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Advantage Mexico
With so many other international stories dominating the news these days – Russia’s war in Ukraine, US-China tensions, Iran’s nuclear program, etc. – it’s easy to lose track of more positive stories. And when it comes to Mexico, the headlines suggest the country is struggling.
And I could write that story too. In most media, today’s Mexico conjures images of violent drug cartels and other organized crime groups, trouble at the US border, or large-scale protests led by an opposition that accuses the country’s president of a power grab that threatens democracy.
Mexico has its share of problems. But today, I want to give you three reasons for optimism that, politically and economically, Mexico is strong and getting stronger.
The China substitute
First, Mexico’s economic success remains closely tied to economic growth in the United States. (In 2022, Mexico’s total trade with the state of Texas was five times higher than its total trade with all of Latin America.) Over the years, that’s been a mixed blessing. When the US economy weakens, Mexico’s export revenue takes a hit. There are fewer remittances flowing south from Mexicans working in the United States. There are few American tourists pumping dollars into Mexican cities, towns, and businesses.
But over the decades, the US economy has remained strong and is currently running hot. Even with high inflation and rising interest rates, the US job market is strong, consumers are spending, and pandemic-weary tourists are traveling.
Mexico’s exports are surging. The country’s consumer confidence is close to its highest point in a generation. Add the reality is that the war in Ukraine has put strong upward pressure on global energy prices, boosting Mexico’s oil revenue. As the war grinds on, that advantage is likely to continue.
But the factor that matters most for coming years is souring US sentiment on relations with China. The Biden administration, both Democratic and Republican members of Congress, and many US governors are pushing for a significant national security and strategic decoupling from China and Chinese companies. US businesses are increasingly less confident they can navigate complicated US-China politics, abrupt changes inside China like the 180-degree turn on COVID policy, and other factors to continue to do profitable business in China.
Who benefits? Mexico. Particularly as “nearshoring” becomes a much more familiar word for many Americans. Nearshoring is the practice of shifting investment in manufacturing, production, and business operations closer to home to avoid the problems that come with both political risk and dangerously long supply chains.
Mexico already has the world’s 15th largest economy. While China, much of Europe, and Japan are aging, Mexico also has excellent demographics. Its population tops 130 million; its median age is 29.
A cost-conscious populist
Then there’s the country’s president. Andrés Manuel López Obrador has his fans and his detractors. But overall, he’s remarkably popular. After four years in office, his approval rating stands at 63%. How has he accomplished that? Mexico’s chief executive has crisscrossed the country by car and commercial airlines, visiting people and places, particularly in southern states, where national politicians are rarely seen.
But, talented populist though he is, he hasn’t bought support by launching a state spending spree. Even after the pandemic, Mexico’s debt-to-GDP ratio still stands at a healthy 50%, because the leftist López Obrador, aka AMLO, has confounded critics by both expanding the country’s tax base and keeping government spending in check.
Nor does Mexico’s president face the problem of balancing relations with multiple other countries. AMLO understands that his country’s giant neighbor is its primary source of both opportunities and challenges, and he’s invested in pragmatic relations with both Donald Trump and Joe Biden. His economic ambitions center on strengthening and expanding the USMCA trade agreement (NAFTA 2.0) rather than on hedging bets on Europe and Asia.
Strong institutions
The one area where AMLO is picking a fight that won’t help Mexico is on the question of judicial oversight of government. At the moment, he’s going after Mexico’s National Electoral Institute, which administers elections, by trying to cut 80% of its funding. This plan has filled Mexico City streets with hundreds of thousands of angry protesters, who warn that if he succeeds, AMLO would undermine Mexico’s ability to hold free and fair elections.
But the president isn’t going to succeed. The country’s Supreme Court is going to rule against him, and though AMLO can (and probably will) call on his own protesters to block traffic, Mexico’s governing institutions are plenty strong enough to keep the country moving forward.
In fact, that’s the lesson from Mexico’s presidential election of 2006, which AMLO lost by the smallest of margins and then rallied his supporters to occupy the center of Mexico’s capital for many weeks. But as I wrote in September 2006, the country’s political institutions absorbed that shock with no great difficulty. Politics continued. The currency remained stable. The economy moved forward.
