After surprising win of Republican candidate Donald Trump in US Presidential elections, Mexico said on Wednesday that it will not pay for a border wall with the United States.
In a report of Reuters, it has been said that Mexican officials held back from taking any action to support the peso despite the currency hitting lifetime lows overnight. It had been witnessed that the peso plunged 13 per cent in its biggest fall since the Tequila crisis devaluation 22 years ago. It later traded down 8.7 per cent at 19.91 per dollar.
In his campaign, Trump had threatened to amend the NAFTA trade agreement with Mexico, and to tax money sent home by migrants to pay for building a wall on the southern U.S. border. The report added quoting Gabriella Siller, an analyst of Mexican bank BASE, “Very hard times are coming to Mexico.”
“I congratulate the US for its electoral process and reiterate to @realDonaldTrump willingness to work together for the bilateral relationship,” Enrique Pena Nieto, Mexican President posted on twitter. “Mexico and the United States are friends, partners and allies must continue to work for the competitiveness and development of North America,” he added.
But Mexican Foreign Minister Claudia Ruiz Massieu reiterated that Mexico would not pay for Trump’s proposed wall along the U.S. border, reuters claimed. “Miscellaneous, mature and strong, US-Mexico relationship should always start mutual respect and responsibility,” her tweet said. It is to be noted that the threat that Mexico will pay for the wall was a key feature of trump’s speeches.
In a report earlier, ratings agency Fitch said Trump’s victory may add downside risks to Mexico’s economic growth, however, Moody’s warned that the government may not meet its goals of cutting its budget deficit if flows of trade or foreign investment wilt under Trump.
Reportedly, both Moody’s and Standard & Poor’s rating agencies put Mexico’s credit rating on a negative view earlier this year.
Reuters reported that Gabriel Casillas, an economist at Banorte, predicted Trump’s victory will shave 0.3 percentage points from 2016 economic growth, and also said that peso could suffer for months as the market tries to figure out what Trump could do in office. However, he said, “I don’t think Trump will do a lot of the things he said he will do.”
Others like Morgan Stanley analysts said in a note that the fallout from a Trump presidency would have “deep ramifications” for the equity market and that foreign investment could stall.
It has been noticed now that market has now pulled back from its initial panic. The peso recovered from its low after Trump took a measured tone in his victory speech and did not invoke any of his threats against Mexico, analysts said in the report.
It had been noticed that Mexico’s benchmark IPC stock index fell more than 3.0 percent initially, but pared losses and were down around 2.00 percent by afternoon. Later, Jose Antonio Meade, Finance Minister told Reuters that authorities were monitoring the situation and that they would act if needed. “It is important to recognize that market operations have remained ordered. This has been seen in the last hours,” Meade said.
Reportedly, Mexico has more than $175 billion in foreign reserves, and Carstens said last month he would consider using a $90 billion International Monetary Fund flexible credit line “in the event of an external shock.