Feature: Mexico’s oil industry cautiously optimistic of future energy policy

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S&P Global / Daniel Rodriguez / Edited by Pankti Mehta / October 1

 

Mexico City — Oil and gas executives attending last week’s Mexican Petroleum Congress (CMP) in Acapulco told S&P Global Platts that they were cautiously optimistic about the future of the country’s energy reform, pointing to higher oil prices and some clarification of President-elect Andres Manuel Lopez Obrador’s policies.

The conference took place as Lopez Obrador held a closed-door meeting with the country’s association of hydrocarbon producers, AMEXHI, on Thursday in Mexico City.

The incoming administration gave a firm message: Mexico will continue the energy reform and private upstream investment as long as they can deliver results by boosting output.

The meeting cleared some uncertainties that had built up since Lopez Obrador’s electoral victory in July. Obrador has been historically opposed to private investment in Mexico’s energy sector.

PRIVATE OPERATORS TO PRODUCE 280,000 B/D: LOPEZ OBRADOR

According to a video of the meeting obtained by Platts, Lopez Obrador told operators that the future of the reform rested on their shoulders.

“We want to give you the opportunity to invest and work on this reform,” Lopez Obrador said. However, companies must invest and boost output to prove the success of the country’s new energy model.

The president-elect said his goal is that private operators produce 280,000 b/d of crude oil and 305 MMcf/d of the natural gas by the end of his term in 2024. “That would be the ideal. We aren’t asking for more and we are happy with that level,” he said.

This is a very conservative projection compared to the 430,000 b/d estimate shared by outgoing Energy Secretary Pedro Joaquin Coldwell at the inauguration of CMP.

At a webcast press conference Thursday, Mexico’s future energy secretary Rocio Nahle said that auction rounds would be halted. She said the country first needs to evaluate the 110 contracts awarded to date because they have not helped boost domestic production.

“It would be irresponsible to continue auctioning areas without a previous production gain [from awarded areas],” Nahle said.

OPERATORS ARE CALM WITH INCOMING GOVERNMENT

AMEXHI members are allies of the state and can collaborate with Pemex to “continue strengthening Mexico’s energy security,” Alberto de la Fuente, AMEXHI’s president, said in a statement Thursday.

This message of partnership was also shared by senior executives from BHP Billiton, BP, Chevron, DEA Deutsche Erdoel, Equinor, and Shell at the CMP.

“We aren’t here to replace Pemex but to complement it and help to achieve the incoming administration’s goal of boosting oil output,” Steve Pastor, BHP Billiton’s president for petroleum operations, told Platts last week at the CMP.

De la Fuente denied that private operators were uncertain over the review of contracts awarded by the country’s National Hydrocarbon Commission (CNH).

In the statement, he said that AMEXHI members left the meeting with the incoming administration with the knowledge that Lopez Obrador will honor their contracts.

However, some industry members expressed their frustration to Platts at the conference about an apparent lack of understanding from the incoming administration on the long-term nature of the upstream industry.

INCOMING ADMINISTRATION WILL SEEK TO CUT RED TAPE

At the meeting with AMEXHI members, Lopez Obrador said his administration would work with regulators to cut the red tape and quicken the development of new projects.

“Some of you have told me permits take too long, and regulators delay your investment plans as well as Pemex’s activities,” Lopez Obrador said. “We are going to solve all bureaucratic roadblocks.”

Juan Carlos Zepeda, CNH’s president commissioner, told reporters Friday there was space to make the regulatory process leaner and more efficient while protecting the wellbeing of the country’s fields and hydrocarbon resources.

“We share views with President-elect Lopez Obrador and the industry … we are working toward that path without neglecting our responsibility of protecting Mexico’s reservoirs,” Zepeda said.

Right now, Mexico is more efficient than the US when it comes to the development of wells as CNH only requires notice from the operators instead of regulatory approvals, Zepeda said.

Also, CNH is working on a new process to expedite the approval of exploratory and development programs, which is currently under public consultation, he added.

A major regulatory roadblock for Mexico’s upstream sector has been Pemex’s framework to farmout projects via CNH auctions, Pemex senior officials said at CMP.

Zepeda said he supports the idea of Pemex being able to choose its own farm out partners. However, the company should maintain transparency levels upheld by CNH.

