Joe Biden will be the 46th President of the United States, what is expected for Mexico? The first reactions are from the financial markets that have shown rises in the stock markets and in the exchange rate appreciation reaching levels below 21 pesos per dollar.
Biden’s resolution as president will confront us, unlike Trump, with a more experienced and orthodox team, with a greater command of foreign policy and a more social than progressive approach. Trump of aggressive negotiation put us to work pending the bilateral agenda, Biden more passive of dialogue, he will be more strict with compliance with the norm.
In this sense, the bilateral agenda with Mexico will address trade issues, energy policy, migration, among others. In foreign trade, we expect less litigation with China, which is not good news for Mexico because it will displace us as its main commercial partner.
In addition to this, in International Consultants, SC® we expect a greater regional integration by the USMCA, although with a tightening in the application of requirements and rules with the sanctions that this entails; highlights the labor chapter that had the greatest Democratic resistance to its approval in Congress and in which we anticipate supervision, conciliation and arbitration processes for compliance with the rules.
The energy policy is perhaps the biggest point of contrast with Mexico since Biden’s environmental pro proposing, in addition to the return of the US to the Paris Agreement, a green agenda in favor of renewable energy and a regional investment strategy focused on infrastructure sustainability. That is why we warn political and legal pressures for Mexico to comply with international agreements, unlock investments in renewable energy, while the United States protects its investors in the oil and gas market.
In migration, we perceive chiaroscuro, although there will be no wall and the treatment of migrants will be more humane, it must be remembered that Obama deported more than 380,000 migrants on an annual average, more than Trump. On the other hand, the fate of the National Guard and security on the southern border will have to be seen since Biden could remove that pressure, causing greater immigration in Mexico, resulting in economic and labor tensions in border cities to the north and south.
At Consultores Internacionales, SC® we believe that companies must anticipate to reduce their risks and take advantage of opportunities, therefore we recommend:
- For companies with operations in dollars, it is necessary to take advantage of a dollar below 21 pesos since to the extent that a result in favor of Biden is postponed, exchange movements could be more volatile and push the dollar up.
- For companies that do business with the United States, the pressures of the Biden administration in labor and environmental matters will be under the protection of the laws so you must be attentive to the current regulations. Check the guidelines and monitor their compliance to avoid penalties.
- We anticipate a slow and uncertain economic recovery for Mexico, so today more than ever we must not lower our guard and take care of cash flows to avoid hindering operations.
Although the currency is still in the air, companies cannot leave their permanence in the market to luck, so it is important to keep an eye on the coming days and anticipate decisions that reduce their risks.
By: Julio Alejandro Millán, President, International Consultants, SC®