Uncertainty over the outcome of NAFTA negotiations has resurfaced, raising concerns over the prospect of a geopolitical shock.
Discussions between Mexico, Canada and the United States have now been extended to the first quarter 2018, with significant distance remaining in their respective positions. President Trump has stated his willingness to “terminate” the treaty and elections in the U.S. and Mexico next year will add to investor anxiety. Already, concerns are weighing on asset classes in Mexico, a major energy producer and the world’s fourth largest auto exporter.
J.P. Morgan maintains the view that negotiations will likely be successful, with regional benefits in areas such as ecommerce outweighing nationalist impulses. However the current climate requires a closer examination of the adverse scenario and its possible impact on Mexico.
Projected impact of NAFTA collapse
The state energy company remains an attractive opportunity as operations would be unaffected: