What will happen to Mexico if Trump is US president?
Some economic analysts say the possible victory of US billionaire next November would have a significant negative impact on Mexican finances.
In the event that the Republican candidate, Donald Trump, becomes president of the United States, the Mexican economy would suffer a fall of 3,4% of gross domestic product (GDP) and the country would be plunged into a similar economic crisis occurred in 1994, portends a Mexican study.
According to the Director of Economic and Financial Analysis of Banco Base, Gabriela Siller, there is a high probability that Trump is president, which would create a bleak outlook for Mexico
The mathematical model used by the house analysis considers that if the real estate mogul keeps his promise to implement a tariff of 35% to automotive Mexican exports would generate a decline of 11,6% in non-oil exports , which would result in a fall of 2.9 % of GDP.
In addition, the arrest of remittances to Mexico would cause a decline of 1% in consumption, which would represent an additional blow from 0,5% to GDP.
The biggest risk for Mexico is that Donald Trump wins the election, Siller said.
The economist explained that Trump is technically possible to pull off the United States from the North American Free Trade Agreement (NAFTA)
Some [signatory] can exit the agreement six months after giving notice to other parties. In that case, the treaty would remain in force between Mexico and Canada, but 33% of our exports go to the United States. said Siller .
One of the economic impacts mentioned by Trump happen if he decide to remove the 35% tariff on Mexican auto imports, which would result in a 11.6% drop in non-oil exports from Mexico to the United States, which would imply a 2.9% contraction of GDP.
In addition, regarding the peso - dollar, Banco Base estimated that a victory for the Republican lead the exchange rate to 22 pesos, compared to 19 today, despite an increase in interest rates by the Bank of Mexico you could reach 8%.
Should fulfill his campaign commitments, it would not be crazy to think about a rate above 25 pesos per dollar
Finally, the expert estimated the possibility of an increase in inflation mixed with a recession, which would increase social risks due to rising prices of basic goods.
We believe that a time would come fairly strong economic recession to Mexico where also the manufacturing states and those receiving remittances would be most affected, she said
The currency would react badly
Meanwhile, an analysis of the National Bank of Mexico (Banamex) explains that the Mexican currency could overreact if a new government of Trump dismisses United States from NAFTA, which would force the authorities to take measures to mitigate the impact.
Possibly would result in an ' overreaction ' exchange rate . We believe that authorities in Mexico are aware that this scenario would require responses in economic policy, the analysis says.
Last September, the Republican candidate threatened to renegotiate or even break the North American Free Trade Agreement if he wins the White House in 2016 .
Meanwhile, the Mexican Business Council (CMN) considered the victory of Donald Trump generate more uncertainty in Mexico by the "virulence" has shown the country and against the NAFTA
From what has taken advantage Trump is that today in the United States to attack Mexico has no political cost, said Alejandro Ramirez Magana, president of CMN, who lamented that no one has explained to Trump the importance of the NAFTA, one of the issues that Trump used to criticize Mexico.
Source: Taringa!