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A Chinese company that manufactured Ivanka Trump shoes and has been accused of serious labor abuses is being celebrated in a blockbuster propaganda film for extending China’s influence around the globe.

The state-backed documentary “Amazing China” portrays the Huajian Group as a beneficent force spreading prosperity — in this case, by hiring thousands of Ethiopians at wages a fraction of what they’d have to pay in China. But in Ethiopia, Huajian workers told The Associated Press they work without safety equipment for pay so low they can barely make ends meet.

“I’m left with nothing at the end of the month,” said Ayelech Geletu, 21, who told the AP she earns a base monthly salary of 1,400 Birr ($51) at Huajian’s factory in Lebu, outside Addis Ababa. “Plus, their treatment is bad. They shout at us whenever they want.”

With epic cinematography, “Amazing China” — produced by China Central Television and the state-owned China Film Group Co. Ltd. — articulates a message of how China would like to be seen as it pursues President Xi Jinping’s vision of a globally resurgent nation, against a reality that doesn’t always measure up.

China’s ruling Communist Party recently announced it would take direct control of major broadcasters and assume regulatory power over everything from film and TV to books and news.

As the party deepens its ability to cultivate “unity of thought” among citizens, “Amazing China” demonstrates the scope of China’s propaganda machine, which not only crafted a stirring documentary about China’s renaissance under Xi but also helped manufacture an adoring audience for it.

The movie, which weaves together extraordinary feats of engineering and military, environmental and cultural achievements, hit theaters three days before China’s rubber-stamp legislature convened to amend the constitution and allow Xi to potentially rule China for life.

The star — duly noted by IMDb.com — is Xi himself, who appears more than 30 times in the 90-minute film.

“Amazing China” presents Huajian as an inspiring example of China exporting the success of its own economic miracle by creating transformative jobs for thousands of poor Ethiopians and sharing China’s knowledge, language and can-do discipline to build a new industrial foundation for Ethiopia’s economy.

The company is celebrated as a model of the inclusiveness at the heart of a much larger project: Xi’s signature One Belt One Road initiative, a plan to spread Chinese infrastructure and influence across dozens of countries so ambitious in scope that it’s been compared to the U.S.-led Marshall Plan after World War II.

“In opening to the outside world, China’s pursuit is not to only make our lives better, but to make the lives of others better,” the narrator says.

In the film, Huajian chairman Zhang Huarong stands before neat rows of Ethiopian workers singing a song about unity, describing himself as a father to his employees, who “like me very much.”

But four current and former Huajian employees told the AP their wages were so low that they struggled to pay their bills. They said they had no protective gear, were forced to work 12 hours a day and participate in military-style physical drills, were not permitted to form a union and were regularly yelled at by their Chinese managers.

All that made it hard for them to relate to the inspirational video about Huajian circulated by mobile phone with its sweeping shots of a gleaming factory and a soundtrack that repeats in operatic Mandarin: “Huajian has come, Huajian has come … holding the torch of hope.”

“If someone complains, he will be accused of disturbing the workplace and will be fired right away,” said Ebissa Gari, a 22-year-old who estimated he earns 960 Birr ($35) a month. “That’s why we keep quiet and work no matter how much we are subdued.”

Getahun Alemu, a 20-year-old who quit Huajian last year to continue his studies, complained of inadequate safety gear.

“There are chemicals that hurt our eyes and nose, and machines that cut our hands,” he said. “They have no idea about hand gloves! If you refuse to work without that protective gear, then you will be told to leave the company.”

Huajian declined the AP’s requests for comment. Ivanka Trump’s brand said it no longer does business with Huajian and “has always and continues to take supply chain integrity very seriously.”

Huajian’s investment in Ethiopia was part of a government-led industrialization drive. In the last few years, Ethiopia’s leaders and business allies came under intense criticism, with more than 300 businesses attacked by protesters who saw them as bolstering a repressive regime.

These days, armed soldiers stand guard at the entrance to the Eastern Industrial Zone in Ethiopia’s Oromia region, where Huajian opened its first factory.

Six years after the company’s arrival, the dream of turning Ethiopia into a shoe-manufacturing hub remains unrealized, and few harbor illusions about the main incentive for Huajian’s investment in a country where there is no legal minimum wage.

