Reuters | Concerns about a U.S. recession and a trade spat Mexico is embroiled in with the United States and Canada over Lopez Obrador's energy policy, which critics call nationalist, muddy the outlook for the peso.
"The perception of risk could rise due to the consultations in the framework of the USMCA (trade deal), which could lead to the imposition of measures against Mexico," said Banco Base.
Traders at the Chicago Mercantile Exchange, considered a bellwether of market sentiment, have started to bet the peso will begin depreciating.
Mexico's peso, which is ending 2022 with one of its strongest performances in a decade, could have its gains wiped out in 2023 after an expected end to the Bank of Mexico's rate hikes cycle and a possible recession in top trade partner the United States.
The peso last month clawed its way back to pre-pandemic levels and has appreciated over 5% versus the U.S. dollar in 2022, making it one of the best-performing global currencies alongside Brazil's real .
Houstonchronicle | Just weeks before President Joe Biden’s planned visit to Mexico, talks on the neighbors’ biggest trade dispute have stalled due to the departures of negotiators from the Latin American nation’s side and its reluctance to make concessions, according to people familiar with the matter.
The two sides have struggled to make headway on the energy-policy spat after Tatiana Clouthier, the economy minister at the start of the dispute in July, resigned in October, said the people, who asked not to be identified because the discussions are private. The dismissal of her trade deputy and more than a dozen senior staff also hindered progress, they said.
Divisions have affected the Mexican team, with Energy Minister Rocio Nahle and Manuel Bartlett, the head of the electric utility, refusing for months to provide the nation’s trade negotiators with key information needed to address U.S. concerns, the people said.
President Andres Manuel Lopez Obrador also has been unwilling to push for major changes in the nationalist energy policy at the heart of the U.S. complaint, the people said.
A spokesperson for the Mexican economy ministry didn’t immediately respond to a request for comment. A spokesperson for the White House National Security Council acknowledged the request but didn’t immediately respond. The U.S. Trade Representative’s press office declined to immediately respond.
The two sides and Canada — which has some of the same concerns as the U.S. — are working to address the conflict before Biden visits Mexico next month, but American negotiators have little expectation for advances in that period, the people said.
Lopez Obrador’s policy privileges Mexican state-owned oil producer Petroleos Mexicanos and the electricity provider known as CFE. The U.S. says this violates the U.S.-Mexico-Canada Agreement on trade, which went into force in 2020 to replace the two-decade-old NAFTA pact. Canada filed a similar request for talks over Mexico’s electricity policy.
Lopez Obrador denies that his policies violate the pact, saying that the U.S. must respect Mexico’s sovereignty.
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