AMLO has continued to wage war on a political elite he believes is plagued with corruption and cost him victory 17 years ago. But now, as then, Mexico is politically mature enough to handle challenges even larger than we now see in the president’s standoff with courts.
Finally, AMLO has given no indication he wants to remove presidential term limits from the country’s constitution, and unlike former US President Donald Trump and Brazil’s former President Jair Bolsonaro, he and his party are genuinely popular and have no need to contest the next election outcome with violence. And all of AMLO’s likely successors agree with the merits of nearshoring and deeper integration with the US, reinforcing the country’s long-term economic stability.
Make no mistake: Mexico will continue to face major challenges in the years ahead. Mexico must continue to develop its infrastructure, energy, and water supplies to fully benefit from nearshoring opportunities. Crime, corruption, and the need to manage shifting US border politics will remain formidable obstacles to progress. But advantages both external and internal provide a solid foundation for progress.A protester wears a mask in the shape of corn during an anti-GMO rally in Mexico City.
What We're Watching: US-Mexico corn fight, Chinese crackdown
US and Mexico spar over corn
Mexico and the United States are on a collision course over an issue of serious economic concern to farmers on both sides of the border: Mexico’s imports of US corn. Mexico is the world’s second-largest importer of corn (after China), and much of it comes from the country’s giant neighbor to the north. Before he became president in 2018, candidate Andres Manuel López Obrador promised to halt the import of genetically modified corn by January 2024 over fears that GMO seeds would threaten Mexico’s own corn varieties. A total ban on GMO corn would cut US corn exports to Mexico by half, with major fallout for the US agriculture sector. The Trump and Biden administrations have both tried to bargain with López Obrador over this question, in part by reminding him that US corn is a major source of Mexico’s animal feed and that the quantities sold by the US would be impossible to replace. But so far, Mexico’s president hasn’t budged. With the deadline for action looming, Washington threatened legal action on Monday under the terms of the USMCA trade deal, which was signed by the US, Mexico, and Canada in 2020.
China tracks down protesters
The anti-government protests over China’s zero-COVID policy have subsided for now — except for an overnight flare-up in Guangzhou — but when it comes to tracking down those responsible, Chinese authorities are just getting started. Several protesters in Beijing have reportedly been contacted by people identifying themselves as police and demanding they report to local precincts to testify about the demonstrations. Protesters also say they are frantically scrubbing their online histories to avoid being swept up in a fresh crackdown. The authorities, of course, have to tread carefully — it’s important to show the fist against protesters who called for Xi Jinping’s ouster, but as my colleague Willis points out, “the ground is very dry right now, and any spark could set things aflame again.” To try to dampen things a bit, authorities in some cities have relaxed — but not eliminated — the COVID quarantine guidelines and ramped up vaccination campaigns for the vulnerable elderly. But the world’s second-largest economy and biggest autocracy will continue to wrestle with the tradeoffs between public health, popular outrage, economic damage, and political power.Visitors walk past an image of President Xi Jinping holding a ballot ahead of the 20th National Congress of the Communist Party of China in Beijing.
What We’re Watching: China’s party congress, US-Mexico migrant deal
China's party is having a party
China's ruling Communist Party kicks off its 20th Congress on Sunday. By far the most-followed event in Chinese politics, the CCP will give itself, as always, a (glowing) report card and lay out how it'll govern China until 2027. All eyes will be on Xi Jinping, a shoo-in to get a precedent-shattering third term as CCP secretary-general, paving the way for him to become China’s leader for life. What's more, Xi is also expected to adopt the symbolic title of “Helmsman,” putting him at the same level as Mao Zedong. Perhaps even more importantly, by the end of next week, we'll know the composition of Politburo's elite Standing Committee, whose seven members — including Xi himself — have the final say on major political, economic, and social issues. If the bulk of them are Xi loyalists instead of technocrats, that'll be a signal that he prioritizes political control over the structural reforms China needs to fix its big problems. Finally, keep an eye out for the order in which the seven men step onto the stage of the Great Hall of the People in Beijing. If none of them is in his mid-50s and stands close to Xi, that’ll mean he hasn’t picked a successor yet.
