LatinFinance - November/December 2017 - 21

had in the past. Regardless of the NAFTA
negotiation, this relationship is anchored in
the integration that over the last decades has
taken place among the three countries.
Gutiérrez: If I may interject, and I'm merely
an outsider just looking in and Secretary
Meade is obviously much closer to the situation and NAFTA, but I'm actually not sure
that everyone is negotiating in good faith. I
think there's one big guy who's not, who is
potentially threatening to inject some poison
pills and really disrupt the whole process.
Unfortunately, we have a situation where
economics are not our foremost consideration. It's the political considerations that
are dominating.
Mexico isn't really representative of the
rest of Latin America in the sense that it's
much more of a manufacturing economy.
It's not commodity-dependent, which has
served Mexico quite well in the vagaries
of the recent shocks in the commodity
markets. I came here [Washington DC]
thinking that, yes, Mexico's valuations are
improving, it's looking attractive. I've had
some additional skepticism injected into my
thought process because of what I've been
hearing from the DC policy-making framework [about the US approach to NAFTA
negotiations].
Renfrew: I think that the parties that come
with an open mind to negotiate, they will
be the victors, even if NAFTA does demise.
I think it's the US change of orientation that
we, as investors, need to keep in mind. Mexico has done a good of job of outreaching to
other economies around the world and signing their own free-trade agreements. Where
this goes for the largest market in the world
is not clear, and I think that will be a global
macro issue. But I think Mexico is resilient.
It has done a lot of the hard work, and while
we definitely see a market reaction, you see
that play out in the effects.
Meade: There's always a risk that negotiations can go wrong. But if you look back at
the beginning of the year, there was talk
about taxes [the border adjustment tax].
That's no longer a worry. As for NAFTA,
significantly negative scenarios were considered at the beginning, whereas today, even if
it is cancelled, a more constructive narrative
for the region is being discussed.
González Anaya: There were lots of things
on the table at the beginning of the year.
And slowly but surely, some of these things

Latin America has benefitted generally from
the rise of China through commodity exports and over the course of time in terms of
trade. There have been shocks on that front
in the last several years, but things seemed
to have turned the corner.

On Latin American elections

REASONABLE RESULTS: Pemex CEO José
Antonio González Anaya says energy reforms
have created stakeholders that can help focus
the NAFTA negotiations

have been taken out. People were worried a
border adjustment tax would happen. But
that got taken off the table because it didn't
make sense. Hopefully, what will happen
is that the negotiations will narrow into
something that is reasonable and perhaps
even constructive. I'd like to talk a bit about
energy. Before Mexico's energy reforms
there was only Pemex in Mexico. We now
export about a million barrels a day, mostly
to the United States, mostly to Texas. We
import about 500,000 barrels a day, mostly
from Texas. We import about 2 billion cubic
feet of gas every day from Texas. So Mexico's
reform process has also led to the creation
of stakeholders that I think can help to focus
the negotiation into something that is reasonable as time goes on.

On geopolitics and emerging
markets

Das: It's fairly clear that something significant has changed in the United States, in the
United Kingdom, because of Brexit, and in
Western Europe. I think it's also important
to say that it's dangerous to overinterpret
what's going on. There's been more bluster
and noise and that, of course, needs to be
confirmed most imminently by what's going
on with the NAFTA negotiations, but also in
Europe with Brexit and the need for re-administration of the European Union. Zooming out from the western world to emerging
markets, in many respects the emerging
markets have been the most important
beneficiaries of a world where trade barriers
and barriers to investment have come down.

Velasco: We are now seeing our economy
pick up in the second half of the year, along
with consumer confidence and manufacturing confidence. We are still seeing low numbers. But we have done our homework. We
are adjusting our fiscal numbers and we are
seeing an improvement in our deficit this
year. In 2016, the deficit was 4%. This year,
we think it will be 3.6% and we expect to get
it down to 2.1% in 2016. I think if you look
across the political spectrum in Colombia,
you might see some different visions about
issues regarding the post-conflict agreement with the FARC. But the vision about
the economy has not changed. We will keep
working on greater integration among the
Pacific Alliance countries. We will keep
trying to pursue investment through infrastructure.
Colman: Brazil's economic crisis has obviously impacted us. But despite the challenge
we have managed to grow very well over
the last few years. We reached public investment growth of almost 20% in nominal
terms last year and this year it's like 15%. Our
industrial sector and services are growing.
In terms of the political scenario in Paraguay, all of the candidates are talking about
similar agendas for the economy, emphasizing investment and our fiscal caps.
Renfrew: We're watching the political
situation in Brazil. Our base case is that
there will be a candidate who is someone
the market can work with and see some
rational policies, but there are some unknown candidates. The uncertainty there is
something we're watching. Beyond Brazil,
I think largely we still are very constructive
on Latin America.
Meade: I think that Latin America in general is converging in the right direction
if you look at Peru, Chile and Colombia.
Plus, if you look at the big transformation
in Argentina and the Brazilian agenda, it is
moving in the right direction. I think most
of the Latin American countries are moving in the direction of integration and more
market-friendly policies and more sustainable policies in the long run. LF
November/December 2017 - L ATINFINA NCE.COM 21

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