The Economist magazine hosts a series of events around the world and September 7 was Mexico City’s turn with a summit titled “Thriving through disruption,” an event that revolved around the current political climate between Mexico and the United States.
The event that took place at the St.Regis hotel in Mexico City, gathered figures from many industries in order to provide the most accurate view on the current and future economic landscape of Mexico.
Since the election of Donald Trump, Mexico has been forced to face its own economic demons and those demons include helping to develop the potential of the country’s younger generations, regulating financial technology, the renegotiation of the North America Free Trade Agreement (NAFTA) and the upcoming presidential elections of 2018.
There seemed to be a recurring theme throughout the summit; many speakers talked about the fact that after the creation of NAFTA, Mexico sort of put its relationship with the United States and its economy on cruise control.
The Mexico-U.S. relations dominated the summit, which should not be a surprise. We are at a time when many countries are evaluating their economic situations in the light of each country’s relationship with president Donald Trump, and Mexico in particular has been a target of Trump due to immigration and trade.
NAFTA
Many experts agree with the fact that while the renegotiation of NAFTA comes with threats, there are also opportunities.
“I think that a very good opportunity is trying to incorporate corruption into the NAFTA talks,” said Director of Mexican organization Mexico, How Are We Doing? (¿México, cómo vamos?) Valeria Moy.
“I don’t think we’ll be able to but I would love to see that. We have been witnessing corruption scandals increase every single day and we have this rhetoric that we have to battle corruption, but nothing happens. It would also benefit the U.S. and Canada if this subject were to be somehow incorporated,” she said.
The fact that Mexico has for so long taken for granted the fact that much of its income comes from trade has also led politicians to be able to disguise the country’s finances as part of a proper political atmosphere and has also contributed to corruption running rampart through government.
It seems that regardless of Trump’s push for NAFTA renegotiations, during a talk by the name of “The Road Ahead: U.S.-Mexico Relations,” former U.S. Ambassador to Mexico (2003) Jeffery Davidow said there’s a real need to revaluate the agreement, or as he puts it: “I’ve said very vulgarly in the past that NAFTA reminds me of two people that after having sex just laid back and smoked a cigarette and didn’t do anything else.” This Davidow said in reference to the lack of talks between Mexico and the U.S. regarding trade after NAFTA was negotiated in 1994.
The highlight of the summit was a talk titled “Forging Ties Not Trade Wars” with former Secretary of State and Industry Jaime Serra Puche (1986-1994), former Ambassador to the U.S. Jaime Zabludovsky (1998-2001), economic counselor at the Embassy of Japan in Mexico City Aoyama Takero and head of postgraduate studies at the National Autonomous University of Mexico (UNAM) Carlos Reyes Díaz.
Serra and Zabludovsky played a major role in the negotiations of NAFTA, Serra led the negotiation and implementation while Zabludovsky acted as Mexican Deputy Chief Negotiator.
#MexicoSummit @jaimezab and Jaime Serra on NAFTA and trade. pic.twitter.com/rkpJehfBmG
— COMEXI (@COMEXI) September 7, 2017
Zabludovsky referred to Chapter 11 of NAFTA, which is the chapter that establishes a framework of rules and disciplines for investors, as “a key component for the U.S. private sector,” and that he would imagine that “the private sector should fight to keep this chapter.”
The issue of the U.S.’s commercial deficit as a negotiation tool was also addressed by Zabludovsky.
“It’s absurd to put on the table the U.S.’ commercial deficit since … since the U.S. is a country with a fiscal deficit that is bound to become a commercial deficit and therefore it needs to bring foreign capital,” said Zabludovsky
Serra Puche said that “Mexico should avoid protectionist clauses; it would be counterproductive for the economy. We have to follow the guidelines for healthy negotiations.”
THE FUTURE: Presidential Elections, The U.S. and Trump
Chairman of the Mexican Council on Foreign Relations (COMEXI) Luis Rubio and former U.S. Ambassador to Mexico (2002-2009) Luis Antonio Garza joined Davidow during the talk “The Road Ahead: U.S.-Mexico Relations.”
Rubio thinks that the NAFTA renegotiations will be tied to the Mexican presidential race if they don’t conclude by the beginning of 2017.
“We can’t have negotiations during an electoral process, what will happen is that this will conclude by December-January. If it concludes, that’s it, otherwise there will be a freeze oil negotiations until after the election. There is no other way,” said Rubio.
The border wall, the end of DACA and the threat of rip up NAFTA… What does the future hold for US-Mexico relations? #MexicoSummit pic.twitter.com/p3B9BaZlRw
— The Economist Events (@EconomistEvents) September 7, 2017
Garza thinks that “it’s reasonable to expect negotiations to advance in 2018 but to completely would be ambitious.”
Davidow siad that political figures such as Andrés Manuel López Obrador (AMLO) combined with Trump’s character, might damage the renegotiation process
“I think that at some point we could see some unfortunate verbiage coming from the White House, in particular about AMLO. I think what AMLO wants the most is for Trump to become the issue of the election, because that way it will be one nationalist against another,” Rubio said.
During a talk titled “Mexico’s Next President” former special assistant to President Barack Obama and Founder and Managing director of Restrepo Strategies LLP Dan Restrepo said that in his opinion “Trump is not a nationalist, he’s a nativist.”
Restrepo referred to Trump’s actions on immigration, trade and the economy as proof that Trump is not really interested in working on the best interests of the United States but rather on focusing that U.S. citizens don’t face competition from abroad.
FINTECH
Associate General Director of Banking and Value at the Treasury and Public Finance Secretariat (SHCP) Anna Laura Villanueva Vega said that “the Fintech industry has the potential to completely change the financial system.”
During a talk titled “The Future of Fintech,” Villanueva Vega said that the law initiative that President Enrique Peña Nieto will submit before the end of September, looks to “provide a legal framework of certainty that can help these companies to grow the financial sector.”
“La ley fintech permite ser disruptiva porque regula flexiblemente a cada entidad financiera” #AnaLauraVillanueva de @cnbvmx #MexicoSummit pic.twitter.com/TzEfyVPJUl
— The Economist Events (@EconomistEvents) September 7, 2017
Villanueva Vega also said that the law initiative was built around crowdfunding and Electronic fund transfers (EFT).
“We believe that this two industries will explode within the next few years in terms of the number of companies that will use them as means of payments,” said Viallnueva Vega.
Alejandro Consentino founder of Afluenta and Adolfo Babatz, Co-Founder of Clip were part of the panel. When audience member asked the panel what they thought about Banks buying up Fintech companies, Cosentino and Babaatz provided different points of view.
Babatz considered that “banks making offers for Fintech companies is an indication of a healthy market, because it can provide these companies with greater resources to operate better.”
Cosentino differed by saying that he has received offers in the past but considers that his company “innovates and, therefore, operating independently we have a better path towards coming up with new ideas.”