LatinNews Daily - 11 November 2024

*International credit ratings agency Fitch Ratings has warned that the victory of Donald Trump in the US elections on 5 November “could have multiple significant implications on the economic and financial stability of the Mexican states, especially those with economies that are strongly linked to trade, investment, and remittances coming from the US”. Fitch states that the review of the US-Mexico-Canada Agreement (USMCA), due in 2026, could increase trade barriers, which it said would especially impact the northern border states of Baja California, Coahuila, Chihuahua, Nuevo León, and Tamaulipas, “which depend greatly on exports to the US”. Fitch added that, “increased tariffs and stricter import policies could reduce the competitiveness of Mexican products in the US market, reduce tax revenues derived from economic activity and affect payroll tax collection.” In terms of foreign direct investment (FDI), Fitch states that the political and economic uncertainty generated by Trump’s victory could lead to a slowdown, particularly in nearshoring investment. States such as Baja California, Nuevo León, and San Luis Potosí, which have attracted significant US investment, could see a reduction in new investment projects if Trump focuses on bringing manufacturing production back to the US, according to Fitch. Trump’s hard-line migration policies, which include plans for a mass deportation drive, would reduce the flow of remittances to Mexico, which are a “crucial source of income” for states including Chiapas, Guerrero, Michoacán, Oaxaca, and Zacatecas. Fitch states that a reduction in remittances could directly impact internal demand and the quality of life of families that depend on this income, increasing the need for public services and social programmes and therefore inflating social spending.

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