The renegotiation of NAFTA: Is it favorable or detrimental to Latin America?

The stipulation of the North American Free Trade Agreement continues to be prolonged and uncertainty extends over the entire American continent

La renegociación del TLCAN, ¿favorable o perjudicial para América Latina?

The consequences of not closing soon the renegotiation of the North American Free Trade Agreement (NAFTA) would be very delicate, said the Secretary of Economy of Mexico, Ildefonso Guajardo. The situation becomes even more serious if one takes into account that the United States will hold legislative elections next November, which could lead to a clash of positions in the Senate.

Leer en español: La renegociación del TLCAN, ¿favorable o perjudicial para América Latina?

Although the Mexican government affirmed in 2015 that one of its priorities is the strengthening of relations with its neighbors in the south, not only in the economic sphere, but also in the legal and cooperation sectors, the renegotiation of the largest trade agreement in the world continues to cause uncertainty about the strategies to be implemented in the region. The consequences of a postponement in the renegotiation of NAFTA or even the dissolution of NAFTA begins to alarm Latin American countries.

Banco Santander recently said that the leaders of Canada, the US, and Mexico are optimistic about the outcome of the negotiations, since they seek to reach an agreement that benefits the three parties. However, some issues such as the rules of origin of the cars are still under discussion.

In this sense, the increase in the percentage of tariffs on products of vital importance such as agriculture and automobiles could cause Mexico to consider buying products from Latin America that it currently obtains from the United States, such as meat and cereals. Such diversification could represent an opportunity to increase exports and with that, to grow the economy of countries that have kept away from Mexico in the commercial aspect, especially in the case of South Americans like Brazil and Argentina.

However, if on the one hand Latin America could take advantage of this situation, increasing its exports to Mexico and potentially generating more jobs, it could also be affected while the products imported from Mexico could have a higher cost, because this country will have less tariff privileges.

The former president of Mexico, Vicente Fox, said that if Trump ends the agreement, not only Mexico would be affected, but also all the countries of the region, mainly due to the commercial dynamism of this country. However, there are those who affirm that a less close relationship between Mexico and its powerful northern neighbor would end up improving the markets for Latin America, since Mexico would turn its attention to this region and strengthen the Pacific Alliance and the other regional integration organizations to which Mexico belongs, such as the Community of Latin American States (CELAC) and the Latin American Integration Association (ALADI).

It is undeniable that regardless of the result of the renegotiation of NAFTA, Trump's policy has been a wake-up call to Mexico to diversify its commercial relations, which could be beneficial for the country, as it does not depend to a large extent on a single market but also by stimulating the economic growth of the region.

Latin American Post | Mariana Castellanos
Translated from “ La renegociación del TLCAN, ¿favorable o perjudicial para América Latina?”

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