LatinFinance - September/October 2017 - 21

Interview
Vista Oil & Gas

MEXICO
FOCUS

PAGE 26

Oil & Gas
Testing reforms
PAGE 28

Turning the corner
Mexico is on the mend after weathering harsh rhetoric from US President Donald Trump.
The peso and the stock market are in good shape, but NAFTA renegotiations and next year's
presidential election could offer new tests. By Amy Guthrie
The year got off to a gloomy start for
Mexico. Before Donald Trump was even
sworn into office as the 45th US president,
Ford Motor Co. canceled plans to build
a $1.6 billion assembly plant in San Luis
Potosí.
For many, the Ford announcement signaled that Trump would make good on his
campaign promises to lure manufacturing
jobs back to the United States and possibly
rip apart the decades-old North American
Free Trade Agreement (NAFTA). Investments froze across Mexico's industrial sector, a major engine of the economy, and
the peso plummeted to an all-time low.
In Querétaro, not far from the doomed
Ford plant, Luis Palomé, regional director
for the Belgian auto-parts maker Bosal,
got word in January to put all investment
plans on hold. "We didn't really know
what the impact of Trump's politics would
be," Palomé says from his office overlook-

ing a factory floor humming with activity.
By mid-year, Palomé no longer saw
Trump as a threat to his business. He
believes that low wages will continue to
make Mexico an attractive destination
for manufacturing investment. A highly
skilled Bosal factory worker might make
$18 a day, while his US counterpart performing the same task will earn that in an
hour. "Many turned to Mexico as a lowcost country," Palomé says. "Now they
stay for quality."
Manufacturing employment has continued to expand during 2017, reaching a
record high in June. And the automotive
sector, which drives a large share of both
manufacturing employment and trade, is
firing on all cylinders. Mexico is on track to
post its eighth consecutive year of recordhigh automotive production and exports.
The optimism extends to other parts of
the Mexican economy. Nervousness over

Trump's aggressive campaign declarations
inspired Mexican trade officials to hit the
ground running in January. They dove
into analysis, plowed through numbers
and rushed to seek out new sources for
key critical goods purchased in the United
States, such as grains. Observers say these
moves are seen as having strengthened
Mexico's negotiating position on NAFTA.
Mexico is the top US export market for
dairy, grains and beef.
More than eight months into the Trump
presidency, Mexico appears to have
weathered the worst of the candidate's
rhetoric without catastrophe. The hurricane has passed, investors say, unlocking value in contrarian trades for those
who were willing to stick out the storm or
march into gale force winds to increase
their exposure to the country. Talks to update NAFTA could still create some market
volatility, and investors have trained a cau-

September/October 2017 - L ATINFINA NCE.COM 21

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