At the Otay Mesa Chamber of Commerce meeting in December, Doctor Deborah Riner, Chief Economist of the American Chamber of Commerce in Mexico, spoke about Mexico's economic panorama following the U.S. presidential elections and what the results mean for NAFTA and the region.

Dr. Riner started her presentation with a focus on exchange rate and its impact for both countries. Over the past two years, it has been evident that the price of the dollar (USD) with respect to the Mexican peso (MXN) has been rising. However, in November something happened that hadn't since the 1998 and 2008 crises; the value of the MXN with respect to the USD varied by three MXN, an extreme degree of volatility that shows the importance of the economic relationship between the U.S. and Mexico, according to Dr. Riner.

She assured that the exchange rate of 18 MXN per 1 USD would not return; on the other hand, economists from large Mexican institutions predict that the range over the next year will be between 20 and 24 MXN per 1 USD, with 2017 closing at 21 MXN per 1 USD.

The economist emphasized that the volatility of the MXN is not only a result of the presidential election; it has been decreasing for two years. "The Mexican peso depreciated when the price of oil fell. Another important factor has been portfolio investments, as many investors are putting their money in CETES (Mexican Government Bonds), bonds, and other fixed rate investments", she explained.

"Investors want to know what will happen with NAFTA before investing"

Interest rates in Mexico have increased. At the end of November, the Bank of Mexico increased the reference rate by 50 points. However, this isn't only happening in Mexico, as interest rates from all around the world have registered an increase, all led by the Federal Reserve in the United States. Inflation is increasing, while growth and investment are decreasing. The reasons, according to Dr. Riner, are varied: the growth rate of exports has decreased and could become negative, the growth of remittances has decelerated, and investment has diminished because investors want to know what will happen to NAFTA before investing.

"Where is the growth that was promised with the reforms?" asked Dr. Riner. "We haven't seen it… We were waiting for the 'Mexican Miracle' and annual growth rates of 5%. It hasn't happened and it won't happen." But she shares that it is possible to assume that things could have been worse without the reforms, with an estimated growth rate of 1%.

Dr. Riner said it is hard to know how the future will be. What we can expect is.... Continue reading article here

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