AMLO keeps USMCA hopes alive amid divisive US politics

Mexican President Andrés Manuel López Obrador (AMLO) has added fresh optimism to the possibility of expeditious passage of the USMCA trade pact in the US Congress upon reassurances that Mexico is making on labor issues. 

“I think things are going well, progress is being made and I'm confident that it will be approved, because I also believe that there is more common ground on this issue than differences,” said the president in his Friday morning press conference (pictured). “Be they from the Republican Party, be they from the Democratic Party, there is the conviction that the treaty should be approved.”

The statement comes on the heels of several weeks of intensive efforts on the part of Mexican officials, including economy minister Jesús Seade, to meet with key lower house lawmakers in an attempt to head off any potential limbo created by the 2020 election in the US and possibly even the impeachment of US President Donald Trump.

A litany of comments from high-profile Democrats this month have put hopes of passage before the upcoming political fray on a continuous spin cycle; however, potential written guarantees from the López Obrador administration and intermittent signs of openness on the side of Democrats, who control the lower house, keep the possibility alive for US approval by late November.

“We were looking for a series of assurances. Those assurances were verbalized and now we hope they can be put into writing,” said US lower house lawmaker Richard E. Neal, head of the critical Ways and Means Committee in the lower house, in a recent interview with the LA Times after returning from a two-day trip to Mexico with four other Democrats.

Canadian approval looks to largely hinge on the outcome in the US Congress.

October is not over

“I'm optimistic … October isn't over yet. I believe that this month it can be approved,” he added. “I don't see any major conflicts.” 

The leader stressed that he had reached out to US legislators in a recent visit and directly in a letter to the US lower house leader Nancy Pelosi to provide guarantees that Mexico would uphold its commitments to improve labor conditions, as has been demanded by key US lawmakers of the opposition Democratic Party.

AMLO specifically pointed to labor legislation passed in April that brings Mexico into clear alignment on the labor chapter of the USMCA, the hard-fought replacement agreement for the decades-old Nafta trade pact between the US, Mexico and Canada. 

“And of course we're in favor of improving wages, benefits; and of course this cannot be done by decree, this has to be given in accordance with the economic possibilities of the country, of the companies… to not go bankrupt, for businesses not to close,” added AMLO.

The long view

In an exclusive interview with BNamericas, Standard & Poor’s manager for sovereign ratings in the Americas, Joydeep Mukherji, stressed that the agency, which changed its outlook for the Mexican sovereign to negative in March, was looking beyond the political noise to the fact that regardless of the current political noise surrounding USMCA, the persistence of Nafta meant business as usual. 

“Our base case underlying the ratings is that the trade links between the US, Mexico and Canada more or less remain in place,” said Mukherji.

“Every week because of something that happens in Washington, all sorts of people say the USMCA is ‘more likely to be approved’ or ‘less likely to be approved’. Just do a Google search on the last six months and you see breathtaking headlines predicting eminent approval or rejection of the USMCA,” he added. 

“I think reality is much more stable, which is that it’s going to take some time,” Mukherji told BNamericas. 

“It’s not as if the new [treaty], if it’s not approved, would lead to [Nafta] dying. So, if [congress doesn’t] approve the USMCA now, because Washington’s obsessed with impeachment and soon it will be an election year, 2020, well, the old one is still in place,” added the S&P sovereign analyst. 

“I think that serves as a basis for companies to make their plans and to carry on. And if the USMCA approval is delayed, it gets delayed,” he noted, adding that it may end up being the new US Congress after the November 2020 general election that actually takes up the task of ratification.

“That might not help a few companies here and there that are changing some plans based on the parameters of the new treaty, but I don’t think the old treaty is preventing anyone from carrying on business at this moment,” said Mukherji.