 

S&P Global / Daniel Rodriguez / Edited by Pankti Mehta / October 1

 

Canada trade minister pushes quick ratification of trade deal with Asia Pacific

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The Business Times / AFP / September 18

 

[OTTAWA] Canada’s trade minister on Monday signalled that the government will push ratification of the Trans Pacific Partnership quickly through parliament, as stalled North American free trade talks have raised concerns it could lose its privileged access to the US market.

“Rapid ratification of the TPP” will mean “farmers, ranchers, entrepreneurs and workers across the country can finally tap into new markets,” trade minister Jim Carr said in a speech to parliament.

Signed in March without the United States, the Trans-Pacific Partnership will come into effect 60 days after ratification by at least six of the 11 signatories – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

The trading bloc represents 500 million consumers and 13 percent of the world’s economic output.

Ottawa wants to be among the first six TPP signatories, but is facing pushback from the powerful union representing Canadian auto workers. Unifor wants stricter labour standards written into the pact and for negotiations with the United States and Mexico to revamp the North American Free Trade Agreement completed first.

High-level talks ended last week with no deal, and no date has been set yet for Canada’s foreign minister Chrystia Freeland to return to Washington to continue negotiations.

For Canada, implementing the TPP is “of paramount importance,” said Mr Carr, if only to act as a counterbalance to growing US protectionism under US President Donald Trump, who has threatened to cut Canada out of a new continental trade deal if Ottawa didn’t give in to his demands.

“This is not just a new trade agreement for Canada, it is also a message we send to the rest of the world: trade is important, the rules are important and we will not give in to protectionism,” the minister said.

 

The Business Times / AFP / September 18

 

U.S. turns up pressure on Canada to loosen grip on dairy industry in NAFTA talks

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Calgary Herald / The Canadian Press / September 11

 

WASHINGTON — Canada’s foreign affairs minister says Tuesday’s anniversary of the 9/11 terrorist attacks on the United States should serve as a reminder of the deep ties between the two countries as they haggle over the future of North American free trade.

Chrystia Freeland underlined the anniversary at the start of another day of trade talks aimed at breaking an impasse on a renewed North American Free Trade Agreement.

The renegotiation of the 24-year-old NAFTA, which also includes Mexico and is integral to the continent’s economy, has dragged on for 13 months.

The in-person, high-level negotiations got back underway as events marking the 17th anniversary of the 2001 attacks took place around the U.S., including at the Pentagon with Vice President Mike Pence, not far from where the trade meetings are taking place.

Freeland said the memorials should help to add some context to the ongoing negotiations on free trade that were started at Trump’s behest.

“Maybe that helps us all put into perspective the negotiations that we’re having — and also put into a little bit of historical perspective the importance and the significance of the relationship between Canada and the United States,” Freeland told reporters outside the offices of her counterpart, U.S. Trade Representative Robert Lighthizer.

“At the end of the day we’re neighbours, and at the end of the day, neighbours help each other when they need help.”

Freeland and Lighthizer left the bargaining table Friday without a deal following two weeks of negotiations. She said she spoke with Lighthizer over the weekend and they agreed it would be useful for them to meet again face to face.

“The conversations over the weekend continued to be constructive and productive,” she said.

Freeland will spend Tuesday in the U.S. capital before she heads to Saskatoon to attend Liberal caucus meetings that begin later in the day and run through Thursday.

Lighthizer spent Monday in Brussels for trade discussions with the European Union — preliminary talks that are scheduled to resume later this fall.

Ottawa and Washington are trying to reach an agreement that could be submitted to the U.S. Congress by month’s end. A deal would see Canada join a preliminary trade agreement the Trump administration struck last month with Mexico.

The two sides have so far been unable to resolve their differences over U.S. access to the Canadian dairy market, a cultural exemption for Canada and the Chapter 19 dispute resolution mechanism.

A Canadian source with knowledge of the NAFTA discussions says an agreement is within reach, but getting there will require flexibility from all sides.

Prime Minister Justin Trudeau said during an interview Tuesday with a Winnipeg radio station, CJOB, that there are certain positions Canada has and remain firm on. But he said the Liberals plan to be flexible on other issues in order to get a deal.

“It’s time to update this deal after 25 years. We’re just going to stay working constructively to get to that win, win, win that we know is there,” he said in the interview.