“These companies are moving out of Asia and coming to Africa to save labor costs,” said Fitsum Arega, who recently stepped down as head of the Ethiopian Investment Commission to become an adviser to the new prime minister. He praised Huajian for employing more than 5,000 Ethiopians, but said the company “could have done better.”

“I’m not saying all employees are happy and there are no abuses here and there,” Arega said, adding that the government pushes companies to protect workers. “There’s a labor law which actually the companies say favors the employees.”

The Chinese-owned Eastern Industrial Zone effectively took fertile land from Ethiopian farmers and handed it over to foreign investors — a strategy the Ethiopian government is rethinking, according to Nemera Mamo, a teaching fellow in economics at the University of London.

“You can clearly see that these industrial zones are absolutely favorable to the Chinese investors, but not to the local communities or the local private investors,” he said. Huajian workers told the AP they made 960 Birr ($35) to 1,700 Birr ($62) a month. A basic living wage in Ethiopia is about 3,000 Birr ($109) a month, according to Ayele Gelan, a research economist at the Kuwait Institute for Scientific Research.

In a post promoting “Amazing China” on its official WeChat account, Huajian claimed to be Ethiopia’s largest exporter — an exaggeration also promulgated by China’s official Xinhua News Agency.

Huajian is Ethiopia’s largest shoe exporter, shipping out $19.3 million worth of goods last fiscal year, according to Ethiopia’s Leather Industry Development Institute. But coffee producer Mullege PLC said it exported $42 million worth of coffee during the same period and that other companies export even more.

Huajian’s record within China also has been troubled. In at least five cases since 2015, Huajian sued workers in Chinese court rather than pay compensation mandated by a government arbitration panel. Huajian lost every case, court records show, and the court had to freeze Huajian’s assets to get one worker the 44,174 yuan ($7,000) he was owed.

Last year, Huajian found itself entangled in labor and human rights controversies that made global headlines but attracted little attention in China’s official media. Three men working with the New York-based non-profit group China Labor Watch were arrested after their investigation of Ivanka Trump’s suppliers zeroed in on Huajian. The men are out on bail, but remain under police surveillance.

China Labor Watch founder Li Qiang said Huajian’s factory in Ganzhou, in southeastern Jiangxi province, had some of the worst conditions he has ever encountered, including excessive overtime, low pay, and verbal and physical abuse.

Huajian has called those allegations “completely not true to the facts, taken out of context, exaggerated” and accused the investigators of conducting industrial espionage — a charge that was parroted in China’s party-controlled media.

Wei Tie, the director of “Amazing China,” said he wasn’t aware of the controversy surrounding Huajian until the AP informed him. That’s not too surprising given the years of positive coverage of Huajian in party-controlled media and the fact that many foreign news sites, especially Chinese-language ones, are blocked inside China.

Wei said he included the company in the film because it is “introducing China’s experience of prosperity to Africa.”

He said he prefers to focus on the good. “What I did was absorb the essence and discard the dross,” he said, citing a longstanding aphorism of Chinese political thought.

At first glance, Wei’s selective approach appears to have resonated with Chinese audiences. “Amazing China” smashed box-office records for documentary films, raking in 456 million yuan ($72 million) in its first five weeks, according to ticketing website Maoyan.com. It even thumped “Star Wars: The Last Jedi.”

Wei attributed this success to the “spontaneous feeling” of citizens inspired by the arc of tremendous progress they’ve witnessed, a national rejuvenation forged with sweat and skill that he compared to Europe’s Renaissance and the pioneering days of the American republic.

In Shanghai, midday screenings during the week sold out immediately, suggesting either unquenchable public appetite or organized bulk ticket sales.

None of the viewers surveyed by AP had purchased their own tickets. Instead, they said they got them from state-run companies, neighborhood committees or government departments that handed them out as part of their “party building work.”

Douban, a popular film review website, blocked users from rating and commenting on the movie. The only entries came from official media, which gave it an 8.5 out of 10 ranking. On IMDb.com, a subsidiary of Amazon, “Amazing China” earned only one star.

But for some, “Amazing China” is balm for old feelings of inferiority and a welcome reaffirmation that China is ready to resume its rightful place in the community of great nations.

