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Mexican CEOs Bullish on Business Conditions, Concerned Over Trade Policy

While the U.S. business community deals with the potential fallout of protectionist trade policy from the Trump administration, similar sentiments are percolating in Mexico.

The Oxford Business Group’s (OBG) new survey of Mexican CEOs shows concern that if Left Wing candidate López Obrador, currently the frontrunner, wins the upcoming election, it could bring protectionism and changes in legislation as the renegotiation of the North American Free Trade Agreement (NAFTA) continues to drag.

Obrador, the former Mexico City mayor, is officially the candidate for the National Regeneration Movement, but he also has allied himself with the Labor Party and the Social Encounter Party led by religious conservatives.

He faces four challengers–coalition candidate Ricardo Anaya, José Antonio Meade of the governing Institutional Revolutionary Party, Margarita Zavala, a lawyer and wife of ex-President Felipe Calderón, and independent Jaime “El Bronco” Rodríguez.

About 88 percent of the CEOs interviewed had positive expectations about business conditions compared to 80 percent in the OBG survey published in late 2017, and 47 percent of their companies are likely to make a capital investment over the coming months.

According to the “Business Barometer: Mexico CEO Survey,” CEOs said in spite of the context of political uncertainty due to the upcoming general elections, they appear more positive than ever about the economic climate of their country. Regarding investment, 73 percent of the CEOs said they were likely or very likely to make a significant capital investment in the next 12 months.

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However, the possible changes ahead in the upcoming general elections are stirring uncertainty among the business leaders, and a potential win by Obrador could represent a shift in the Mexican economic strategy, OBG said. With the left-wing in power, 24 percent of the business leaders predict an increase in the amount of protectionist domestic policies and 20 percent are concerned that structural reforms could undergo changes.

According to the interviewed business leaders, tackling corruption must be the main priority for the next administration. Improving the rule of law and the health and education of the population must be the next priorities in Mexico, state the survey participants.

With NAFTA negotiations ongoing, 41 percent of the CEOs interviewed cited industry and 34 percent said energy are the key sectors to reach new strategic markets and to develop bilateral trade. The U.S., Mexico and Canada are said to be in the final stages of renegotiating NAFTA, but the final outcome is uncertain.

Jaime Pérez-Seoane de Zunzunegui, OBG regional editor for The Americas, said, “The reasons behind the optimism of the Mexican businesspeople are rather structural. Mexico has a workforce that is strong in industries at both ends of the spectrum, from primary to tertiary and its legislation is competitive. With further efforts to fight corruption and enhance the fiscal landscape, inequalities should reduce over time and the economy will continue to grow rapidly in the years ahead.”

He said there is a strong focus in the business community on how to best propel the country’s development forward into the next decade, while “there is also the question of boosting trade with new partners across the Pacific, without losing traditional commercial territories.”

In terms of domestic economic development, 27 percent of respondents cited research and development as the skill in greatest need, followed by leadership at 25 percent and engineering at 18 percent.

Oxford Business Group is a global research and consultancy company with a presence in over 30 countries, from Africa, Asia and the Middle East to the Americas.