Source link : https://theamericannews.net/america/mexico/a-u-s-reset-with-mexico-is-still-possible/
Mexican President Claudia Sheinbaum, who was inaugurated on October 1, has come into office with more political power than any Mexican leader since the country’s transition away from single-party rule in the 1990s. As the protégée of and successor to Andrés Manuel López Obrador (also known as AMLO), she received a record 35.9 million votes—nearly 60 percent of those cast for the top office—and effectively controls a two-thirds supermajority in Congress. Her party, Morena, governs 22 of the country’s 31 states, enough to ratify constitutional reforms. And the recent overhaul of Mexico’s courts, whereby all judges will be elected rather than appointed, will likely consolidate Sheinbaum and her party’s control over the judicial system, as they will choose the vast majority of candidates on the ballot.
Yet economic headwinds will temper this political gift, as expectations for fast and meaningful action on wage increases, a greener energy grid, expanded public benefits, and other issues will likely outpace Sheinbaum’s ability to deliver. Hopes that Mexico could become a hub for U.S. manufacturing and attract more foreign direct investment are diminishing because of a lack of infrastructure, the growing scarcity of energy and water, deteriorating security, and rising uncertainty for businesses given the court overhaul and further plans to do away with independent regulators. Sheinbaum faces a cash squeeze as the economy slows and public coffers empty.
Hanging over these challenges, moreover, is the U.S. election, the outcome of which will determine the future of bilateral cooperation on security, migration, and commerce. No matter who enters the White House in January, there is an opportunity—albeit a narrow one—for a reset with Mexico, one that could make both countries safer and more prosperous rather than beset with crises and consistently at odds with each other.
ANXIOUS ONLOOKERS
Over the last few years, near-shoring, or efforts to relocate U.S. business operations to neighboring countries, has boosted Mexico’s economy. For U.S. manufacturers in particular, the country’s geographic proximity, free trade access, and a wealth of industrial suppliers make Mexico an attractive location for companies looking for alternatives to China. In 2023, Mexico surpassed both China and Canada to become the United States’ top trading partner, with over $800 billion worth of goods crossing the border. Rising international corporate spending and foreign direct investment pushed growth above three percent for the last three years, raising hopes that Mexico could finally break out of its more than two decades of mediocre economic performance. But Sheinbaum’s political and economic policy proposals, which have come into clearer focus since her inauguration, are threatening to undo that progress.
At first blush, Sheinbaum’s administration does look to be more private-sector friendly than the last. She has filled her cabinet with technical experts and intellectuals. Her public infrastructure plans, laid out in meaty PowerPoint decks shared at international investor conferences, would improve Mexico’s logistics and infrastructure with new roads, rails, ports, and airports. A climate scientist by training, she recognizes the need for a transition toward green energy, an about-face from the previous administration, which doubled down on fossil fuels and refineries.
Economic headwinds will temper Sheinbaum’s political advantages.
Nonetheless, whether because of true beliefs or political necessity, she has pledged to retain elements of the AMLO administration that are not friendly to the private sector, including measures that favor state-owned companies, curb legal guarantees for private companies, and weaken or eliminate many of the independent checks and balances in Mexico’s political system. She is committed to a large and expanding role for the government in the economy. She has vowed to keep the majority of power generation and distribution, even if greener than in the past, in government hands—an endeavor that will cost the state an estimated $40 billion over the next five years. She has promised public support for some two million farmers. She has vowed to continue—and even expand—an array of state programs, including scholarships, internships, and pensions for Mexico’s students, workers, and elderly. And she has fully backed Mexico’s recent judicial reform, which will require all judges—filling nearly 7,000 posts—to be elected by voters rather than appointed by the state, in the name of democratizing the courts. With the long lists of candidates nominated mostly by her office—or her party, which also controls Congress—many in business and across society worry about the neutrality and fairness of verdicts to come.
The vast security challenges that Sheinbaum has inherited have also left investors and policymakers in the United States and elsewhere anxious. Cartel-fueled violence and instability surged under the AMLO administration: over the last six years, murder rates hovered near all-time highs, and extortion rates, forced disappearances, and human trafficking climbed. Organized crime has strengthened its hold on more of the country—and on its politics. Recent elections saw record levels of electoral violence, with over three dozen candidates killed and dozens more bowing out after receiving threats.
Sheinbaum has pledged to take a stronger stance on law enforcement than did her predecessor. She has appointed Omar García Harfuch, a career police officer who was credited with nearly halving Mexico City’s homicide rate as the capital’s top law enforcement official, as security minister. In his new position, he has presented a plan to concentrate security forces and step up intelligence efforts to capture and prosecute criminals and dismantle crime rings in Mexico’s most violent cities. Yet Sheinbaum has also supported the recent constitutional change that placed the 130,000 or so members of the National Guard under the army’s control. This militarization of security runs counter to the strategies of civilian policing and community building that not only were successful in Mexico City under García Harfuch but also have helped reduce crime in other places including Colombia and the United States.
