The Savills Blog

Impact of a Lopez Obrador victory in Mexico and latest on NAFTA negotiations and implications

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These are turbulent times for relations between the US and Mexico. In addition to obvious political matters, there are two large issues which have the potential to entirely change the business environment as we know it. The first has to do with the daily uncertainties regarding the North American Free Trade Agreement (NAFTA), established in 1994 with the idea of freeing up trade between the US, Mexico and Canada. NAFTA has altered the business dynamics between the three countries, with manufacturing operations tied to sophisticated supply chain networks spanning North America.

President Trump is threatening to pull out of NAFTA, and has established protectionist trade barriers on steel and aluminum. How will this affect companies’ current supply chains and future investments in Mexico? If the US pulls out of NAFTA, the automobile industry would be among the sectors hardest hit. The intricate supply chains that the auto sector has developed would face uncertainty. Factories that were once highly profitable in Mexico may reduce their output with higher import duties back into the US, reducing the need for warehouse space. Industrial markets near the US-Mexico border would feel an impact, including warehouse markets in Texas and California.

The second issue relates to the upcoming presidential elections in Mexico, which will take place on July 1st, 2018. Currently, a controversial and “leftist” candidate, Andrés Manuel López Obrador (commonly referred to as AMLO) is leading the polls by double digits and barring unforeseen circumstances, will be the Mexican president for the next six years. Will he be another Chavez from Venezuela? Or will he somehow help the Mexican political environment? How will this affect the business economy in Mexico and the US?

One of the main concerns for a new political leader has to do with central banking and foreign exchange rates. For example, the Mexican Peso has been consistently devalued in recent history. This leads to a deteriorating effect on Mexican consumers for American goods. Products made in the US become more expensive while demand tends to fall. This would be a negative outcome for American manufacturers located in big industrial markets such as Chicago and New Jersey.

With these issues on the table, the International Executive Resources Group (IERG) and Savills Studley invited two specialists to present and lead an interactive discussion on these pressing issues. IERG was founded in 1997. It is a global non-profit, professional association for executives who have lived and worked outside of their home countries at senior levels for extended periods.

The Savills Studley Miami office was filled with seasoned international executives, most of whom have a direct connection with Latin America and Mexico. Our discussions were led by John Price and Antonio Pena.

John Price is the Managing Director of Americas Market Intelligence with over 24 years’ experience helping companies succeed in Latin America. John has conducted 1,400 + consulting engagements across Latin American markets and 16 industries. Previously, John was Managing Director of Knoll focusing on market intelligence in Latin America. He is a graduate of Queen’s University in Ontario, Canada.

Antonio Pena is a Shareholder of Greenburg Traurig law firm and currently President of Mexico-United States Chamber of Commerce in Miami. Antonio has four law degrees from the United States, Mexico and Spain and has an impressive track record representing strategic investors and private equity funds in cross-border mergers and acquisitions, joint ventures, financing and restructuring throughout the US, Latin America, Caribbean and Spain.

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