There is another wild card in Washington: hurricane Florence, a monster Category 4 storm that’s bearing down on the U.S. east coast and is sure to make its presence felt in the national capital area later in the week.

 

Calgary Herald / The Canadian Press / September 11

 

AGRICULTURE, ECONOMY, GDP, INTERNATIONAL TRADE, TRADE WARS Last week in economy: Indian rupee slides while US dollar stabilizes after Trump secures Mexico trade deal

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Qrius / Pavas Gupta / September 3

 

Last week heralded further woes for the Indian economy as the rupee touched its lowest-ever-level of 71 against the dollar. At the same time, GDP forecasts stood at an all-time-high of 8.2% in 2018-19’s Q1. On the other side of the world, the US and China agreed to overhaul the NAFTA deal, bringing relief to the dollar. Read on to know more about what’s been up in the economy, outside and at home:

Indian Rupee slides to record-low at 71 against the greenback

On Friday, the rupee hit an all-time-low at 71 against the US dollar. The primary reason identified behind the drastic drop is persistent demand for the dollar amid rising crude oil prices. This is further reinforced by weak exchange rates of almost all Asian peers of the rupee. Per Forex dealers, the dollar’s strength against its rival currencies on expectations of rising interest rates amid lingering Sino-US trade tensions also weighed on the Indian fiat. To add to all these factors is the growing fear about rising inflation and consistent outflow of foreign funds from the domestic equity market.

“[The] Indian rupee has depreciated around 11 per cent year to date. Higher crude oil prices, demand from defence and oil marketing firms have contributed to the latest bout of weakness. Rupee was overvalued on trade weighted real effective exchange rate. Robust FDI flows in e-commerce companies, healthy forex reserves may limit the downside of the rupee”, said VK Sharma, Head Private Client Group & Capital Market Strategy, HDFC Securities.

US dollar steady post US-Mexico agreement to overhaul trade deal

After the United States and Mexico agreed to overhaul the North American Free Trade Agreement (NAFTA), volatility in the dollar cooled down; the currency is now steady against the euro and a basket of other major currencies. The overhauling of the deal brought optimism amidst global trade tensions.

The agreement to overhaul NAFTA exerted pressure on Canada to consent to new terms with the aim of preserving a three-nation pact.

“[The deal] would be positive for the Canadian dollar, Mexican peso, these currencies that have been sold on the back of higher trade tensions,”, said Shusuke Yamada, currency and equity strategist at Bank of America Merrill Lynch in Tokyo. “Overall, that would be negative for the Japanese yen and the US dollar. That’s positive for the risk assets in general,” he added.

On Tuesday, following two sessions of losses, the dollar index, which gauges the fiat’s performance against six other currencies, fell nearly flat. Later, it edged 0.05% higher to 94.834, making up for the earlier losses.

Ever since it hit a high on August 15, the dollar has fallen more than 2%. This comes amidst US President Trump’s criticism of the Federal Reserve for raising interest rates while the US government attempted to boost the economy.

India poised to become world’s fifth-largest economy in 2019

Finance Minister Arun Jaitley, on Thursday, said that India is expected to outstrip Britain to don the title of the world’s fifth-largest economy in 2019.

“This year, in terms of size, we have overtaken France. Next year we are likely to overtake Britain. Therefore, we will be the fifth largest [economy],” he asserted. Further, he said that the other economies of the world were growing at a much slower rate, adding that India had the potential to rank among the top three economies of the world within a span of 10-20 years.

India’s GDP growth at 8.2% in Q1 of 2018-19

In the first quarter of the 2018-19 fiscal year, ending June 30, India’s economy performed at an impressive rate of 8.2%. This marks India’s highest growth rate since the first quarter of 2016. Gross Domestic Product (GDP) growth was backed by a strong core performance and a healthy base.

These growth figures will be factored in by the monetary policy committee at its next review, which is scheduled for October 3-5.

The sectors of the economy that registered a growth of over 7% include ‘manufacturing, electricity, gas, water supply and other utility services’, ‘construction’, and ‘public administration, defence and other services’.

Foodgrain output to reach new heights in 2017-18

Foodgrain production in India is expected to grown to an all-time-high of 284.83 million tonnes in the 2017-18 crop year, which ended in June. According to the Agriculture Ministry, this burst in output is fuelled by record production of wheat, rice, coarse cereals and pulses after a normal monsoon cycle.

