Economics: Trade plunges as USMCA takes effect
Last week marked a significant development in Mexico’s economic relations with the rest of the world, as the revised North American free trade agreement in the form of the reconfigured United States-Mexico-Canada Agreement (USMCA) was formally launched, with all the challenges and risks it entails for Mexico. The depth of the immediate challenges was on clear display in last week’s trade report for May, which revealed a much greater deterioration of trade activity than even pessimistic analysts had been projecting. As expected, the combined effect of the global pandemic and recession was clearly apparent in greatly reduced export and import activity in general, but Mexico was clearly on the losing end, with exports well under half their levels of a year earlier; even those of basic consumer goods fell, even though that is supposedly the segment for which demand was most resilient amid the pandemic. Meanwhile, imports were off by 47%, including an almost 70% plunge in its petroleum component.
These trade numbers will do nothing to allay the concerns expressed by many critics who see the USMCA as a modified, yet in many respects more restrictive, version of Nafta that could provide continuity in previously existing investment and production processes, but hardly anything that could remotely serve as a substitute for other factors that might lure investors into the Mexican economy, as President Andrés Manuel López Obrador insists that with the USMCA enactment he has handed business all the stimulus it will need, or get, for achieving an economic recovery in the short term.
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