BIG DREAMS, EMPTY COFFERS
Sheinbaum’s early agenda is already facing political and economic difficulties. With the new president having voiced full-throated support for AMLO’s constitutional and judicial reforms, overseas investors have stopped coming—and domestic investment, too, is running scared. According to The Wall Street Journal, some $35 billion in foreign capital—nearly equal to Mexico’s total 2023 haul—sits waiting on the sidelines as foreign firms pause their investment plans in the country. The peso has slid by around 15 percent since Sheinbaum’s win. And the International Monetary Fund, the World Bank, and the Organization for Economic Cooperation and Development have all downgraded their 2024 and 2025 growth expectations for Mexico as a result.
The shabby state of Mexico’s public finances will put another brake on the president’s ambitions. AMLO’s profligate spending on programs such as cash transfers and pet infrastructure projects has left Sheinbaum little financial wiggle room to address investor and everyday citizen concerns. During the AMLO administration, spending increasingly outpaced revenues, and the fiscal deficit climbed to a 30-year high of nearly six percent. AMLO also emptied Mexico’s stabilization and sovereign wealth funds and numerous other trusts earmarked for the arts, sciences, and public health to pay the country’s bills, leaving Sheinbaum with few rainy-day funds. Adding to Sheinbaum’s financial woes is the pending fiscal bomb posed by Pemex, the state-owned energy company, which is set to cost the Mexican government another $18 billion—three times the state’s health budget—in 2025.
Sheinbaum has tried to reassure domestic and international investors with promises to halve the fiscal deficit—but has failed to lay out how, exactly, she would do so. She has promised not to raise taxes, even as she promotes ambitious infrastructure and energy plans. Sheinbaum also faces the challenge of maintaining a fractious political coalition that has historically been knitted together with patronage spending.
And Mexico’s economic engine is sputtering in ways that go beyond Sheinbaum. Foreign interest in Mexico was already ebbing because if weak public infrastructure, electricity scarcity, bureaucratic red tape, and crime. Of the celebrated tens of billions of dollars coming into Mexico in 2023, very little was new money or from companies not already on the ground and used to operating in the country’s particular environment.
Without economic growth, Sheinbaum’s political strength could turn into a liability. Pressure from within her party to do more and do it fast could further undermine foreign and domestic investment, tanking the peso and the broader economy—and with them, her presidency. And unlike her predecessors, Sheinbaum could face a public reckoning halfway through her tenure, with a new recall referendum, introduced in the country’s 2019 constitutional reform, giving voters the means to kick her out of office before her term is up.
LOOMING CROSS-BORDER DISPUTES
Sheinbaum will also have to navigate politics and policies to the north. Regardless of who takes office in Washington in January, the United States and Mexico will have to engage in difficult discussions and negotiations over commerce, security, migration, and a host of other issues. Any U.S. administration will doubtless harbor concerns over the future of trade, security, Mexico’s political stability, and the specter of China in the bilateral relationship. And with a review of the U.S.-Mexico-Canada Agreement (USMCA), the free trade deal reached under the Trump administration, due in 2026, the future of North American economic integration may well be at stake.
Until now, the Biden administration has been fairly forgiving of alleged violations of the USMCA, given the electoral importance of migration and Mexico’s vital role in limiting crossings at the United States’ southern border. But that leniency could end if a new U.S. administration chooses a harder line. Moreover, U.S. businesses and investors are increasingly anxious about the possibility in Mexico of government expropriation, bans on genetically modified corn imports, and politicized court verdicts—concerns that could push the United States and Mexico into trade disputes.
Migration will continue to bedevil the U.S.-Mexican relationship.
Although both Donald Trump and Kamala Harris could, as president, take firmer positions on trade with Mexico, their approaches would differ. Trump sees tariffs as a general fix, promising 60 percent hikes on all Chinese goods and ten to 20 percent on everything and everyone else, including free trade partners. Mexico should theoretically benefit from the faster and harder U.S.-Chinese trade decoupling that would likely take place under Trump—yet the former U.S. president also repeatedly rails against U.S. companies expanding into Mexico, most recently threatening John Deere with 200 percent tariffs should it move some equipment manufacturing from Iowa south of the border. His punitive, unilateral, and often company-specific policies could limit Mexico’s economic upside.