The previous record was pegged at 275.11 million tonnes, in the 2016-17 crop year.

In the Ministry’s fourth advance estimate released on Tuesday, it revised, in the upward direction, the total foodgrain production by 5.3 million tonnes from the earlier projection of 279.51 million tonnes for the current crop year.

“As a result of near normal rainfall during monsoon 2017 and various policy initiatives taken by the government, the country has witnessed record foodgrain production in 2017-18,” the ministry said in a statement.

 

Qrius / Pavas Gupta / September 3

 

Oil industry encouraged by Trump’s trade deal with Mexico

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Washington Examiner/ John Siciliano / August 27

 

President Trump’s announcement with Mexico on Monday is being taken as an encouraging sign by the U.S. oil and natural gas industry.

“We are encouraged that negotiators have reached a preliminary agreement to modernize our trade relationships,” said Mike Sommers, the new president and CEO of the American Petroleum Institute, the oil industry’s top lobbyist in Washington.

“America’s natural gas and oil industry depends on trade to continue to grow U.S. jobs and our economy, and deliver for consumers,” he added.

Trump announced Monday morning that progress had been made toward a deal with Mexico on renegotiating the North American Free Trade Agreement. Negotiations with Canada, the final piece in the agreement, are still ongoing.

Trump called it a “big day for trade” and the nation in an Oval Office announcement in which he teleconferenced with outgoing Mexican President Enrique Pena Nieto.

Energy has been a key aspect of the negotiations on a revamped version of NAFTA. However, no announcement on energy trade was made on Monday. The agreement with Mexico centered on ensuring that a higher percentage of automobiles sold in North America are made with parts produced on the continent.

Negotiations on an update to the free trade agreement had stalled in recent months amid disagreements over, among other things, provisions related to the automotive and energy industries. U.S. and Mexican negotiators, however, had made breakthroughs on those issues ahead of Monday’s announcement.

Jesus Seade, the incoming Mexican government’s chief NAFTA negotiator, said Sunday the energy issues have been “ironed out,” without going into detail, Reuters reported.

Mexico has become a large importer of U.S. natural gas and oil in recent years. Energy Secretary Rick Perry had visited Mexico ahead of Monday’s announcement. He was there to discuss “how the U.S. and Mexico can continue to work together to make North America a world-wide leader in energy production and exports,” Perry said last week in a tweet.

 

Washington Examiner/ John Siciliano / August 27

 

Trump deal with Mexico eases fears of trade wars, offers template to end other conflicts

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Market Watch / Jeffry Barthash / August 27

 

That sound of ice thawing? It’s the Trump administration’s tentative deal with Mexico to rewrite the controversial Nafta free-trade pact, the first clear evidence the White House is willing to compromise on its hardline demands and avert ruinous trade wars.

News of the deal sent U.S. markets surging Monday. The Nasdaq Composite IndexCOMP, +0.17%  topped 8,000 points and the S&P 500 SPX, +0.06%  index almost hit 2,900, both touching record highs. The Dow Jones Industrial AverageDJIA, +0.15%   jumped nearly 260 points to surpass 26,000.

Details of the pending agreement are sketchy for now. Senior White House officials suggested the new pact would result in more new cars and trucks being made in the U.S. using steel and other materials produced in North America. That was one of President Donald Trump’s chief goals.

Other key provisions could lead to higher wages for Mexican auto workers and even give them greater rights to unionize, moves meant to reduce the incentive for U.S. automakers to shift operations south of the border due to lower labor costs.

The new agreement also puts greater emphasis on crafting rules to govern the “digital economy” and protect copyrights and intellectual-property rights, areas in which the U.S. is a global leader.

“I think this is an extremely historic time,” said Robert Lighthizer, the chief U.S. trade negotiator, in a call with reporters. “We had a Nafta agreement that got seriously out of whack … and needed modern updating.”

A deal is far from done, of course. Canada is the third country that was party to the original North American Free Trade Agreement signed in 1994, but negotiations have been at a standstill. The White House hopes Canada will now rejoin the talks and quickly join with the U.S. and Mexico to ratify a successor agreement to Nafta.

“We hope that Canada can join in now,” Lighthizer told reporters Monday. Talks are expected to resume soon, and at this point, it’s unlikely that any Nafta successor would be voted upon until the next Congress convenes in early 2019.

