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08/10/2017 | NAFTA talks could extend weakness of Mexican pesos, say analysts

Xinhua

The Mexican peso could see its run of weak performances carry on due to uncertainty revolving around the North American Free Trade Agreement (NAFTA) renegotiations, said analysts on Friday.

 

This week has seen the peso on a weak run unseen since June, reaching 18.62 pesos to the U.S. dollar, due to strong economic data in the United States, according to the director of economic and financial analysis at Banco Base, Gabriela Siller.

Siller told Xinhua that the value of the peso could vary between 18.4 and 18.88 to the dollar in the coming days.

"Next week, the value of the pesos will remain vulnerable to losses against the dollar, especially given the news that what could come out of the fourth round of NAFTA renegotiations," she said.

The Mexican business community has this week been nervous about the fact that Mexico could walk away from talks if it is faced with proposals from the United States and Canada that it sees as impossible to meet, added Siller.

Negotiations from all three countries will meet in Washington from Oct. 11 to 15 for the fourth round of talks, which is likely to tackle thorny issues such as the U.S. trade deficit and rules of origin.

Other factors are pressuring the peso, including the fact that Mexico could seek a "plan B," which would mean scrapping NAFTA, the pillar of North American trade since 1994, said Pedro Tuesta, a Latin American economist from Continuum Economics.

"The Mexican peso has been one of the currencies to suffer the most from the strengthening of the dollar," Tuesta told Xinhua, pointing to the peso having been worth 17.95 against the dollar on Sept. 26.

Santander Bank also published a report this week, saying the Mexican peso had seen the most depreciation among emerging markets.

"Faced with this environment of uncertainty, the handling of the fourth round of negotiations will be crucial," wrote Salvador Orozco, an analyst from Santander Bank.

On Sept. 28, Mexico's Finance Minister Jose Antonio Meade said it was likely that controversial proposals would be tabled during the fourth round.

All sides have expressed their desire to conclude talks after seven rounds of negotiations by late 2017 or early 2018.

Xinhuanet (China)

 



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