“I did not know how good our country is until I watched this movie,” said Zuo Qianyi, a 68-year-old retiree. “I have been to many countries, Britain, Spain, and they are not as good as China, at least not as Shanghai. I am very happy, and I will love my country more.”
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When Andrew Chamberlain started in his job four years ago in the research group at jobs website Glassdoor.com, he worked in a programming language called Stata.

Then it was R. Then Python. Then PySpark.

“My dad was a commercial printer and did the same thing for 30 years. I have to continually stay on stuff,” said Chamberlain, who is now the chief economist for the site. Chamberlain already has one of the jobs of the future — a perpetually changing, shifting universe of work that requires employees to be critical thinkers and fast on their feet. Even those training for a specific field, from plumbing to aerospace engineering, need to be nimble enough to constantly learn new technologies and apply their skills on the fly.

When companies recruit new workers, particularly for entry-level jobs, they are not necessarily looking for knowledge of certain software. They are looking for what most consider soft skills: problem solving, effective communication and leadership. They also want candidates who show a willingness to keep learning new skills.

“The human being’s role in the workplace is less to do repetitive things all the time and more to do the non-repetitive tasks that bring new kinds of value,” said Anthony Carnevale, director of the Georgetown Center on Education and the Workforce in the United States.

So, while specializing in a STEM (science, technology, engineering and mathematics) field can seem like an easy path to a lucrative first job, employers are telling colleges: You are producing engineers, but they do not have the skills we need.

It is “algorithmic thinking” rather than the algorithm itself that is relevant, said Carnevale.

Finding gems

Out in the field, Marie Artim is looking for potential. As vice president of talent acquisition for car rental firm Enterprise Holdings Inc, she sets out to hire about 8,500 young people every year for a management training program, an enormous undertaking that has her searching college campuses across the country.

Artim started in the training program herself, 26 years ago, as did the Enterprise chief executive, and that is how she gets the attention of young adults and their parents who scoff at a future of renting cars.

According to Artim, the biggest deficit in the millennial generation is autonomous decision-making. They are used to being structured and “syllabused,” she said.

To get students ready, some colleges, and even high schools, are working on building critical thinking skills.

For three weeks in January at the private Westminster Schools in Atlanta, Georgia, students either get jobs or go on trips, which gives them a better sense of what they might do in the future.

At Texas State University in San Marcos, meanwhile, students can take a marketable-skills master class series.

Case studies

One key area zeroes in on case studies that companies are using increasingly to weed out prospects. This means being able to answer hypothetical questions based on a common scenario the employer faces, and showing leadership skills in those scenarios.

The career office at the university also focuses on interview skills. Today, that means teaching kids more than just writing an effective resume and showing up in smart clothes.

They have to learn how to perform best on video and phone interviews, and how to navigate gamification and artificial intelligence bots that many companies are now using in the recruiting process.

Norma Guerra Gaier, director of career services at Texas State, said her son just recently got a job and not until the final step did he even have a phone interview.

“He had to solve a couple of problems on a tech system, and was graded on that. He didn’t even interface with a human being,” Guerra Gaier said.

When companies hire at great volume, they try to balance the technology and face-to-face interactions, said Heidi Soltis-Berner, evolving workforce talent leader at financial services firm Deloitte.

Increasingly, Soltis-Berner does not know exactly what those new hires will be doing when they arrive, aside from what business division they will be serving.

“We build flexibility into that because we know each year there are new skills,” she said.
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With their manicured nails, immaculate makeup and matching handbags and

stilettos, you would be forgiven for mistaking the five women seated in the cafe of the upscale Nairobi hotel for a group of senior female executives.

Sipping white hot chocolate from delicate porcelain cups, they discuss their long working hours and challenges in finding time with their children, and share strategies on networking and dealing with difficult clients.

But these Kenyan women aren’t company directors, finance professionals or corporate lawyers — they are part of a new breed of women who are breaking into the male-dominated taxi sector and hitting Nairobi’s roads as e-cabbies.

“Taxi driving is not something I would have considered before, but after driving for a taxi app service, I think it’s a really good job for women,” said Lydia Muchiri, 29, in a knee-length fitted white dress with floral print.