The Canadians and no doubt the Europeans and Chinese are likely to comb over the details of the agreement. The U.S. is sure to use the deal with Mexico as a template for negotiations in talks with other countries to update trade rules that Trump has long complained are unfair.

What the Mexico deal also shows, though, is the Trump administration is ready to compromise on some of its toughest demands. The U.S., for instance, dropped its insistence on a hard “sunset” clause that would cause the trade deal to expire after a certain number of years.

“Despite the Trump administration’s intransigence over trade disputes in recent months, it is willing to negotiate in good faith and accept a compromise, which will be welcomed in both China and Europe,” contended Paul Ashworth, chief U.S. economist at Capital Economics.

The new pact calls for the U.S. and Mexico to review an updated North American free-trade deal six years into a 16-year window. The countries could extend the pact another 16 years at any point after that six-year period.

The U.S. also appears to have softened its demand for an end to an arbitration process for determining if a country was violating the trade agreement. Industries in the U.S. mostly support the current process for resolving problems and lobbied the White House to back off.

Yet even if the agreement is not entirely what the White House wanted, the deal with Mexico allows Trump to claim partial victory for his “America First” policy.

What’s more, the deal will go a long way in easing tensions on Wall Street and in Washington that Trump’s tough talk on trade would ignite a conflagration damaging to economies all around the world.

Major industry lobbying group and trade experts were cautiously optimistic after the White House deal.

It’s “a victory for rationality over rhetoric,” said Steve Nelson, a partner at the law firm Dorsey & Whitney and a former state department lawyer.

 

Market Watch / Jeffry Barthash / August 27

 

 

Mexico’s outgoing President Peña Nieto and President-elect Lopez Obrador vow to work together despite differences

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Los Angeles Times / Patrick J. McDonnell / August 20

Mexican President Enrique Peña Nieto and his once-fierce rival, President-elect Andres Manuel Lopez Obrador, on Monday pledged cooperation in confronting the nation’s challenges despite differences on issues such as education reform and a controversial airport project.

Peña Nieto and Lopez Obrador — along with many current Cabinet members and the president-elect’s designated ministers — appeared together at the National Palace downtown and stressed themes of mutual respect.

It was the latest in a series of gestures meant to demonstrate stability and continuity as leftist Lopez Obrador prepares to assume power amid pledges for a far-reaching “transformation” of Mexican society. Peña Nieto has faced widespread unpopularity and the perception that he has been an ineffective leader.

“It is an institutional transition but it is also a respectful transition because we have received help without conditions from the constitutional president, Enrique Peña Nieto,” said Lopez Obrador, who won the presidency after losing in the two previous national elections, in 2012 and 2006.

Peña Nieto, in turn, vowed to do all he could to ensure that “the next government begins its term in a successful fashion.”

Lopez Obrador, elected July 1 in a landslide, is scheduled to take office Dec. 1 for a single six-year term. Peña Nieto was not a candidate in the election as Mexican law bars reelection of presidents.

The two men Monday answered a half dozen questions from the press but didn’t veer from differences on a number of contentious issues — notably national education reform and a planned new multibillion dollar airport for Mexico City.

Lopez Obrador reiterated his vow to review the controversial airport plan — critics say it is too expensive and not needed — and to rescind the current administration’s education overhaul blueprint. The president-elect has said he will seek out views from all sectors on how to improve the nation’s moribund public education system and what to do about the airport proposal.

Education reform was a centerpiece of Peña Nieto’s administration, but it drew fierce criticism from teachers opposed to revised rules to evaluate teacher performance. The new airport, already under construction, was the major infrastructure project of the outgoing administration.

Lopez Obrador and Peña Nieto met July 3, two days after the election, but that was a one-on-one meeting before Lopez Obrador had been legally declared president-elect.

Despite many preelection fears of an economic slide after a Lopez Obrador victory, Mexico’s economy has remained stable and the peso has retained its value against the U.S. dollar and other currencies. The incoming president has vowed to revitalize the sluggish Mexican economy, but has provided few specifics beyond a broad anti-corruption push.

Since election day, Lopez Obrador has generally toned down his often fiery rhetoric— he campaigned relentlessly against what he labeled “mafia of power,” including Peña Nieto’s administration — and has met repeatedly with investors and business interests.

