Publish in Trade Talk - Wednesday, May 16, 2018
Mexico has replaced Brazil in Latin America FDI confidence, according to A.T. Kearney. Here capital Mexico City. (Photo: CDMX Gobierno)
NAFTA exit would cost US retailers $15 billion annually.
BY LATINVEX STAFF
Despite uncertainty surrounding the future of the North American Free Trade Agreement (NAFTA) and the July presidential elections, Mexico now tops FDI confidence in Latin America, according to the latest FDI Confidence Index from A.T. Kearney.
While its score actually declined – from 1.51 points to 1.47 points – it outperformed the previous top country, Brazil, which saw its score decline even more – from 1.52 points to 1.37 points.
Mexico ranks 17th for the second consecutive year.
“The government has taken steps to improve the investment environment, such as lifting price controls on fuel and privatizing its hydrocarbon sector, which have already resulted in major deals,” A.T. Kearney says.
Brazil ended in 25th place, down nine spots from last year.
“Brazil continues its streak of ranking in the top 25 throughout the entire history of the Index,” A.T. Kearney says. “Despite lingering economic and political uncertainty, the country’s sheer size makes it an enduring destination for FDI."
The report comes just as both Mexico and Brazil face crucial elections that could impact foreign investors positovely or negatively.
In Mexico, the front-runner is Andres Manuel Lopez Obrador, a leftist firenbrand who is threatening to roll back the country's recent energy reforms and has made threats against the new international airport being built in Mexico City (see Mexico: AMLO Threatens Airport, Energy Reforms).
Meanwhile, in Brazil the business favorite -- former Sao Paulo Governor Geraldo Alckmin -- is trailing behind several other candidates, according to the latest poll.
NAFTA EXIT COSTS $15 BLN FOR RETAILERS
An exit from NAFTA, would cost US retailers $15.8 billion each year and consumers $5.3 billion, according to a new report from A.T. Kearney, in partnership with the Food Marketing Institute, the National Retail Federation, and the Retail Industry Leaders Association.
Meanwhile, the loss of tariff-free access across North America would have a negative impact on GDP growth, which would in turn translate to more woes for retailers.
“We estimate that retail spending would drop by $290 per year per US household. In this scenario, consumers would re-evaluate what they want and need, perhaps passing up a new flat-screen TV so they can avoid cutting back on needed groceries,” A.T. Kearney says. “As consumers reduce spending to avoid higher-priced items, retails could see sales drop, and retailer revenues could drop by as much as $39 billion per year. The trickle-down effects would be significant as well, as it could spell the loss of 128,000 retail-related jobs within the next three years.”
The effects for retailers in different sectors will be complex, with the impact varying from product to product, the report says.
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