Mexico's Election Won't Halt Nafta Talks, Minister Signals

(Bloomberg) -- Economy Minister Ildefonso Guajardo signaled that the Mexican government is willing to negotiate a reworking of Nafta all through the run-up to July’s presidential election. The peso pared earlier losses on optimism for improved odds of a deal.

July shouldn’t be ruled out simply due to the national vote, Guajardo said Tuesday in a Bloomberg Television interview at the World Economic Forum in Davos. The administration of President Enrique Pena Nieto wants an agreement before he leaves office in December.

"If you read the position that the U.S. administration is taking, this negotiation should be done when we have a good deal," Guajardo said. "That can happen anywhere from March, the beginning of March or it can happen in July. It will depend upon our ability to get a good agreement. Mexico is ready to work constructively towards getting it."

Trump indicated this month that he could be flexible with talks ahead of the Mexican election -- and then repeated his threat to withdraw if he can’t reach an agreement that’s “fair” for America.

The peso also pared losses after President Donald Trump told reporters Tuesday at the White House that Nafta is ”moving along pretty well.” In afternoon trading in New York, the currency weakened 0.3 percent to 18.7431 per dollar paring an earlier loss of as much as 1 percent.

Guajardo spoke in Switzerland as the latest round of negotiations to update the North American Free Trade Agreement enters its third day in Montreal. Yesterday, the U.S. decided to slap tariffs on imported solar panels and washing machines, including from Mexico and Canada, an action that may aggravate tensions during the Nafta talks. Trump has threatened to pull out of the deal if Canada and Mexico don’t bend to U.S. demands.

“It helped a little the peso to at least have more clarity of what is the potential timeline on the Nafta talks,” Marco Oviedo, the head of economic research for Latin America at Barclays Plc, said in a phone interview. “The market is focused on the headlines and the outcome from this round.”

Failure to get a good Nafta deal will primarily lead to dislocations in Mexico, "which could have a really adverse political impact, which would be bad for the United States, be bad for Mexico," Blackstone Chief Executive Officer Steve Schwarzman said on a panel in Davos. Canada would be less affected since it can fall back on a bilateral trade agreement from the 1980s, he said.

"Nafta clearly will come to a head this year," Schwarzman said.

Guajardo met on Monday in Toronto with Canadian Foreign Minister Chrystia Freeland before traveling to Switzerland. He plans to have dinner on Thursday with U.S. Trade Representative Robert Lighthizer in Davos and will raise the issue of Monday’s tariff decision, Guajardo said.

"The first thing that we’ll do is talk to him about this and what was the rationale of imposing and including Mexico in these measures," Guajardo said. Mexican lawyers are analyzing the decision to determine whether to take it to the World Trade Organization, he said.

The three Nafta ministers are scheduled to meet on the closing day of the current round of Nafta talks on Jan. 29, while the seventh negotiating session is set for late February in Mexico.

©2018 Bloomberg L.P.