No short-term economic impact for Mexico under new trade agreement: HR Ratings
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E-mail Xinhua, October 6, 2018
The new North American trade agreement will not have a significant impact on Mexico's economic growth in the short-term, the Mexican rating agency HR Ratings said Friday.
In a report on the United States-Mexico-Canada Agreement (USMCA), the agency said a positive aspect is that the pact reduces uncertainty for both direct foreign investment and portfolio investment.
"We don't see a significant impact in the short term in Mexico's credit rating," the agency said.
It has given the country a long-term rating of HR A- (G) and a short-term rating of HR2 (G), with a stable forecast.
HR Ratings sees an economic growth for Mexico of 2.16 percent for 2018 and 2 percent for 2019.
Mexico's economy, the second largest in Latin America, behind Brazil, saw 2 percent growth in 2017.
However, the rating agency said changes in the automotive industry could have a negative impact on manufacturing exports and the non-oil trade balance in the long-term.
As part of the modernization of the North American Free Trade Agreement (NAFTA), the three trade partners agreed to have a larger regional content in the manufacture of light vehicles as a way to guarantee free trade in the zone.
HR Ratings considers it positive that legal certainty has been guaranteed to providers of services, exporters, importers and investors who participate in the energy sector.
"The important thing is not so much changes in the agreement, but the fact that the trilateral trade relationship continues, avoiding the risk of a break," the agency said.
"In this context, even though the approval by the U.S. Congress is likely, the political environment in that country is characterized by very strong conflicts that could result in uncertainty in its approval," it said.
The modernization of NAFTA, now known as USMCA, concluded on Sept. 30, although final approval now rests with the legislative bodies of the three countries.
Negotiations to modernize NAFTA began in August 2017 after U.S. President Donald Trump threatened to leave the pact arguing that it was detrimental to the country's industries and jobs.
The USMCA could be signed by the three countries by the end of November.
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