Given its commercial and trade dependence on the United States, Mexico also remains vulnerable to Trump’s playbook of wielding tariffs as a negotiating chip to extract concessions from other countries. During his first term, Trump’s threats to levy 25 percent tariffs on steel and aluminum led Mexico to agree to receive and hold tens of thousands of migrants awaiting their U.S. asylum hearings in what became known as the Remain in Mexico program. If Trump wins, Sheinbaum will need to prepare for similar escalating demands.
Harris, too, does not seem inclined to enhance U.S.-Mexican trade, having voted against the USMCA as a senator in early 2020. Yet she is more likely to work to improve the agreement than to disregard it. She has said she will focus on strengthening what she sees as weak labor and environmental provisions in the 2026 USMCA review. Harris will also likely continue to enforce the 2022 Inflation Reduction Act, which contains, among other things, subsidies for North American electric vehicles, including those produced in Canada and Mexico. This measure has been a boon for Mexico, as nearly one-third of its exports come from automobiles and their parts, and inclusion in U.S. industrial policies ensures that the country will remain an essential part of the North American auto industry.
THE MIGRATION QUESTION
Migration will continue to bedevil the bilateral relationship. Unauthorized arrivals at the U.S.-Mexican border have fallen from record highs in 2023, largely as a result of steps taken by Mexico after closed-door negotiations in December 2023. In what has become known as the “carousel,” Mexican authorities pick up tens of thousands of migrants in the north of the country and bus them south. This stopgap solution, however, is already overwhelming Mexican migration authorities, who have the capacity to intercept just a small percentage of the hundreds of thousands of migrants who enter the country each month. Both Trump and Harris would likely continue looking to Mexico to help manage the flow of migrants toward the border.
Harris’s approach would entail less pressure on Mexico to enforce U.S. immigration rules, building on the Biden administration’s current mix of tough restrictions at the border and expanding legal pathways to migration. She has promised to revive the bipartisan Senate border security bill—which Trump pressured Republican senators to kill in February—that included billions of dollars for new Border Patrol agents, asylum officers, and expanded detention facilities alongside 250,000 new family- and employment-based visas. And she is likely to keep in place the Temporary Protected Status programs that allow hundreds of thousands of Venezuelans, Salvadorans, Haitians, and others to legally stay in the United States.
Trump would very likely take a much harder line against migrants on their way to or already in the United States, looking to revive the restrictions enacted during his first term. He could reduce the numbers of green cards and high-skilled and temporary visas available, and cap refugee admittances. He could end Temporary Protected Status and other visa programs that legally shelter 2.7 million migrants in the United States today. He would likely go even further than he did in his first term, too, adopting a migration strategy focused on expulsions. On the campaign trail, Trump has repeatedly promised to carry out the “largest deportation effort in American history,” which would involve expelling the 11 million undocumented migrants in the United States by mobilizing local police forces, the National Guard, and Immigration and Customs Enforcement agents. Experts doubt the U.S. government’s capacity to find and expel such a large number of migrants, many of whom have been living in the United States for decades. But even if just partially successful, Trump’s plans would disrupt the lives of millions, including some of the nearly 5.5 million U.S. citizens under the age of 18 who have an undocumented parent, as well as many in the communities in which they all live and work.
These deportations would affect Mexico, too, as just under half the undocumented migrants in the United States hail from there. Sheinbaum would have to develop a plan to absorb hundreds of thousands of displaced citizens, many of whom may have not lived in Mexico for decades. In the long term, the influx of people could boost Mexico’s economy. But during Sheinbaum’s presidency, the move would undercut the some $63 billion that migrants in the United States send back to Mexico each year, adding to the country’s financial woes. Moreover, the wave of arrivals would strain Mexico’s already limited social and economic infrastructure—and could animate latent anti-American sentiment in Mexico’s politics, making cooperation on other issues all the more difficult.
CRACKING DOWN ON CRIME?
The United States and Mexico face intertwined security threats, but Sheinbaum and her new counterpart in the White House will lead governments with diminishing capacity to address them cooperatively. During his six-year term, AMLO’s single-minded policy focus on the socioeconomic root causes of crime, along with his general distrust of the United States, led him to undermine or end most formal bilateral security programs. He restricted U.S. law enforcement agent access, disbanded their counterpart police units, ended joint intelligence collection, and replaced the decadelong Mérida Initiative security framework, aimed at cooperating in the fight against organized crime, with a substitute that is poorly funded and less comprehensive. In contrast, Sheinbaum has promised new law enforcement measures alongside expanded violence prevention and other social programs for at-risk youth. This opens space for increasing bilateral cooperation if the next U.S. president is so inclined.
