NAFTA negotiations and salary increases were among the key topics discussed during the second presidential debate on Sunday, issues that weigh directly on Mexico’s automotive industry.

Regarding NAFTA, rules of origin for the automotive industry continue to be a thorny topic on which no final agreement has been reached. If negotiations in this area stretch beyond the July 1 election, this process will be overtaken by the next presidential team and the continuity risks that entails. All presidential candidates agreed upon the need to diversify the country’s trade relationships beyond North America and most candidates proposed adopting a stronger line to face Trump’s protectionist rhetoric related to the NAFTA 2.0 negotiations.

Ricardo Anaya Cortés, candidate of the right-leaning, PAN-led “Por México al Frente” coalition, underlined the importance of diversifying trade and said the country needed to reconsider the nature of the Mexico-US relationship. He added that his government would pursue a relationship with the US based on mutual respect between both nations and underlined that 80 percent of Mexican exports go to that country.

Similarly, candidate of the center-right, PRI-led “Todos por México” coalition, José Antonio Meade Kuribreña, said it was necessary to defend Mexico’s commercial openness and warned that jobs will be lost in Mexico if this line is not followed. Meade added that commercial diversification with more regions beyond North America is important and that increasing trade volumes with the Asia-Pacific region is key in this process. Contrary to his counterparts who proposed a more confrontational approach to the NAFTA talks, Meade called for maintaining an open dialogue and underlined that the US has not dropped out of NAFTA as it did from the Paris Accord, the Iran Nuclear Deal and TPP.

Independent candidate Jaime “El Bronco” Rodríguez Calderón stated that Mexico needs to “wean off” the US and “put (the US) in its place”. He said that having an FTA with the US was not necessary and called for Mexican government officers to look to other countries, speficially new agreements with markets in Asia and South America.

Finally, candidate of the leftist, MORENA-led “Juntos Haremos Historia” coalition Andrés Manuel López Obrador proposed the creation of an Alliance-for-Progress-style economic cooperation program within NAFTA. This project would not only include the US, Mexico and Canada but also Central American countries and would not only boost trade in the region but also create jobs and generate well-being and peace in the region. Whereas the other contenders called more emphatically for the diversification of trade, AMLO, as López Obrador is known, also said it was necessary to strengthen the Mexican economy to reduce its dependence on foreign countries.

AGREEMENT ON SALARIES

Salaries, a topic that has taken the spotlight in the NAFTA negotiations, was widely discussed by all candidates and there was concurrence on the need to raise wages. As the US has proposed that a certain percentage of regional content for vehicles comes from high salaries, the fact that salaries in Mexico have flatlined since NAFTA entered force became an important area of discussion.

The purchasing power of Mexican workers has remained relatively constant since 1994 due to inflation and other economic phenomena. For the manufacturing industry, this has meant more companies have arrived to the country attracted by competitive labor costs and more jobs have been created in Mexico. All four candidates underlined the need to raise minimum wages, to boost the economy and to strengthen the purchasing power of Mexican families, but each proposed a different minimum wage goal and the means to reach it.

For instance, AMLO said that that by the end of the next federal administration salaries should grow to a daily MX$171 (US$8.59), that minimum wages should be doubled in the northern borderland and that salary increases should be included in the final text of NAFTA 2.0. “Minimum wages must be doubled as workers in the US earn up to 10 times more than Mexicans and that is unfair,” he pointed out. “We cannot have a commercial agreement unless we talk about wage equality.”

Anaya called for raising salaries from the current rate of MX$88.36 (US$4.44) to MX$100 (US$5.02) in 2019 and then (similar to AMLO) gradual salary increases so that minimum wages eventually reach CONEVAL’s well-being line (which measures the amount of income needed to have access to basic food, housing, clothes, health, education and culture). Anaya added that the minimum wage will double within the first four years of his administration if he wins the election.

The second part of his proposal on salaries consisted of exempting workers earning less than MX$10,000 (US$503.4) a month from paying income tax.

Bronco called for the diversion of funds destined for social programs to boost salaries in Mexico and reducing the income tax from 35 to 30 percent, VAT from 16 to 10 percent and eliminating taxes on gasoline. He proposed raising the minimum wage to MX$335 (US$16.86) to balance Mexico’s purchasing power with that of its NAFTA counterparts.

Contrary to the other contenders who looked to boost salaries by decree, Meade called for the minimum wage to be raised according to the country’s productivity and as a result of an investment-commerce-salaries policy that closes gaps.

Finally, two candidates proposed infrastructure plans that could support the growth of Mexico’s automotive industry. These plans are particularly oriented to logistics infrastructure that eases manufacturing exports. On one hand, AMLO called for the construction of a railroad that connects Salina Cruz with Coatzacoalcos to transport containers by land and support product commercialization. He also proposed the expansion and modernization of Mexico’s road infrastructure.

Similarly, Anaya proposed a national infrastructure plan that boosts the competitiveness of the whole country. He underlined that only 10 of the 32 states are benefiting from Mexico’s exports and that the country needs to integrate more.

 

Don’t forget to follow us on twitter at @mexautomotive and @mexautomotriz for the latest industry news.

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