Simon Levy | Trump and the “new” world order?
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Trump and the “new” world order?

Trump and the “new” world order?

“A fleeting pleasure, is followed by quick disappointment.”

Schopenhauer

This is a moment in which the duration of truths is short and that of perceptions has increased.

The visit of Trump to Mexico was decisive, and marked an inflection point: it demonstrated his electorate his capacity to impose an agenda even much before he had the remote possibility of becoming President. For Mexico, if during the 19th century half the territory was lost, it would seem that early in the 21st century we have lost all our dignity.

Since the beginning of his campaign up to now, one of the main concerns of Trump´s victory is the discriminatory and hate filled speech in face of the sensationalism of the campaign promises. In consequence, we risk the danger that a lack of sensibility and ignorance turn themselves into frivolity and that this stirs a return to times of Deep chauvinism, racism and xenophobia.

How will Trump´s victory affect the world?

It seems that the beginning of the observance of Trump´s campaign proposals has initiated with the announcement of the cancellation of U.S. participation in the TPP (Trans-Pacific Partnership). Now, by the time the reader is following these lines, there is the possibility that an announcement has been made in the order of a renegotiation of the NAFTA agreement. If this were to happen, the ASEAN (Association of Southeast Asian Nations), would become the largest global trade platform, with China looking to lead free trade, multilateral policies, the presence of military bases and the promotion of credit lines for the development of infrastructure in all the world.

Looking at Trump´s proposals, China has a strategic position since nowadays they are the main holders of U.S. government debt bonds, according to data from CNN from May 10th of this year, with a 7% stake, so any financial movement from this Asian government would notably affect the financial capacity of the United States.

Also, the “communist” country keep depreciating the Yuan in a Controller manner afore other international currencies, in order to drive competitivity. This will generate, in the short term, a currency war and high volatility, where the Chinese will try to counter the strength of the US Dollar through the manipulation of US bonds.

What will happen with NAFTA?

With Trump’s new policies focused on the internal market, he will press to change the average Value of Regional Content (VRC) to an average Value of National Content (VNC), – one of the main elements with which tax preferences are awarded to products and supplies – with the objective of provoking that as many of the productive processes as possible return to the US, and under that condition award a preferential tax rate to Canada and Mexico, for components and raw materials. Nowadays the automotive industry, in view of NAFTA, holds a 62.5% VRC. If this is modified to a higher value (thus the VNC), there will be more and more components manufactured in the United States, and this could cause that important production processes return to the US, leaving only low aggregate value processes in Mexico, which would benefit either from the low salaries in our country or if their commercialization destiny is in our internal market.

México – China

Mexico built, during the past 30 years, its trade policies with a logic of Regional integration through the NAFTA, but this is going to change. Trump’s victory will force Mexico, in a obligatory manner, to an unavoidable need of diversifying its trade relationships. China then recovers an importance that many haven’t wanted to see. An example of this, Mexico only represents 0.51% of China’s total imports (7.89 billion dollars).

What to expect in Mexico?

Even though projections are less than favorable, due in part to an increase in poverty, with over 50 million people, to the huge public debt from recent years ( in 2017 it will cost all the Mexicans 568.197 billion pesos), to a lower economic growth and to a possible increase of inflation due to elevated exchange rates, about 22 to 24 pesos at least through 2018, we are before one of the greatest moments in Mexican history, where we can transform our future and move towards a new economic destiny.

To affront this it is necessary to transform the political and economic regimes in Mexico, which up till now hasn’t happened, and in our opinion it will be achieved only through a government with a social and progressist set of views.

We have before us an enormous and unintelligent social radicalization caused by large economic disparities. Setting our sight on the expectations of the US is a waste of our time. We require boldness and also, as I mentioned earlier, to diversify to the world, to strengthen the Mexican internal market and to understand that the new economic growth engine resides in making cities function better, with improved infrastructure, transport and public services.

The industrial policies, the internal market and driving strategic industries must be the road for internal growth.

There will be no way to generate the level of resources to maintain and create public works without discussing new ways of financing for the cities. Public Private Associations will play a great role in this.

Our suggestion is to invest in projects with lesser financial volatility, education projects, training, energy and agriculture.

When you hear the reaction of the government in turn, one can remember Carlos Monsivais when he said “Either I don’t understand what’s happening or what I understood has already passed”.

An independence cry charged with false nationalism doesn’t cover a sick economy.

Memory is the only defense to avoid and prepare against the setbacks of humanity. Today this new facet of history and of our lives demands less reactivity and  a lot of audacity to harness the reins of a country that has yet to find its course.