(Redesigns, additions of details, context, analysis)

By Isabel Woodford

MEXICO CITY, Oct 14 (Reuters) – Mexico’s president on Friday replaced a top trade negotiator as part of a major overhaul at his economy ministry that leaves a team inexperienced to tackle a fraught and potentially costly trade dispute with the United States and Canada.

Alejandro Encinas Najera, a relatively unknown labor ministry official whose father is deputy interior minister, replaced Luz Maria de la Mora as deputy economy minister for trade, the government said.

The move stunned economic analysts and came a week after de la Mora’s boss, Economy Minister Tatiana Clouthier, resigned and was replaced by Raquel Buenrostro, head of the tax administration.

“This is a very bad sign for the economy,” said Gabriela Siller, economist at BANCO Base. De la Mora “was the one who had all the experience, and was in all those discussions to get everything resolved.”

The upheaval has been accompanied by the sacking of at least 12 other economy ministry officials in recent days, a government source said. The ministry declined to comment.

Buenrostro rose to prominence by increasing government tax revenue from big business, ending years of leniency with powerful corporations. But neither she nor Encinas had worked on the trade dispute, which erupted after US companies challenged President Andres Manuel Lopez Obrador’s nationalist energy program.

In July, the United States demanded settlement talks on the grounds that Lopez Obrador’s energy policies discriminated against American companies and violated a North American trade pact.

However, despite his trade inexperience, some analysts hope Buenrostro has more political clout than his predecessor and could pressure government energy nationalists to give ground, reducing the risk of a harmful tariff dispute.

“THE HARDLINERS WON”

She and Encinas likely have “more credibility with the energy ministry and the president” than the previous duo, said Luis de la Calle, a former Mexican trade official, pointing to a statement from the economy ministry that said which the reshuffle would allow “better coordination” across departments.

“It does not depend so much on negotiations with the United States as on internal negotiations inside Mexico,” he said.

After his resignation, Clouthier told the Mexican newspaper La Jornada that there was a “pack” around the president and that the energy ministry “does not want to give in anything”.

Under the trade agreement between the United States, Mexico and Canada, if the controversy is not resolved during consultations, a panel may be appointed to examine the claims.

Sources told Reuters this month that Washington and Mexico City, unwilling to escalate the trade dispute amid soaring inflation, had extended the initial consultation window by 75 days.

Lopez Obrador also presented a bullish front, insisting on Friday that U.S. officials had “decided not to take the step to a panel” and were seeking a deal.

However, the United States can always choose to do so if the talks do not come to a satisfactory conclusion, and many analysts in Mexico have seen the reshuffling of the Ministry of Economy as a sign that Lopez Obrador would not be willing. to compromise on energy.

“I guess the diehards won,” said Andres Rozental, Mexico’s former deputy foreign minister. (Reporting by Isabel Woodford, Adriana Barrera and Dave Graham; Writing by Brendan O’Boyle; Editing by William Mallard)