Mexico’s president-elect Andres Manuel Lopez Obrador “AMLO” easily won yesterday’s election with 54% of the vote; the highest vote total in three decades. In addition his MORENA party won an absolute majority in both the Mexican Senate (38% +/-) and the Chamber of Deputies (38% +/-).
The multinational financial community is in the process of evaluating how the nationalist win will impact all prior investing. One of the key issues is NAFTA. Multinational corporations have poured billions into Mexico as a structural method to utilize the trade deal to gain access to the U.S. market.
Despite his campaign position, AMLO is now affirming a positive intention to renegotiate NAFTA; however, he is speaking from both sides of the current issue. Example:
[Today] Lopez Obrador said he supports reaching a deal on renegotiating the North American Free Trade Agreement with the United States and Canada.
[…] Lopez Obrador said he will propose that his own team of experts be included in the talks. The winning candidate said he will make that proposal in a meeting Tuesday with current President Enrique Pena Nieto.
Lopez Obrador told Televisa that he will respect the current team of negotiators, and let them continue representing Mexico until he takes office Dec. 1.
[…] Lopez Obrador said individual and property rights would be guaranteed, promised respect for the autonomy of the central Bank of Mexico and said his government will maintain financial and fiscal discipline.
He said contracts obtained under energy reforms passed under President Enrique Pena Nieto will be scrutinized for any corruption or illegality, but otherwise contracts will be honored.
“There will be no confiscation or expropriation of assets. … Eradicating corruption will be the principal mission,” he said.
[…] The polling firm Consulta Mitofsky predicted Morena allies would take between 56 and 70 seats in the 128-member Senate and between 256 and 291 spots in the 500-seat lower house. (more)
On NAFTA the bottom line is easily identified. There are no ongoing negotiations. The NAFTA fatal flaw, which allows Canada and Mexico to act as pass-throughs for foreign products, is an impossible impasse to overcome. Neither Mexico or Canada can negotiate away their economic process of importing foreign goods, assembling them, and then using NAFTA to trans-ship the finished product into the U.S market.
Neither Mexico or Canada manufacture much of the product they assemble. The overwhelming majority of Canadian and Mexican products, including cars, are assembly operations for manufactured goods using parts from Europe and Asia, mostly China. They do not have the raw materials, infrastructure, or heavy-duty manufacturing plants, to *create* component parts for manufactured goods. Therefore in order to maintain their three-decades-long economic and trade system they cannot negotiate a NAFTA plan that demands high-content source of origination, for durable goods, from North America.
Nothing can change that.
China has invested tens of billions in ports and transport infrastructure to facilitate the current process. Those port and transit investments would become functionally obsolescent if Mexico and Canada were forced to stop importing parts for assembly.
♦ In the food sector the Mexican farmer, and by consequence Mexican farm-worker, are caught in the same multinational big AG network. Archer Daniels Midland (ADM), Monsanto, Nestlé, PepsiCo, Kraft (or, outside the United States, by the company’s alter ego, Mondelēz International).
Once the plowing, planting, nurturing, and harvesting are done, around 80 percent of major crops pass through the hands of four traders: ADM, Bunge, Cargill, and Louis Dreyfus. This is a controlled market.
For farmers, BIG AG (oligopolies) mean fewer choices of supplier and sometimes no choice at all about whom they will sell to. This leads to “contract farming”, in which farmers grow according to corporate specifications, with all supplies provided by the company, in return for its commitment to purchase the farmers’ output if it is acceptable.
On the Agricultural side of NAFTA president-elect Andres Manuel Lopez Obrador and U.S. President Donald Trump can actually work together. Neither AMLO, nor Trump, support the continuation of the corporately-controlled, Wall Street profit-driven, status quo. An interesting dynamic.
Keep in mind this next article about AMLO is from “Reuters”, a media outlet owned, operated, and messaging service of Wall Street:
(Reuters) – Mexico’s next president, Andres Manuel Lopez Obrador, said on Monday he will seek to remain in NAFTA along with the United States and Canada and that he respects the existing Mexican team renegotiating the trade pact.
Lopez Obrador won a landslide election victory on Sunday, getting more than double the votes of his nearest rival, dealing a resounding blow to establishment parties and becoming the first leftist to win the Mexican presidency since one-party rule ended in 2000.
“We are going to accompany the current government in this negotiation, we are going to be very respectful, and we are going to support the signing of the agreement,” he told Milenio TV in an telephone interview, saying the aim was a deal on the North Atlantic Free Trade Agreement that was good for Mexico. (read more)
Overall, Obrador represents an ideological outlook almost identical to former U.S. Presidential Candidate Bernie Sanders. [coincidentally the same as former Venezuelan president Hugo Chavez]. Hollywood celebrities and avowed leftists will likely embrace Obrador in 2018/2019 as they did Chavez in 2009/2010. Watch, you’ll see.
AMLO has a governing philosophy almost identical to Bernie Sanders; the problem AMLO faces is his Mexican economic policy starts without any underlying Mexican wealth to spread around. [Again, the Venezuelan issue] Socialism only works when you have other people’s money, labor, and property to distribute. The majority of the value in Mexico is owned by outside multinational interests. Those multinationals will now have to figure out how to deal with a nationalist who despises their ownership and control.
[Again, see big picture Venezuela]
Eventually, in order to make good on his promises, AMLO is going to need to *take* value from private ownership and redistribute that wealth to his constituents. That process may take a few years, but it is inevitable. In the history of the world, a socialist economy has never survived itself (without absolute economic capitulation of the citizens).
When that process happens, those entities who have their wealth expropriated will exit the economic system. It has always been thus; there has never been a socialist economy where that did not happen.. and that process begins the Venezuelan spiral.
The most dangerous time for a rescue swimmer is the moment when he reaches the desperate and drowning man. The MOST IMPORTANT aspect for President Trump, and for the survival of the United States, is to make sure the U.S. is not pulled under when Mexico begins to drown.
That, my friends, is why we need the Southern Border Wall. [Regardless of cost.]
Now, think carefully about AMLO’s quote again today:
“We are conscious of the need to maintain good relations with the United States.”
Yeah, I guarantee they are..