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Mexico’s New President-Elect Lopez Obrador and the Future of NAFTA, Mexico Manufacturing

Mexico’s New President-Elect Lopez Obrador and the Future of NAFTA, Mexico Manufacturing

After Landslide Election Victory, AMLO Talks Trade with Trump and Trudeau. | On Sunday Mexico went to the polls and elected the leftist Andres Manuel Lopez Obrador (AMLO) of the Morena party in a landslide victory. Capturing the highest share of the vote over rivals not seen since the 1980 election.

President-Elect Lopez Obrador is said to have received a mandate from the people to change the country.

What does this mean for Manufacturing in Mexico and the future of NAFTA?

If you were to believe rival parties’ propaganda and the memes shared on social media leading up to the election, Lopez Obrador’s victory could make Mexico another Venezuela (read: disaster for business, people). Surely this means Mexico will become a bad place for business, investment and progress? As with all blanket labels and fear-mongering, these broad strokes are far from the truth.

We’re going to accompany the current government in this negotiation, we’re going to be very respectful, and we’re going to support the signing of the agreement,” Lopez Obrador said in an interview with Milenio TV this week.

During his victory speech, Lopez Obrador also assured investors, reaffirming practical economic policies and the independence of the Bank of Mexico.

Though Lopez Obrador had previously been a staunch critic of the North American Free Trade Agreement (NAFTA, TLCAN in Spanish), the former mayor of Mexico City has since adjusted his views. Global trade and international business are firmly cemented in our interconnected economies. This is the new norm and President-Elect Lopez Obrador seems keenly aware of this, opting instead to champion better wages and working conditions within these existing trade agreements. Which, not surprisingly, is a stance the US has also taken during recent NAFTA negotiations.

The US and Canada Congratulate the New President and Southernmost Ally

Canada and Mexico are close friends and longtime partners. We share common goals, strong people-to-people ties, and a mutually beneficial trading relationship that is the envy of the world — reflected in our joint effort to update the North American Free Trade Agreement for the 21st century," said Canadian Prime Minister Justin Trudeau in a statement.

Trudeau also spoke with President-Elect Obrador by telephone, discussing their mutual trade interests and their "shared priority of updating the North American Free Trade Agreement for the betterment of their peoples," a transcript of the call revealed.

US President Trump congratulated Mexico’s President-Elect, saying, “I think the relationship would be a very good one. We’ll see what happens, but I really do believe it’s going to be a very good one.”

President Trump has said that NAFTA negotiations will resume after the US midterm elections in November. With Lopez Obrador taking office in December, the new Mexican President will have time to assemble his trade delegation and integrate his vision for Mexico with the finer negotiating points between the three nations.

What does this mean for manufacturing in Mexico?
Existing US manufacturers in Mexico and those exploring expansion south of the border appear to be confident.

Alberto de la Pena, partner and head of the Mexico and international practice groups at the law firm Haynes and Boone, spoke with Market Week just after the Mexican election, saying “AMLO’s first speech [on Monday] was one that gave comfort to the market.”

“Let’s also not forget that AMLO wants to put a lot of money into infrastructure, but has also said that he wants to be fiscally responsible. That means Mexico will need investors, and I think there will be appetite,” he added.

De la Pena also suggested that Lopez Obrador could spur public-private investments, particularly in the energy and power sectors.

These speculations could mean better roads for transporting goods and a more robust energy and power infrastructure, all vital to manufacturers operating in Mexico. With a five-month transition period before Lopez Obrador is sworn in, Co-Production International will be keeping a close watch on the incoming president and how it will impact manufacturing in Mexico.

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