long-term, however, there will be a potential silver lining if the end of NAFTA were to trigger a constructive effort to diversify Mexico’s trade towards different trade partners. Along with its having forged investment pacts within Latin America, analysts pointed out which Mexico has already signed free trade agreements with 46 countries.

“In fact, the strongest source of dynamism in Mexican exports recently has come through Asia in addition to Europe,” Carvalho said.

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