“It’s convenient, easy and safe — much better than sitting at home and depending on handouts,” she said, as the other women, in their 20s and 30s, nodded in agreement.

As taxi-hailing apps mushroom to fill a hole in Nairobi’s poor public transport system, rising numbers of women are taking up jobs as drivers — citing benefits such as flexible working hours, the ability to select passengers, and guaranteed payment.

Online female cabbies currently make up only about 3 percent of the city’s estimated 12,000 e-taxi drivers, but industry officials say their numbers are growing exponentially.

Little Cabs, one of Nairobi’s popular ride-sharing platforms, and the only app offering riders the choice of a male or female driver, has witnessed a 13-fold increase in the number of female drivers over the last two years.

“There were 27 women drivers registered with Little Cabs when we first started in June 2016, now there are 381. We aim to have 1,000 women drivers by the end of this year,” said Jefferson Aluda, operations manager for Little Cabs.

“Many people think taxi driving is a man’s job, but that view is changing. Customers tell us that women are careful drivers and very professional. Through our recruitment campaigns, we expect more women to join.”

Empowering

Kenya’s economy has grown on average by 5 percent annually over the last decade, but the benefits have not been equally distributed — and women remain disadvantaged socially, economically and politically.

Women make up only a third of the 2.5 million people employed in the formal sector and own only 1 percent of agricultural land, according to the Kenya National Bureau of Statistics (KNBS).

Despite global criticism that the sharing economy lowers wages, encourages tax evasion and provides little protections to users, the emergence of platforms such as taxi-hailing apps in Kenya is in fact helping to empower women.

In the last three years, at least a dozen e-cab apps have launched to meet the demands of a growing smartphone-armed middle class seeking an affordable and safer alternative to the city’s reckless overcrowded matatus, or minivans.

Drivers earn a minimum of 30 Kenyan shillings ($0.30) per minute and companies take up to 25 percent their earnings, but female drivers still welcome the opportunity provided by firms such as Uber, Taxify, Little Cabs and Pewin.

Minus the company fee, fuel and car rental costs, drivers working 12 hours daily can earn on average 60,000 shillings ($600) in a month, say industry sources.

Faridah Khamis, a single mother of five children, decided to become an online taxi driver in February last year after chatting with a male driver who encouraged her to apply.

“The rates are low and I have to work 12 hours daily — when my children are at school and at night when they are asleep. But it’s better money than an office job these days,” said the 36-year-old woman standing beside her silver Mazda.

“I also think it’s very safe for women. I choose when I work, where I work, and which clients I work with. If I was a regular taxi driver, I would be on the roads looking for passengers. The app means I can find customers from my home.”

The women choose riders with higher ratings and opt for locations in populated rather than isolated areas. Their companies also track them via GPS, and they have an alert/SOS button on their apps for support if they need help. 

Not always a smooth ride

Uber officials say ride-sharing apps can provide a great economic opportunity for women, particularly in developing nations such as Kenya.

“We think apps like Uber can help break down global, structural barriers that keep women from fully participating in the economy,” Uber’s East Africa spokeswoman Janet Kemboi told the Thomson Reuters Foundation.

“These include social biases, security risks, financial and digital inclusion, and access to vehicles and other assets.”

But it’s not always a smooth ride for Kenya’s female e-cabbies. They occasionally face discrimination and abuse — from difficulties renting cars due to biased perceptions that women are bad drivers, to fending off drunken male passengers.

And with their phone numbers accessible to customers through the app, the women also endure daily “follow-up calls” from former customers who want to date them after the trip is over.

The female cabbies say they also face sexist comments where people perceive them to be sex workers simply because they are well-dressed, working at night, and doing a “man’s job.”

But such instances are rare, say the female drivers, and working in the taxi sector has inspired some of them to one day have their own fleet of taxis — for women, driven by women.

“There is a demand for women taxi drivers. Customers appreciate our appearance and professionalism. Some say we drive safer and our cars are cleaner than [those of] male drivers,” said Muchiri.

“We take pride in ourselves and in our job. We are no less than someone who works in an office. We see our car as our office and believe that once we are in the car, we must behave like a professional.”
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A U.S. federal court has given tobacco companies until June 18 to post a corrective statement on their websites about the dangers of their products and their efforts to mislead the public about those risks.

