Mexico’s Top Diplomat Says Nation Can Survive End of Nafta

  • Videgaray: Mexico will walk away if overhaul isn’t a win-win
  • Updated deal could include mechanism to ensure peso stability

Luis Videgaray

Photographer: Susana Gonzalez/Bloomberg

Mexico is prepared for the end of the North American Free Trade Agreement if it can’t reach a deal with the U.S. and Canada that benefits all three nations, the country’s top diplomat said.

President Enrique Pena Nieto’s administration is committed to keeping North America tariff-free and has set clear limits for what it can accept in negotiations with the U.S., Foreign Relations Minister Luis Videgaray said Thursday in an interview with Bloomberg TV. He added that his strong relationship with Jared Kushner, President Donald Trump’s son-in-law and adviser, is an asset for Mexico going forward.

Videgaray said that Mexico is open to including a peso stabilization mechanism, alluded to earlier this month by U.S. Commerce Secretary Wilbur Ross, as part of a Nafta update, as long as it preserves free trading for the peso. Improved rules of origin could also added, he said. Like central bank Governor Agustin Carstens, Videgaray said he views the nation’s currency as undervalued even after its world-leading rally since Trump’s inauguration. The rebound shows that investors understand the three Nafta partners are committed to reaching a good deal, he said.

"If what is on the table is something that is not good for Mexico, Mexico will step away from Nafta" and rely on the rules of the World Trade Organization, Videgaray said, speaking on the sidelines of Mexico’s annual banking convention in the resort city of Acapulco. "There will be a future without that. The question is ‘Why would you want to do that, if we can have a trade deal that can be much improved to the benefit of the three countries?’"

Mexico Foreign Relations Minister Luis Videgaray discusses U.S.-Mexico ties with Bloomberg’s Erik Schatzker.

(Source: Bloomberg)

Mexico felt the initial brunt of Trump’s presidency after the peso tumbled amid threats he’d rework or scrap Nafta and make Mexico pay for a border wall to keep out undocumented immigrants. The currency has since made a comeback after Trump administration officials including Ross and trade adviser Peter Navarro said that the U.S. and Mexico have an opportunity to reach a Nafta deal that can benefit both countries.

Asked about Trump’s "America First" mantra, Videgaray said that while any sovereign nation should be prioritizing its own interests, the U.S.-Mexico relationship and Nafta aren’t zero sum games.

"For any country, and that includes Mexico and the U.S., having good, robust relationships with crucial allies and neighbors -- that’s putting your country first."

In Nafta Showdown, Mexico Has Wild Card to Play Against U.S.

Videgaray said Nafta should continue to protect investments made in all three countries. While Ross said earlier this month that Nafta talks will probably start in the latter part of 2017 and suggested they could last a year, Videgaray said the White House has been telling him they expect the renegotiation to begin this summer.

At the same time, Videgaray said Mexico is "very concerned" about democracy in Venezuela, where regional elections have been delayed, the legislature’s powers curbed and political opponents of the government jailed. Mexico wants to work with the region to send a strong message, he said

Videgaray, a 48-year-old, MIT-trained economist, has long been considered to be the master strategist behind Pena Nieto; first as his finance chief when Pena Nieto was governor of the State of Mexico, then as his 2012 campaign manager and later finance minister for his first three years of his presidency. He has forged relationships with both Trump, who has referred to him as a “wonderful man,” and Kushner, who Videgaray on Thursday said is "a very smart person, somebody that I know and trust personally."

Kushner and Videgaray helped arrange an August visit by then-candidate Trump to meet with Pena Nieto at the presidential residence in Mexico City. While Videgaray resigned days later amid criticism of the trip, he was brought back into the cabinet in January after Trump triumphed.

The Mexico-U.S. relationship "is defined by institutions; it’s not about a particular individual," Videgaray said. "I think always having somebody that you trust and you know can help in the communication; that is very important. But at the end of the day, it’s institutions that are going to define the future of this relationship."

— With assistance by Nacha Cattan

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