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Last updateFri, 17 Nov 2017 11am

Trump victory will be hell for Mexico, experts predict

Which would be the more shocking, some Americans are saying – Donald Trump winning the White House or the high-flying Chicago Cubs lifting the World Series?

Given that the Cubs – who haven’t won the crown since 1908 – had a regular season average of .640 and an amazing win-loss record of 103-58, and that Trump is trailing Hillary Clinton by six percentage points with a month to go before the general election, the point is arguably moot.

The “shock” that a Trump victory will have on Mexico, however, cannot be minimized.  

Interviewed on national radio this week after raising interest rates for the third time this year (see story page 2), Mexico’s Central Bank President Agustin Carstens highlighted the current ”nervousness derived from the possible consequences” of a Trump victory in November.  He warned of a coming “hurricane and an especially intense one if he fulfills his campaign promises.”

Some economists correlate the fluctuating fortunes of Trump in the opinion polls to the topsy-turvy movement of the Mexican peso in recent months. His openly anti-Mexico stance, promising to deport 12 million undocumented citizens, build a border wall and scrap the North American Free Trade Agreement (NAFTA), has not only rattled this country’s politicians but threatened its long-term economic stability.

Augusto de la Torre, chief economist for Latin America and the Caribbean at the World Bank, said this week that it would be a “heavy blow” for Mexico and its “battle against poverty” should Trump win the election and significantly change or dispense with NAFTA.

Speaking at a conference in Mexico City, de la Torre said thanks to NAFTA Mexico has become one of the world’s most diversified nations, with its exports mushrooming by 525 percent between 1994 (when the trade agreement started) and 2015. Without NAFTA, he noted, poverty in this country would not have fallen in the manner it has.  The World Bank also credits the trade agreement with creating a better-skilled labor force that has helped bridge the gap between the rich and poor.

It is frequently mentioned that Trump would not have the power to ditch NAFTA and that he requires the consent of Congress. That’s not actually true.  NAFTA’s Article 2205 says that a party may withdraw from the agreement “six months after it provides written notice to the other parties.”   Trump himself has said he might activate this clause, and doesn’t seem concerned that doing so could trigger the biggest trade war in U.S. history.

Another major concern in Mexico is what might happen to the peso in the event of a Trump victory on Tuesday, November 8?

Daniel Curiel, coordinator for the Committee of Jalisco’s Industrial Chambers, said Trump as a president-in-waiting is likely to drive the peso down to around 23 to the dollar by the end of the year, provoke another interest rate hike and further reduce long-term growth.

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