The companies were also ordered to include the statement on cigarette packages by November, according to the order issued Tuesday. It will also apply to any social media campaigns aimed at promoting cigarettes.

The corrective statements will state, among other things, that cigarette smoking causes on average 1,200 American deaths per day; that cigarettes are designed to create and sustain nicotine addiction; that low-tar, light, and natural cigarettes are no less harmful that regular ones; and that secondhand smoke causes disease and death in non-smokers.   

The statements are part of a 2006 injunction against major U.S. cigarette makers to “prevent and restrain” further deception of the American people regarding tobacco use, a Justice Department statement said.

Three major U.S. tobacco companies, R.J. Reynolds, Phillip Morris and ITG Brands, have been fighting to weaken and delay the statements since 2006.
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Mexico will respond to the latest U.S. proposals to rework automotive sector rules under a revised North American Free Trade Agreement (NAFTA) when ministers meet next week, Mexican Economy Minister Ildefonso Guajardo said on Tuesday.

Guajardo is due to meet U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland in Washington next Monday to push for a deal on NAFTA after more than eight months of talks to update the 24-year-old accord.

At the heart of the revamp is the United States’ desire to retool rules for the automotive sector in order to try to bring jobs and investment back north from lower-cost Mexico.

Mexico’s main auto sector lobby on Monday described the latest U.S. demands, which include raising the North American content to 75 percent from the current 62.5 percent over a period of four years for light vehicles, as “not acceptable.

Response will come next week

When asked whether he agreed with the automotive lobby, Guajardo said Mexico was still consulting with the industry over the matter and would respond to the proposal next week.

“We will bring a plan in response to the U.S. position,” he told reporters at a news conference in Mexico City.

The minister said it was too early to say whether the three countries could reach a deal in the coming days. If the negotiators were sufficiently “creative” and “flexible,” a successful outcome was probable, Guajardo added.

Tariffs are not part of discussion 

The minister was speaking a day after the Trump administration decided to extend by one month an exemption for Mexico and Canada to planned steel and aluminum tariffs.

Guajardo said Mexico would not accept the U.S. imposition of tariffs, and that his government could mirror U.S. policy to ensure Mexico did not become a “back door” to the United States for steel or aluminum imports from Asia in particular, he said.

He stressed, however, that the steel and aluminum dispute was completely separate from the NAFTA negotiations.

The minister noted that the three sides remained at odds over a number of issues, including U.S. demands to change dispute resolution mechanisms and to impose a sunset clause that could automatically kill NAFTA after five years.
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Algerian farmer Hassen Miri trudges through mud to inspect his durum wheat field, helping the oil-producing nation in its efforts to boost agricultural output and reduce food imports.

“Things are moving slowly but better than in past years,” said Miri, who has fields of cereals and vegetables in Bourkika, about 80 kilometers (50 miles) south of Algiers.

“I’m optimistic,” he said, after weeks of heavy rain relieved a long period of drought in the North African country.

Algeria, a member of Organization of the Petroleum Exporting Countries, has long neglected its farmers and focused on its oil and gas industry, which generates about 60 percent of state revenues.

But a crash in oil prices from above $100 a barrel in 2014 to below $30 in 2016 left the nation struggling to fund its $50 billion annual import bill and has prompted the government to look for ways to ease the strain on its coffers.

Emphasis on local production

With 20 percent of the import bill going toward food, the government has launched a drive to increase local production, seeking to encourage farmers with incentives such as low-interest loans and free vaccinations for livestock.

It is also expanding the use of irrigation to cover 2 million hectares in 2019 (7,720 square miles) from 1.3 million hectares now (5,020 square miles), officials say, helping farmers who rely on rains that can fail.

The government is building 15 new dams to add to the 80 existing ones to water cereals covering an area of 600,000 hectares (2,315 square miles), up from just 60,000 hectares now.

“Now Algeria is offering the agricultural sector with great support, with huge funds to help the production and to provide food for all Algerians,” said Mohamed Djahed, head of the parliamentary agriculture committee.

The government wants to boost output of wheat — one of the main items on the food import bill — to 5.3 million tons by 2022 from 3.5 million tons in 2017.