Biden to Venezuelans: Steer clear of Mexico border
Under a new US-Mexico agreement, undocumented Venezuelan asylum-seekers who are caught crossing into the US from Mexico will be sent back across the border. At the same time, however, Washington will now grant temporary residence and emigration flights to 24,000 Venezuelans who have applied for asylum from their home country and have a sponsor in the US. Since 2018, six million have fled political repression and economic collapse in Venezuela, making it one of the world’s worst refugee crises. Many of them have undertaken dangerous journeys on foot through Colombia, Central America, and Mexico. Until now, Washington has allowed Venezuelans to remain in the US while their asylum cases were reviewed. But with record numbers of undocumented migrants arriving at the US southern border, and midterms fast approaching, the White House is utilizing the controversial Trump-era Title 42 provision that allows officials to swiftly expel migrants who arrive without papers.This article comes to you from the Signal newsletter team of GZERO Media. Sign up today.
A natural gas pipe in front of EU and Russian flags.
What We're Watching: Russia-EU pipeline repairs, AMLO in the (White) House, Sri Lanka's new leader
Will Russia turn the taps back on?
“Trust us,” Russia is saying, “we’re just doing routine maintenance.” Moscow has just shut off its Nord Stream 1 pipeline, a major source of natural gas for Germany, for 10 days of summer repairs. Annual checkups to these pipelines are normal, but this is no normal year. Berlin worries the Kremlin might leave the pipes closed as a way to retaliate against the EU for the bloc’s Ukraine-related sanctions. Nord Stream 1 carries about 55 billion cubic meters of gas annually to Germany, equaling about half of the country’s yearly consumption. If Moscow keeps the line shut, Europe would struggle to store up enough gas supplies ahead of next winter. Natural gas prices in Europe are already soaring, and although the EU is moving to wean itself off of Russian energy, any further shortfalls would further stoke already-high inflation, with unpredictable political consequences across the continent. Putin, of course, knows this. Keep an eye on that “closed for repairs” sign hanging on Nord Stream 1.
Biden meets AMLO
Mexico’s President Andrés Manuel López Obrador, popularly known as AMLO, visits the White House on Tuesday for a sit-down with US President Joe Biden at a time when ties are tense. López Obrador has recently irked the Biden administration by calling US support for Ukraine a “crass error” and by skipping the US-hosted Summit of the Americas because the White House didn’t invite the authoritarian leaders of Cuba, Venezuela, and Nicaragua. Washington, meanwhile, has irritated AMLO with criticisms that he’s undermined the independence of some of Mexico’s governing institutions and hasn’t done enough to protect journalists’ lives. Still, the two men will try to make progress on two key issues. On immigration, Mexico still allows the US to deport non-Mexican migrants back into Mexico under the controversial Title 42 policy, but in exchange AMLO wants Biden to authorize more work visas for Mexicans and Central Americans – perhaps a tough sell for a Democrat in an election year. Trade too will figure in the meeting: Washington is concerned about Mexico’s loose adherence to environmental and labor standards in the US-Mexico-Canada free trade deal (the NAFTA 2.0 pact that Trump negotiated in 2020.)
Date set for new Sri Lankan president
Sri Lanka’s parliament will select a new caretaker president from among its own ranks on July 20, in hopes of calming the worst political, economic, and social crisis in the island nation’s history. To clear the way for that, the current president and prime minister will both resign on Wednesday. The moves come after protesters furious about a nosediving economy and high prices for food, fuel, and medicine stormed the leaders’ residences over the weekend. Whoever is tapped to lead the country now will face daunting challenges: the most immediate is to secure an IMF rescue package, but beyond that to re-establish trust in the government and place the country’s tourism-dependent economy back on firmer footing as the pandemic recedes. In May, the country allowed the first sovereign debt default in its history, the result of government mismanagement of foreign currency reserves, which now hardly exist at all.Residents carry Ukrainian national flag as they gather in the Olympic Stadium to mark the Unity Day.
