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Status update from Jalisco: NAFTA Talks and Mexican Elections Causing Volatility

It has become public knowledge that 2018 will bring about an atypical and historically unusual environment for Mexico and the state of Jalisco, created by a mix of political and economic headwinds that will very likely alter the face of business.

NAFTA Woes Continue

There are a number of elements that will play a part in these changes, the first being the US choices that will impact negotiations for a new North American Free Trade Agreement (NAFTA), given the need for it to be ratified by the US Senate.

The negotiation of a new NAFTA is far from simple, and has been mired by complexity in almost all its negotiation rounds as all players hold extremely divergent points of view. Couple that with the doubts that Trump still faces within his own party and from the American people over his management of the Administration, and things become more surprising and unpredictable.

Exactly how changes to NAFTA will affect Jalisco and foreign trade in Mexico is still unknown, but the environment in which we currently find ourselves, and the expectation that it will continue shifting over the next year, makes it obvious that FDI and most markets will behave with volatility, because investors will act with greater moderation.

Federal-Level Uncertainty

Regardless of what happens with NAFTA, next year will also be transformative for Mexico because the federal elections will be held for the first time in six years. Again, no-one can predict the outcome of this election, which is creating another “wait and see” environment for investors.

Despite these uncertainties, investment continues to reach the state of Jalisco, and, in some cases, there are even domestic and foreign investors who perceive these political and economic shifts as an opportunity.

However, the truth is that they are not.

Until we get the result of the NAFTA negotiation rounds in December and January, as well as see the aftermath that will come from any changes to positions of power in both Mexico and the US, we can expect the first half of 2018 to be a very conservative period for investment.

Even so, things won’t remain stagnant in Jalisco, which has already started looking toward other latitudes for its commercial exchanges.

Jalisco’s Strengths Continue to Shine

Whatever happens, the world won’t end for anyone involved, but new rules of the game will almost certainly be imposed in Jalisco when the federal elections are complete, as well as in our neighbor country of the north.

It is for that reason that these changes represent a necessary movement in the entry and exit of FDI into Jalisco, but the main fruit of this environment is the enterprising and social spirit held by the population of the state, something that historically has combined diverse ingredients to create a positive impact on the economy.

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The new generation of entrepreneurs and innovators in the state have a more aggressive spirit to business, without fear of diversifying their poles of negotiation with other countries, as well as having a greater ability to adapt to change.

It is interesting to think that next year there will be both political and sociological factors that the world, and Mexico, will face, and that these new generations could find new ways to surprise us.

What is clear is that older generations will act more cautiously than younger generations, and the differences in educational and cultural opinion that separate the generations could make all the difference in the face of the country’s impending challenges, hopefully allowing Mexico to turn these challenges into opportunities.

Jose Miguel Zozyacorrea

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