The Week in Finance: Canada, the Only One Missing from USMCA
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The Week in Finance: Canada, the Only One Missing from USMCA

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Gabriela Mastache By Gabriela Mastache | Senior Journalist and Industry Analyst - Fri, 01/17/2020 - 17:08

The US Senate ratified the USMCA, Canada is the only country missing ratification and is expected to do so in the coming weeks. The uncertainty generated by the lack of treaty caused  a fall in Mexico’s fixed investments. While Mexico might not have achieved its growth goals, the OECD highlights the country’s fiscal responsibility and macroeconomic stability, while the SAT urges the country to increase tax collection by 25 percent.

In case you missed it, this is what made the headlines over the week!

  • The US Senate approved the USMCA. With 89 votes in favor and 10 against, the new treaty provides certainty for investors and businesses. The USMCA will have a 16-year period of validity, however, in its sixth year of operation any of the involved parties will be able to express their desire to extend the period of validity. Now that the US has ratified the treaty, Canada is the only missing member for the ratification. The Canadian parliament is expected to come together on the 27th of January, though there is no fixed date for the vote. Still, the treaty is expected to be approved.  
  • While the approval of the USMCA is certainly an accomplishment, members of the private industry in Mexico  warns that the treaty is not a panacea. Moises Kalach, from the CCE says that the treaty alone is not enough to boost Mexico’s growth, given the constant change in public policies and signals for investors. According to Kalach, the government has not taken the needed steps to attract more investments. Moreover, the series of reforms that will be needed for Mexico to meet the new commercial standards will represent a challenge, especially in the labor department.
  • Fixed investment in Mexico experienced a 9-month fall. While a drop in investment was expected, analysts did not believe would be so steep. 
  • While Mexico might not have achieved its growth goals, the Organization for Economic Cooperation and Development (OECD) highlights that through President Lopez Obrador´s first year in government the country retained its fiscal discipline principles and macroeconomic stability. José Ángel Gurría, Secretary of the OECD recognized that while the USMCA will provide a degree of certainty, it is not enough to boost growth levels above one percent.
  • Raquel Buenrostro, soon-to-be the person head of the SAT, stated that the country needs to increase its tax collection by 25 percent, to reach levels similar to those in Chile. According to Buenrostro, the average tax collection between OECD members ranges in 34 percent of the GDP, while in Mexico tax income represent solely 16 percent of the country’s GDP.
  • The new president of the IMEF, Ángel García-Lascurain, has asked for a new fiscal reform in order to recompose public income. A new reform would allow the government to finance social programs and investment-generation projects.

 

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