Mexico preparing export push if NAFTA fails

Mexico is seeking new trade amigos, as uncertainty over NAFTA prevails

The Mexican government has begun preparing for a “negative outcome” should the North American Free Trade Association (NAFTA) crumble, according to Rabobank.

Throughout his election campaign, US President Donald Trump labelled NAFTA a “disaster” and threatened to “break it” should renegotiation talks fail. Planning for the worst, Mexico, a NAFTA member along with the US and Canada, is looking for new trading partners as crucial talks to renegotiate the deal are expected to start in the summer.

Mexico was often the victim of vitriolic Trump rhetoric during the US election campaign and has started talking to Argentina, Brazil, Chile and Russia about trade agreements, said Rabobank.

Mexico wants to diversify export and import markets. It is reportedly looking to import grain from Brazil and Argentina, while Russia is keen to import Mexican meat, Rabobank claimed.

Exports to the US still rising

While there is concern in Mexico that NAFTA talks could fail, it has seen big volumes of cattle exports to the US. In the first two months of 2017, trade increased 34% when compared to the same period a year earlier. NAFTA talks are not expected to reach a conclusion until at least the end of 2017, so Rabobank expects Mexican beef exports to increase by 8% to 280,000t for the year.

Its Beef Quarterly Q1 report, published on 6 April, also suggested the global beef industry was treading softy with “a number of significant uncertainties” that could put pressure on the global market.

As the Trans-Pacific Partnership trade deal appears dead in the water, questions hover over the US position on NAFTA, as well as any genuine threat of a US-China trade war.

The global beef industry faces uncertainties surrounding US trade policy with key beef export markets, and the risk of avian influenza (AI) outbreaks in the US that could limit poultry exports, placing pressure on all US protein markets,” said Angus Gidley-Baird, Rabobank’s senior animal protein analyst.

After Brazil was rocked by a rotten meat scandal in March, Gidley-Baird suggested the situation “illustrates how sensitive the market is to shocks”.

During the first two months of 2017, Brazilian beef export volumes dropped by 6% when compared to the same period a year ago. While the Brazilian Beef Exporters Association maintained beef exports would rise 11% in volume this year, Rabobank said quarterly exports from Brazil would be “pressured” and a loss of consumer confidence would lead to “reduced exports”.

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