Joint action may be difficult under Trump, who spins out plans to “wage war” on Mexico’s cartels, equating them to the Islamic State (also known as ISIS). He talks of bombing fentanyl labs, sending special forces to assassinate drug kingpins, setting up naval embargoes, and implementing cyber-strikes. Few to no words are given to bilateral cooperation or intelligence gathering. Trump’s go-it-alone approach would likely limit the ability to confront organized crime, given the sophistication of these criminal enterprises and their economic penetration in many parts of Mexico.
Harris’s platform is decidedly less inflammatory and unilateral. Drawing on her experience as California attorney general, she brings a prosecutor’s toolkit of using courts and building legal cases to take down criminals, and she supports cooperation with Mexico on intelligence gathering, wiretapping, asset freezing, prosecution, and other measures that are needed to dismantle expansive criminal networks. She has indicated that she would give the Department of Justice more resources to crack down on Mexican cartels and stem the flow of fentanyl into the United States, and that she would put pressure on China to crack down on the export of precursor chemicals.
A MUTUALLY BENEFICIAL PARTNERSHIP
The United States benefits immensely from a safe and prosperous Mexico, given the two countries’ expansive commercial relationship and critical supply chain linkages, the familial and community connections that span the border, and the shared dangers of drugs and crime. The United States also faces significant risks from a less stable, less safe, and slower-growing neighbor, as Mexico’s challenges inevitably reverberate across the border.
Washington can mitigate the worst of these risks for itself and for Mexico by cooperating with Sheinbaum’s government when possible. On the security front, joint efforts should focus on stanching the flow of fentanyl chemical precursors from China and elsewhere as they pass through both Mexican and U.S. ports on their way to clandestine Mexican labs. The two countries should restrict the financial access of the multibillion-dollar criminal businesses that move their money through both U.S. and Mexican banking systems. Reinstating intelligence coordination and joint operations with specialized units would build trust between the two neighbors and lead to better outcomes in the fight against organized crime. And the new administrations should revisit the overarching security framework, expanding the remit and ambition of bilateral programs to help make citizens on both sides of the border safer.
The two countries should also see migration as an opportunity for collaboration rather than a lightning rod for conflict, as both nations struggle to absorb the millions that come to and often stay within their borders. With migration trending upward as the result of political instability, economic uncertainty, and climate change, both countries must make domestic modifications: the United States needs to reform its immigration laws and expand pathways for legal migration, and Mexico needs to invest in the state agencies that engage with migrants and work to integrate them into its economic and social fabrics. To incentivize these moves within Mexico, Washington can funnel resources to help build the capacity of Mexico’s immigration agencies. It can also increase development aid for communities absorbing new residents.
The United States benefits immensely from a safe and prosperous Mexico.
The United States and Mexico would also benefit from a more systematic regional approach to migration—one that would manage the movement of people in humane ways and speed their legal processing in both countries. This could include building processing centers in countries sending migrants—including Mexico—so individuals don’t need to make the dangerous trek to the U.S.-Mexican border to seek asylum or other legal entry. These centers could also adjudicate other legal pathways, including humanitarian parole and agricultural work visas.
Both countries would also fare better with deepened economic ties. But for Mexico to actually be a viable arena for U.S. commercial interests in the long term, it needs to be a place where the rules are fairly enforced. The United States needs to hold Mexico to account, leaning into the USMCA to enforce market rules and responsibilities by activating formal consultations and dispute settlement panels. And the new U.S. government should raise its voice against other reforms waiting in the wings, in particular the Mexican government’s efforts to gut the autonomy of independent regulatory agencies overseeing telecommunications, energy, and antitrust efforts, as such moves would further undermine the fairness of the economic playing field and potentially violate the USMCA.
In the upcoming USMCA review, the United States, Mexico, and Canada will need to address the influx of Chinese exports, investment, and emerging production in strategic industries including electric vehicles, telecommunications, semiconductors, aerospace, pharmaceuticals, and advanced electronics. By requiring a higher percentage of inputs to be from North American producers for tariff-free access, creating a North America–wide review process for foreign investments in sensitive sectors, and implementing coordinated tariffs on inputs and finished goods, a revised agreement can help North American production and supply chains survive and prosper. Without a resolution in 2026, the USMCA will have to be renewed every year until it ends in 2036, putting its trade benefits and investment protections for all three member countries on shaky ground—and ending the nascent promise of near-shoring.
Sheinbaum will pursue a policy agenda based on her inclinations, her ambitions, and her domestic constraints. But the United States can make it clear that there will be consequences if she continues down a path that is setting Mexico up to be a less reliable economic, commercial, security, and democratic player. Washington should not bemoan its faltering relations with Mexico City just yet; whoever wins November’s election will have opportunities for détente, and even partnership.
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Publish date : 2024-10-20 17:24:00
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Author : theamericannews
Publish date : 2024-10-21 21:05:40
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