Algeria, one of the world’s biggest wheat importers, is expected to consume 10.55 million tons of the grain in the 2018-19 season, the U.S. Foreign Agricultural Service said.

Algeria also wants to double output for other products such as potatoes, milk and meat over four years.

In addition to promoting Algerian production, the government has drawn up a list of 851 items that it now bans from being imported, including some food products.

Bureaucracy’s effects

But government initiatives are taking time to feed through.

Official figures show the overall value of food imports fell by just 0.2 percent in the first quarter of 2018 compared with a year earlier, while the value of cereal and milk imports rose.

“Algeria has all the tools needed to promote production,” said an economics professor at the University of Algiers, asking not to be identified. “But, as usual, the implementation will take time because of bureaucracy.”

Nevertheless, farmers are responding to the government push.

Mohamed Amine Abid, who breeds dairy cattle, has increased his herd to 70 cows from 40 since starting up in 2013, helped by state aid that included an extra piece of land.

“Our objective is to develop the Algerian cow. We want it to be born in and raised in Algeria to get used to our climate,” he said.

The state budget is still stretched, even as oil prices have been recovering, so some government initiatives have been scrapped. But Prime Minister Ahmed Ouyahia said agriculture spending, worth about $2 billion this year, would not be cut in 2019.

However, analysts say providing aid is not sufficient to achieve the government’s goal of increasing agriculture’s share of economic output from 12 percent now, as long as youths are losing interest in the land and looking elsewhere for jobs.

“We need to win the food security battle,” said farmer Ahmed Moussaoui, 50.
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With cities facing their fastest growth ever, the head of the United Nations’ agency for urban development is on a mission — to revitalize the organization and ensure people, particularly women, are central to future planning.

Maimunah Mohd Sharif, the former mayor of Penang who took up the role of UN-Habitat executive director in January, said cities need to more liveable for women to succeed if they are home, as expected, to 70 percent of the population by 2050.

But first, she said, she had to put UN-Habitat back on track to ensure it could help meet the United Nations’ latest set of global goals calling for cities to become inclusive, safe, resilient and sustainable by 2030.

For UN-Habitat has struggled in recent years to attract funding from national governments — its primary donors — with the Nairobi-based agency receiving just $2.5 million of a  two-year $45 million budget for core operations.

“Before I see change in cities I want to see change in UN-Habitat to make sure it is relevant,” Sharif, a professional planner, told the Thomson Reuters Foundation on Monday on the sidelines of a workshop on sustainable cities.

Since Sharif took office she has stressed that the U.N. General Assembly has adopted a resolution on strengthening UN-Habitat as the organisation’s focal point on sustainable urbanization and human settlements and that is her aim.

Sharif said one of her most immediate challenges is to reform UN-Habitat so that it can be a global driving force in implementing the New Urban Agenda (NUA), a 20-year-road map adopted by global leaders in 2016.

This sets non-binding goals such as developing cities that do not harm the environment, redeveloping informal settlements with residents involved and reining in urban sprawl.

Part of this includes working on a new six-year strategic plan to address urban challenges such as income inequality, affordable housing, climate change and resilience.

Sharif said making cities more liveable for women is one ofbher priorities because the benefits will be far-reaching. “If we plan the city for a woman, we plan it for all,” Sharif said.

“If pavements are more accessible for women with children, it’s also good for men and it’s also good for people with mobility issues.”

Sharif said participatory budgeting, in which ordinary people have a say in how city funds are spent, is an effective way to make sure women are included in key planning decisions.

Sharif added that urban planning was not just a “check-box” of building the school, the park, the road but you need to create “inclusive communities” involving the public, public sector and private companies.

“When you ask people what they want, you can make good decisions,” she said.
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Russia’s Gazprom said on Monday it had completed the sea portion of the first line of the TurkStream offshore gas pipeline across the Black Sea.

Gazprom, which plans to complete the pipeline in 2019, said in a statement that 1,161 km, of pipe had been laid since it began construction last year.

The second line, designed to ship gas to south European countries such as Greece, Bulgaria and Italy, will be laid in the third quarter of 2018, the company said.

Russian Energy Minister Alexander Novak said this month that Turkey’s approval for Gazprom’s onshore portion of the TurkStream pipeline’s second line was still pending.

