Backs against the wall: Trump victory casts pall over Mexico

[November 09, 2016]  By Dave Graham

MEXICO CITY (Reuters) - Mexico was pitched into deep uncertainty by Donald Trump's U.S. election victory on Tuesday after a bitterly divisive campaign, raising the prospect of major clashes over trade, immigration and security.

The peso currency suffered its biggest fall in 22 years on fears Trump will stick to a campaign pledge to rewrite or dump a free trade treaty he says is loaded in Mexico's favor. Investors worry a trade fight could tip Mexico's economy into recession.

The Republican candidate has threatened to deport millions of undocumented Mexican migrants, many of whom he described as rapists and drug runners, and to keep others out by building a massive border wall he says Mexico will pay for.

Watching in homes and bars around the country as the New York real estate tycoon extended his lead over Democrat Hillary Clinton in one U.S. state after another, many Mexicans were gripped by disbelief and fear.

"We have to start saving for that wall," said Rafael Garnica, a 29-year-old Mexico City technology entrepreneur. "It's not just Trump that frightens me, it's that he represents a huge amount of people in the United States."

On Twitter, some Mexicans urged their government to seek dialogue with Trump, while others said they feared a rupture of ties with the United States.

"Trump's victory is the antithesis of the fall of the Berlin Wall," tweeted Fernando Belaunzaran, a politician for the center-left Party of the Democratic Revolution.

Trump has proposed blocking billions of dollars in remittances sent home by Mexicans working in the United States to make Mexico pay for his border wall.

Pena Nieto, who likened Trump's rhetoric to that of Adolf Hitler and Benito Mussolini, has dismissed the idea out of hand.

On the campaign trail, Trump relentlessly attacked the North American Free Trade Agreement (NAFTA) between Mexico, Canada and the United States as the "worst deal ever", vowing to scrap it if he cannot renegotiate it.

NAFTA has been a cornerstone of Mexican economic policy since it took effect in 1994.

Some business leaders say the U.S and Mexican economies are now so closely integrated it is impossible to take steps against one without damaging the other.

"We will be facing months of volatility and uncertainty while the new government in Washington takes office and we see whether Mr.Trump is able to make good on his unfortunate campaign promises and rhetoric," said Andres Rozental, a former Mexican deputy foreign minister.

Mexican officials hope to diversify export markets to try to reduce the country's dependence on U.S. consumers, and Pena Nieto said he would work with whoever the United States elected.

He was pilloried at home for inviting Trump to Mexico in late August in an effort to create some leverage for his government in case the businessman won.

Trump softened his tone on the brief stopover he made to meet Pena Nieto, telling a news conference it was important to keep manufacturing in North America and describing Mexican-Americans as "spectacular, hard-working people."

A man watches a broadcast of the U.S. presidential race between Democratic nominee Hillary Clinton and Republican nominee Donald Trump in a restaurant in Mexico City, Mexico November 8, 2016. REUTERS/Carlos Jasso

But within hours of his departure, he and Pena Nieto got into a Twitter feud over who would pay for the wall.

COOPERATION FEARS

Under NAFTA, four out of every five dollars made by Mexican exporters has come from the United States, and bilateral trade is now worth about half a trillion dollars annually.

Trump has threatened to levy tariffs of up to 35 percent on Mexican-made goods, sparking fears of a massive hit to trade, especially in Mexico's northern border regions.

The U.S. president has the power to rescind NAFTA but policymakers on both sides of the border consulted by Reuters said Trump would come under heavy pressure from Congress and business leaders not to wreck trade.

Still, Mexican officials say Trump's hard line on trade blurs with his radical stance on immigration.

"Trump's wall isn't just a message to Mexico about migrants. It's about imports too," said a senior Mexican government security official, speaking on condition of anonymity.

Friction over trade could put bilateral cooperation over security, the fight against drug trafficking and curbing illegal migration under strain, which U.S. and Mexican officials say has improved steadily under Pena Nieto and President Barack Obama.

Mexico's ambassador to Washington, Carlos Sada, said at an event in Los Angeles last month that Trump had dealt a blow to the United States' image south of the border and stirred up historic resentment.

Alongside him, the U.S. ambassador to Mexico, Roberta Jacobson, joked about how Trump's campaign had also made life difficult for U.S. diplomats south of the border.

"I thought about just hiding until November 9th," she said. "The overwhelming, universal reaction to the Trump visit itself, and even to a lot in the election campaign, has been 'What the ... fff ... you know?'"

"But the more concerning response, the much deeper response has been: 'We're afraid it won't go back to normal after this.'"

(Additional reporting by Natalie Schachar; Editing by Kieran Murray)

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