Tuesday, November 1, 2016

U.S Election Outcome Impacts Mexico-NAFTA

How U.S. Election May Impact Factories in Mexico

Northern border cities see sharp slowdown in business ahead of vote; Trump win could chill market in short term

WSJ Aurthors:   
UST Blogger: ERIKA C.

Mexico's market leasing space has come to halt due to the anxiety of the upcoming U.S Elections. Factories and warehouses that have been utilized by U.S and foreign companies for outsource work has slowly declined due to the possible fact that Donald Trump might actually have a shot at winning the presidency. What may have seemed as rich business man's final stand to promote himself in another arena, has actually in fact turned into a rich business man with no political experience actually having a chance at winning. This idea doesn't just scare people in the U.S.,  in fact it actually scares more abroad, especially Mexico. 

"Mexico’s industrial real-estate market has exploded since the North American Free Trade Agreement (NAFTA) took effect in 1994 and created a unified market between Canada, the U.S. and Mexico, making it easier for manufacturers to take advantage of cheap labor, low costs and less-stringent business regulations south of the border. In the past decade alone, it has nearly tripled to more than 710 million square feet of space"

Since this agreement, Mexico has seen a rather slow but improving rise of a middle class, but the reverse has happened for families in the United States. Mr. Trump blames this solely contributed to the fact that many U.S. companies left to outsource to countries like Mexico, thus taking jobs away from American citizens. Others believe this to be a short term worry, or disruption in the Market. They believe that in order for these Companies to remain competitive, they will have to  figure out ways that produce the same total profit as before and labor costs are the major issues. 

"“Companies that are investing on the border are more affected by free trade because they’re exporting back to the U.S. directly,” said David O’Donnell, president of O’Donnell Mexico, a large industrial landlord and developer. He said that at least three of his potential tenants have put major deals on hold in border markets because of election-related uncertainty."

No one knows what the outcome will be on November 8th, but as of now, we can see that Companies and Countries that rely on NAFTA are preparing for the worst.

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