Moscow, which relies on oil and gas revenue, sees new pipelines to Turkey and Germany – TurkStream and Nord Stream 2 – as crucial to increasing its market share in Europe.

 
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Mexican companies are delaying investment, bringing forward imports to protect against currency swings and warning the next few months could be volatile as the NAFTA trade talks reach a climax and July’s presidential election nears. 

From bakers to retailers and construction firms, more than a dozen of Mexico’s biggest companies cited concerns over NAFTA and the election and issuing conservative guidance in recent weeks, despite economic data pointing to an uptick in Latin America’s second-largest economy.

Grupo Bimbo, the world’s largest bread maker, said it was delaying capital expenditure and tightening costs due to a volatile economic environment amid the presidential campaign.

Though no major company mentioned him by name, the prospect of a government led by left-winger Andes Manuel Lopez Obrador is beginning to unsettle markets. Lopez Obrador is ahead by double digits in all major polls and the peso fell 2 percent in just one day in April, hit by political risk.

“These are not ‘business as usual’ times: there’s much at stake for Mexico in this election,” Bimbo’s Chief Executive Daniel Servitje told an earnings call. “The current situation…demands a cautious stance.”

Exchange rate uncertainty pushed retailer Liverpool to order all the imported products needed for its discount clothing stores Suburbia for the second half of the year.

Its Liverpool department stores have covered 50 percent of imported merchandise needed for the second half of 2018 and even the first half of 2019, the company said.

Juan Fonseca, head of investor relations at bottler and retailer Femsa, one of Mexico’s largest companies, said encouraging signs from falling inflation and wage growth were being overshadowed by the fragility of the peso due to political risk.

“Between now and the election, clearly things are going to be volatile,” he told an analyst call. “There are more data points that would support a cautious case.”

Preliminary gross domestic product (GDP) data for the first quarter on Monday showed year on year growth of 1.2 percent, driven by a jump in the service sector.

Analysts predict Mexico’s gross domestic product will grow 2.3 percent this year as manufacturing activity improves.

However, Scotiabank analysts warned in a recent report that NAFTA and the election could have a significant impact on economic performance.

Tough end to the year

Political leaders from the United States, Mexico and Canada say an initial deal to renew the North American Free Trade Agreement (NAFTA) is close but issues remain. Negotiations in Washington have been paused until May 7.

Mexican companies fear that scrapping the trade pact, as U.S. President Donald Trump has threatened to do, or renegotiating the deal in a way that hinders the Mexican economy would hit their earnings. Around 80 percent of Mexican exports go to the United States.

Executives at Unifin – which leases equipment and vehicles to mid-sized manufacturing, services and construction companies – said clients postponed business decisions every time they saw news suggesting cancellation of NAFTA.

Mexican cement companies Grupo Cementos Chihuahua and Elementia both warned of a tough second half of the year. 

Elementia said government spending on projects was “practically nonexistent” and the private sector was nervous.

“Consumption might stay, but personally, I don’t think it will grow in the second semester,” CEO Fernando Benjamin Ruiz said.

Several companies, including GCC and Mexican bank Banregio, linked their guidance to the outcome of NAFTA and the election.

Paper maker Kimberley Clark de Mexico warned that volumes could be hit by the uncertainty, while airlines Volaris and Aeromexico said it could change customers’ behavior.

The chief executive of Monterrey-based bottler Arca said that while the economy remained very robust in northern Mexico, a good year depended partly on the fate of the trade pact.

“If NAFTA is finally agreed…we definitely will see a good year in volume,” Francisco Rogelio Garza said.

Analysts at MRB Research and Barclays suggested, however, that markets may not yet be pricing the risks of Lopez Obrador winning the presidency.

The former Mexico City mayor, running on an anti-corruption platform, has threatened to cancel a project for a $13 billion airport in the capital and review a major energy reform.

A victory by Lopez Obrador, known as AMLO, would spell volatility in equities and the peso, Barclays said, adding it would be worrying for sectors from infrastructure and banks to construction.

“The assumption that AMLO’s bark is worse than his bite has been drifting into an even more complacent argument: that a populist leader is no bad outcome in the short term, implying fiscal thrust and more growth,” MRB Research said.
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