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November 21, 2017 01:00 AM

NAFTA and an election could spell trouble for Mexico's economy

Bill Bregar
Senior Staff Reporter
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    Rich Williams

    The North American Free Trade Agreement was on the minds of Mexicans at Plastimagen, and people from around the world exhibiting their wares — from Europe, the United States, Canada and China. But looming ahead is the 2018 Mexican presidential election. With NAFTA as the backdrop, that could spell trouble for the economy in Mexico.

    Businesses in Latin America tend to hold onto their money in major elections. I've heard this over and over on trips to Mexico, Brazil and Argentina. The reasons are complex, but government corruption, crime and a sense that elections can signal dramatic movements with hard-to-predict consequences all figure into it.

    What's easy to predict is the tightening of the purse strings around an election means that business will slow down in Mexico. The only question is how much. Now throw in uncertainty over NAFTA and President Donald Trump's bellicose language — and his tweets, which now can be twice as long (thanks, Twitter!) — and you've got a recipe for even more worry and caution before the Mexican election.

    Just two and a half weeks before Plastimagen kicked off, U.S. Border and Customs Protection unveiled eight prototypes of border walls. Trump, in his campaign, promised to build a "big, beautiful wall."

    NAFTA negotiations were set to resume the week after Plastimagen, when officials from the United States, Mexico and Canada were set to meet Nov. 17 for the fifth round of talks on how to reset the 1994 trade deal.

    Trump is unpredictable, which raises the stakes even further. As Plastics News reporters found out at Plastimagen, to many Mexican businesspeople, Trump is Lord Voldemort: He Who Must Not Be Named. Oddly, to American eyes, you did not just see his actual name mentioned by Mexicans.

    Leaders from businesses from other countries who have invested in Mexico — mold makers, material suppliers and machinery manufacturers — generally downplayed any "Trump effect" and printed their plans as long-term. And some business executives from Mexico also were optimistic.

    Juan Carlos Gonzalez, Latin American director for Milacron Holdings Corp., said he does not see the election making a major impact on business. "I haven't seen many variations compared to other [past] elections, for this industry," he said. He said any slowdown will be "no more deeper than in the past."

    Gonzalez also thinks the NAFTA negotiations will work out, saying, "The road is bumpy, but at the end, I think, good things for the three countries will come."

    He added: "I'm a very positive person."

    That may be the case. But all the NAFTA noise — and Trump's volatility — certainly will play a big role in the Mexico election on July 1, 2018. The Mexican president serves a six-year term.

    An official of another U.S. equipment company does expect a downturn in Mexico around the election time and even beyond. He did not want to be quoted.

    In the heat of political battle, no candidate for president of Mexico will want to be perceived as caving in to Trump. The PRI (Institutional Revolutionary Party), of current president Enrique Peña Nieto, will go against the PAN (National Action Party) and a large number of other political parties. In Mexico, you need a scorecard to keep track.

    A wild-card candidate who is getting a boost from good polling numbers is Andrés Manuel López Obrador, known as AMLO, who leads the National Regeneration Movement (MORENA). He founded MORENA a few years ago after breaking up with his longtime affiliation with the Democratic Revolutionary Party (PRD).

    The United States holds most of the power since Mexico is so dependent on exports to the United States. In many ways, it's an unequal, dysfunctional relationship.

    But reports describe AMLO as nationalistic and a combative populist. Sounds familiar. The big question for AMLO: If he wins next year, will he tweet?

    Bregar is a Plastics News senior reporter. Follow him on Twitter @Machinerybeat25.

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