The president-elect has also reached out to Washington and said he would invite President Trump to his inauguration.

U.S.-Mexico relations have experienced turbulence since Trump took office and repeatedly criticized Mexico and Mexicans.

Negotiations are continuing between the United States, Mexico and Canada in crafting a new North American Free Trade Agreement, the three-nation accord that has governed commerce on the continent for almost a quarter century. Trump has assailed the pact as unfair to U.S. interests.

The free-trade regimen is a cornerstone of the Mexican economy. Almost 80% of the nation’s exports go to the United States. Peña Nieto and Lopez Obrador have voiced support for a new trade accord.

Lopez Obrador, who ran on a leftist populist campaign vowing fundamental change, won 53% of the vote, defeating his nearest challenger by more than 30 percentage points. He has vowed to increase social-welfare payments to the poor, make higher education available to all and eliminate deep-rooted corruption.

Lopez Obrador is the first Mexican president to take office with a majority vote since 1988, during the days of dominance by the country’s Institutional Revolutionary Party, known as the PRI.

The PRI’s more than seven-decade hold on the presidency ended in 2000, with the election of Vicente Fox of the right-of-center National Action Party. But Lopez Obrador is the first avowed leftist and first contender from a non-traditional party to be elected president in the 21st century.

Peña Nieto is the current standard-bearer for the PRI, which suffered a humiliating defeat in the July 1 elections.

Lopez Obrador is among a number of left-leaning politicians who abandoned the PRI starting in the late 1980s. Lopez Obrador ran under the banner of his own party, the National Regeneration Movement, known as Morena, which is 4 years old.

Morena — which includes many defectors from the PRI and other traditional parties— not only won the presidency, but garnered major majorities in both chambers of the national legislature.

Despite his party’s newfound dominance at the federal level, Lopez Obrador has repeatedly vowed to run a democratic administration and to reach out to all sectors.

“This government is going to represent all Mexicans,” Lopez Obrador said Monday. “No one will be on the margins of the law or above the law.”

Cecilia Sanchez of The Times’ Mexico City bureau contributed to this report.

Los Angeles Times / Patrick J. McDonnell / August 20

 

US putting ‘final details’ into Mexico trade deal, Trump economic adviser says

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Fox Business / Julia Limitone / August 13

 

Kevin Hassett on trade negotiations with Mexico

White House Council of Economic Advisers Chairman Kevin Hassett on the Trump administration’s efforts to renegotiate U.S. trade deals.

Days after President Trump touted trade negotiations with Mexico – White House Council of Economic Advisers Chairman Kevin Hassett said on Monday negotiators from the U.S. and Mexico are “very, very close” to a deal on the North American Free Trade Agreement.

“The team has been working overtime, late nights, going through what I would almost characterize as the final details,” he told “Mornings with Maria.”

While Hassett stayed tight-lipped on details, Trump tweeted on Friday that a deal with the U.S.’ third-largest trading partner – after China and Canada – is “coming along nicely” and any deal must take care of autoworkers and farmers.

“You should stay tuned because right now it’s closer than it’s been since I’ve been here,” Hassett, a former resident scholar at the American Enterprise Institute who was appointed as Trump’s chief economist in early 2017, added.

Fox Business / Julia Limitone / August 13

Mexico and U.S. studying NAFTA rules of origin proposals – minister

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REUTERS / Adriana Barrera / August 6

 

MEXICO CITY (Reuters) – Mexico’s economy minister Ildefonso Guajardo said on Monday the country has put forward a proposal to update the North American Free Trade Agreement’s contentious rules of origin, and in turn was studying the U.S. position.

The United States has demanded tougher rules of origin, particularly on what percentage of a car needs to be built in the NAFTA region to avoid tariffs than outlined in the current trade deal.

“We have a proposal on the table, we’re analyzing some characteristics of the U.S. position, and we’re doing it clearly in line with our dialogue with Mexico’s auto industry,” Guajardo told reporters after an event in Mexico City.

U.S. President Donald Trump, who launched the renegotiation of the 1994 pact a year ago, has said he wants the reworked deal to bring manufacturing jobs back to the United States.

