- Title: Mexico finance minister doesn't rule out further peso volatility
- Date: 9th November 2016
- Summary: SAN JOSE CHIAPA, PUEBLA, MEXICO (FILE) (REUTERS) VARIOUS OF AUDI PLANT / EMPLOYEES AT WORK
- Embargoed: 24th November 2016 23:07
- Keywords: Mexico finance minister peso volatility U.S. election
- Location: MEXICO CITY, MEXICO / SAN JOSE CHIAPA, PUEBLA, MEXICO
- City: MEXICO CITY, MEXICO / SAN JOSE CHIAPA, PUEBLA, MEXICO
- Country: Mexico
- Topics: Government/Politics,Elections/Voting
- Reuters ID: LVA00257Q8TAB
- Aspect Ratio: 16:9
- Story Text: Mexico's Finance Minister Jose Antonio Meade said on Wednesday (November 9) Mexico's peso could see further volatility ahead after it sank to a record low following the election of Donald Trump as the U.S. president.
Speaking with a group of journalists at the finance ministry in Mexico City, Meade said the finance ministry and the central bank could continue to monitor the evolution of the economy and markets to decide if they need to take any measures.
"We have the possibility to wait and see and we have the possibility to review more components, with more information, seeing how the different variables will evolve, having more components that will allow us to respond in the best way possible to the precise scenario. I think we have the possibility, precisely because of the variables of being able wait and make the best decisions," Meade said.
"The first few moments today, the first few hours, we are seeing an exchange rate which became adjusted and was revalued. That does not mean we can't have further [volatility] ahead and we'll surely have new episodes of volatility," Meade added.
The Mexican peso recouped some losses after falling to a record low. The currency has been vulnerable to Trump's threats to rip up the NAFTA free trade agreement with Mexico and to tax money sent home by migrants to pay for building a border wall.
The peso plunged 13 percent in its biggest fall since the Tequila Crisis devaluation 22 years ago, before paring losses to trade down 8.7 percent at 19.91 per dollar.
Political and economic analyst, Luis De La Calle, who was part of the team that negotiated the NAFTA in the 1990s, said the agreement cannot be scrapped from one day to another.
"It's not something that can change from one day to another. It takes time. The flows of commerce, flows of investment will continue and during a period of uncertainty it can have an impact on future investments. We should look to having sufficient clarity, as quickly as possible, with regards what kind of proposals the United States could have with regards to relations with Mexico but we must also be aware, it's not very probable there will be such a radical proposal because the benefits are for both economies," de la Calle said.
He added it would not make any sense for the United States to leave it but he did not rule out they might.
"To leave the NAFTA, which is probably a campaign promise, looking at it coldly, does not have a lot of sense for the United States but it does not mean they, Trump as President, will not try to do something similar," de la Calle added.
Trump's victory speech pledge that he would forge strong relations with other big nations helped ease some concerns about heavy tariffs being slapped on imports to the United States and a starkly more aggressive geopolitical attitude.
The election of Trump put new pressure on automakers and other manufacturers that depend on open trade with Mexico.
Shares fell for U.S. automakers and suppliers, which rely heavily on production in Mexico to feed their U.S. manufacturing and sales operations.
Trump made attacks on the outsourcing of American auto jobs to Mexico a recurrent theme in his campaign, a message that rallied blue-collar workers while threatening to upend the business assumptions behind billions of dollars in planned investment by the auto industry.
U.S. vehicle manufacturers and many of their suppliers have based billions of dollars of investment on relatively open trade with Mexico, China and other countries.
Between 1994 and 2013, the number of auto factory jobs dropped by a third in the United States and rose almost five-fold in Mexico as lower-wage production boomed.
Mexico now accounts for 20 percent of all vehicle production in North America and has attracted more than $24 billion in investment from the industry since 2010, according to Ann Arbor, Michigan-based Centre for Automotive Research.
Based on current investment plans, Mexico's auto production capacity will grow by another 50 percent over the next five years, said the centre, which draws funding from the industry. - Copyright Holder: FILE REUTERS (CAN SELL)
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