Mexico central bank Governor Agustin Carstens said the possibility of a Donald Trump presidency is implicitly reflected in the risk models used by policy makers, after stressing the importance to Mexico’s economy of the North American Free Trade Agreement.
"Explicitly, no," Carstens told El Financiero-Bloomberg TV’s Carlos Mota when asked if the risk of a Trump presidency is reflected in the central bank’s models, "but implicitly all of us have it in our heads."
Trump has pledged to renegotiate or terminate Nafta, saying it has been a disaster for the U.S. that has encouraged companies to move production south of the border. Asked about the U.S. campaign in the interview Friday, Carstens focused on the importance of a strong economic relationship between the U.S. and Mexico and the benefits that integration of production chains under Nafta brings to both nations. Trade between Mexico and the U.S. has grown sixfold to more than $530 billion in goods annually since Nafta took effect in 1994, making the Latin American nation the largest U.S. trade partner after China and Canada.
In the interview scheduled to air at 8:30 p.m. in Mexico City, Carstens said that the central bank’s surprise decision to raise its key interest rate between regularly-scheduled decisions last month, and the move to direct dollar sales to banks, were responses to the peso trading at levels that didn’t reflect Mexico’s fundamentals. He repeated his statement from Thursday night that the central bank could take additional unconventional measures if conditions warrant them.