Trouble Ahead

Trouble Ahead

By: Erreh Svaia

Goat Dispersion

“The real man smiles in trouble, gathers strength from distress, and grows brave by reflection.”

Thomas Paine

Consumer trust is slowly but steady growing up within the Mexican civil society, as the Trump menace loses strength and the Donald gets caught in his own populistic narrative, the Mexican economy shows now a better growing rate than previously expected among optimist predictions (although inflation could cause some headaches in the short run), it would be easy to go with the flow and jump on the optimistic bandwagon but Mexico is still far from reaching the safe shore, as we are still sailing on troubled waters and more internal and external factors could play against the lucky moment, the first of these events will materialize on June the 4th in the Estado De Mexico or EDOMEX, just as civil society reveals being tired of the endless corrupt rule of the Institutional Revolutionary Party (PRI), it’s not still clear yet that opposition will be able to get rid of it, as the party patronage system is still useful to get a large number of votes and there's still a large inner fight between the left and right wing unable to understand that the main objective is to move out the PRI from the government, but MoReNa, the National Regeneration Movement, a conservative, supposed left wing party, could become the ones with a better chance to topple PRI's candidate Alfredo del Mazo, but is not all happy news, as MoReNa when looking closer at it, looks a lot like an old version of the PRI, let's not forget that MoReNa was created by ex PRD members and that the PRD was formed after an inner struggle in the PRI, so if MoReNa wins, is possible that corruption, authoritarianism, despicable patronage system, populism and corporativism will remain unchanged, if such thing happens, it may end up strengthening the possibility of MoReNa becoming a serious contender for the 2018 presidential election, thus transmitting a certain volatility to our political scenario which will inevitably affect the economy.

Although the chances of Donald Trump cancelling the North America Free Trade Agreement or NAFTA are becoming less probable, it's almost a fact that there will be a revision of it by its three members (USA, Mexico and Canada), Canada already suffering from USA new imposed trade policies on wood and dairy products and Mexico being falsely accused of stealing jobs from the USA soil, negotiations may take a long time, the initial negotiations took four years, this time not only Canada and Mexico will team up on the same side, with time also as their ally, as the USA is under pressure of reaching an agreement before 2018, the time of the Mexican presidential election which could make negotiations take more time, so although it looks that luck is playing against the USA, it could also mean a tough time for the country as Trump's tweets could give us some headaches, so let´s keep our finger cross that the Russian wrong doings of Trump, and the investigations on it, keep him very busy in the meantime.

Agustin Carstens has served as Governor of the Bank of Mexico for nearly 7 years, a powerful and clever character that has helped Mexican macroeconomics reach a point of solid strength in the global scene, a man worldly renowned as one of the best bankers and once a potential candidate to be in charge of the International Monetary Fund, Carstens received recently the invitation to become the head of the International Bank of Settlements in Switzerland, unfortunately for the country, Carstens will start in his new job in July, leaving a place that will be very hard to fill and in a very inappropriate moment of political upheaval, without a doubt Carstens expertise as banker was fundamental to create trust among the International community, so losing such an important player could be detrimental to Mexican stability and a key element to some turmoil to happen in the short time.

In the middle of the year starts the storm season in the country, is a tense moment and one which has brought us some unpleasant surprises in the past, but besides that there is also another possible political storm coming at us, as the office party, the PRI will reach the final date to decide who will be the party's candidate for the presidential election, normally, as part of the PRI authoritarian tradition, the president is the one who chooses his successor, but considering Enrique Peña´s diminishing popularity, it might be a little harder for Peña to impose his candidate, potential candidates are possibly people like Miguel Angel Osorio Chong, the Government's Secretary and Peña's right hand, Luis Videgaray, Foreign Relationships Minister and one of Pena's advisors, very close collaborator and one of the men in charge of the NAFTA negotiations, the other possible candidate is José Narro, the current Health Minister, a man whose affinity to the "old" PRI could ironically represent a fresh change for the PRI whose recent young governors in several states have been accused constantly of corruption charges, Narro, a more left wing oriented man, could also be marketable as the Mexican "Bernie Sanders", the designation would undoubtedly become earth shattering for the country and could add definitely large doses of tension to the current political climate.

So, for Mexico the next couple of months, things don’t look easy, as troubled waters are spotted ahead of us, just as we have reached a certain degree of stability in the middle of the Trump storm that shook the world, it looks as if some elements could align against us in order to create a perfect storm, certain things could be done in order to make our economy more robust, in order to resist the hard exterior blows, but is vital to solve first the inner struggle in order to eliminate distractions and look at the big picture in order to reach the safe shore.