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Trumpanomics would create problems in the region

Monday, August 22, 2016


 

For better or worse, economic relations among the United States, Mexico and Central America would be very different, if Donald Trump were to be elected President.

Renegotiating or withdrawing from free trade agreements, and shelving plans for a $10 billion pipeline, which carries natural gas from the United States to Mexico and Central America, would be part of his agenda.

The United States could create jobs, by limiting imports from its trading partners, while making it hard for American companies to operate in Mexico and Central America, and by deporting and excluding migrants.

The United States could in addition keep down the cost of natural gas in the domestic market, by restricting exports.

On the other hand, the United States could lose competitiveness, by doing things, which other countries do more efficiently.

As far as gas is concerned, American producers – including many small businesses - would lose revenue, if they were prohibited from selling to foreign buyers.

The United States, Mexico and Canada are signatories of the North American Free Trade Agreement, in effect since 1994.

The United States, and – with the exception of Panama - the countries of Central America, along with the Dominican Republic, are signatories of the Central American Free Trade Agreement, which went into effect in the last decade.

Trump’s immigration policy would in addition tend to drive up the cost of labor in the United States, while driving down income in poor countries.

Emigrants from Guatemala, Honduras, El Salvador and Nicaragua, based mainly in the United States, are expected this year to send some $16 billion to their families back home, a 7 percent increase compared to 2015, according to AirPak, a unit of Western Union.

Revenue generated by Central American workers abroad now exceeds that of any of the products, which historically have been the region’s most important exports, including coffee, sugar or bananas.

Remittances currently amount to 17 percent of the GDP of each of Honduras and El Salvador, and 12 percent in the case of Guatemala.

Mexican 2015 remittances of $23 billion amounted to only about 2% of GDP.

On the other hand, revenue from remittances for the first time exceeded the value of oil exports.