Guajardo on Monday also said that Canada, which is not participating in U.S.-Mexico talks that began in Washington two weeks ago after months of negotiations between the three trade partners, could join next week, depending on progress in the next few days between Mexico and the United States.

The bilateral meetings have yielded important developments, Guajardo said, adding that he will return to Washington midweek. He did not give details.

Mexican sources briefed on the negotiations have said Mexico has offered to raise the threshold for regional content beyond a May proposal of 70 percent, up from the current level of 62.5 percent. The United States is seeking 75 percent as well as demanding a proportion of vehicles be made in factories paying $16 an hour or more.

Mexico’s El Economista financial newspaper on Monday reported that Mexico had agreed to those demands, in return for a five-year transition period. Asked about the reports, Mexico’s chief trade negotiator Kenneth Smith said that no deal on autos had yet been reached.

“We haven’t closed or resolved this chapter yet,” Smith told reporters after the same event in Mexico City, saying that Canada also needed to take part before negotiators could reach final decisions.

Smith said Mexico and the United States were discussing technical details and each other’s proposals involving the auto sector, and that Mexico was explaining the areas it considered particularly sensitive.

He also said Mexico would not budge on its rejection of U.S. bids for seasonal restrictions on fresh products or a sunset clause that could strike down NAFTA agreements after five years.

 

REUTERS / Adriana Barrera / August 6

 

 

Trump, Mexico expect progress in stalled NAFTA talks

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Investing / Reuters / Anthony Esposito and Adriana Barrera / July 24

 

PUERTO VALLARTA, Mexico (Reuters) – U.S. President Donald Trump spoke warmly of Mexico’s incoming leftist president on Monday, saying he expected to get “something worked out” on NAFTA, while a top Mexican official said there was scope to revive the trade talks this week.

“We’re talking to Mexico on NAFTA, and I think we’re going to have something worked out. The new president, terrific person,” Trump said in a speech at the White House about American manufacturing.

“We’re talking to them about doing something very dramatic, very positive for both countries, he said, without giving more details.

Talks to reshape the 1994 trade accord have been underway since last August. But they stalled in the run-up to the July 1 presidential election in Mexico, which produced a landslide victory for veteran leftist Andres Manuel Lopez Obrador.

The United States, Mexico and Canada have been at odds over U.S. demands to impose tougher content rules for the auto industry, as well as several other proposals, including one that would kill NAFTA after five years if it is not renegotiated.

Mexican Economy Minister Ildefonso Guajardo, who last week expressed hope an agreement in principle on NAFTA could be reached by the end of August, is due to hold talks with U.S. Trade Representative Robert Lighthizer at the end of the week in Washington.

He will be accompanied by Jesus Seade, the designated chief NAFTA negotiator of the incoming Mexican administration.

“There’s clearly a window of opportunity to be able to bed down a series of open issues which are not numerous, but are very complex,” Guajardo said on the sidelines of a summit of the Pacific Alliance trade bloc in the western coastal city of Puerto Vallarta.

Guajardo is due to meet his Canadian counterpart Chrystia Freeland on Wednesday, also to discuss NAFTA.

After the election, top officials from both the outgoing and new Mexican governments met in Mexico City with senior Trump administration officials led by Secretary of State Mike Pompeo.

Seade said the visit had sent out “excellent” signals.

“We hope these signals translate into a willingness to move forward,” Seade told reporters in Puerto Vallarta.

The talks have been clouded by tit-for-tat measures over trade after the Trump administration slapped tariffs on U.S. steel and aluminum imports.

The United States is also exploring the possibility of imposing tariffs on auto imports, though Guajardo said it was too early to speculate on how that would play out.

Mexico’s foreign ministry said on Monday that South Korea had initiated the process of seeking associate membership in the Pacific Alliance, which comprises Colombia, Chile, Mexico and Peru and is seeking to deepen free trade.

Singapore, Australia, New Zealand and Canada were last year admitted as associate members by the alliance. For Mexico, the expansion is part of a push to diversify its trading partners in the wake of Trump’s previous threats to pull out of NAFTA.

Guajardo indicated that despite his optimism about reaching a deal, risks still exist.

“The biggest risk is that instead of moving forward with an agenda of opening and integration, we move backwards, closing our economy and really undoing what we’ve built in the last two and a half decades,” Guajardo said.

 

Investing / /Reuters / Anthony Esposito and Adriana Barrera / July 24