What We're Watching: US-NATO skepticism, EU rule of law ruling, US truckers' protests, atrocities in Tigray, guac wars
US-NATO skepticism and Ukrainian unity. The US and NATO aren’t yet buying claims by Russia’s President Vladimir Putin that some Russian troops have pulled back from the Ukrainian border. “We have good reason to believe the Russians are saying one thing and doing another … in an effort to hide the truth,” said a US State Department spokesman on Wednesday. NATO Secretary-General Jens Stoltenberg then warned that NATO sees a continued buildup of Russian troops and that the alliance must prepare for a “new normal” in which “Russia is willing to contest some fundamental principles of our security.” Ukraine’s President Volodymyr Zelensky, meanwhile, continues to strike a delicate balance. On Wednesday, he tried rallying his war-weary country to celebrate a "Unity Day" with mixed results. He's urging both outsiders and Ukrainians not to exaggerate the threat of a Russian invasion that is stoking fears and hurting Ukraine’s economy. But he’s also moving forward with a bold plan to tackle Russia-friendly “oligarchs” at home. He announced on Monday that he will keep promises to tackle both corruption and Russian influence within Ukraine by stripping some of the country’s richest business owners of some of the wealth that Zelensky says gives them too much influence over the country’s policies and politics.
Is Europe really Hungary to fight over money? The European Court of Justice on Wednesday ruled that the EU can withhold money from members that violate the bloc’s rule of law standards. This gives the EU a tool for ensuring democratic norms are upheld in countries like Poland and Hungary, which have been accused of undermining judicial independence and facilitating corruption. Warsaw and Budapest say the ruling is an attack on their sovereignty. The ball is in the EU’s court, putting European Commission President Ursula von der Leyen on the spot. The European Parliament, which approves bloc-wide budgets, wants her to use the mechanism right away, particularly against Hungary, which faces crucial elections in April. But larger states like Germany and France prefer a slower roll, particularly as the standoff with Russia over Ukraine tests European unity.
US truckers revving up to protest. Buckle up America, the big wheels are coming. Organizers of an American protest modeled on the Canadian truckers’ “Freedom Convoy” say they’ll begin driving on Feb. 23 from California to Washington, D.C., to protest vaccine mandates and other pandemic restrictions. The announcement comes just days after the Canadian government invoked emergency powers to clear a weekslong anti-mandate protest by Canadian truckers who have occupied downtown Ottawa and blocked crucial US-Canada trade routes. Depending on how much momentum the American truckers get, the “People’s Convoy” could exacerbate supply chain issues and the trucker shortage, posing a tough political challenge for President Joe Biden as he struggles to regain the narrative on the pandemic and the economy.
Atrocities in Ethiopia. Fighters affiliated with the Tigrayan People’s Liberation Front (TPLF) have killed civilians, gang-raped dozens of women and girls, and looted property in Ethiopia’s Amhara region, according to a report published on Wednesday by Amnesty International. The rights group accuses Tigrayan rebels of these crimes, part of an ongoing civil conflict plaguing the country in recent years. It’s not just the rebels who are committing atrocities, according to Amnesty. The group says it has also documented massacres and sexual violence by Ethiopian government forces and allied militias, as well as fighters from neighboring Eritrea. The ongoing conflict, with sharp swings of momentum between government and rebel forces, continues to inflict hunger and suffering. Amnesty is calling for UN investigations and coordinated efforts to bolster human rights in the region.
Is there a guac war? Avocado lovers’ eyes may have watered at the checkout over the past year as prices for the fruit (yes it’s a fruit) have doubled, but now they may simply cry. The US has banned imports of avocados from Mexico, following an alleged verbal threat made by phone against a US safety inspector there. The avocado trade is a multi-billion dollar business these days, and even Mexico’s powerful drug cartels are fighting for a slice of the action. The ban will remain in place until Mexico can guarantee the safety of US fruit inspectors, but with 80 percent of avocados in America coming from Mexico, that means fans of the erotically named fruit will need to brace for higher prices and empty shelves. President Andres Manuel López Obrador, meanwhile, has hit back, accusing Washington of conspiring against Mexican traders to boost American farmers’ sales.Crisis at the border a no-win scenario for Biden
As thousands of migrants, many of them children, attempt to cross the US southern border, stretching the immigration system's ability to process and integrate them, President Joe Biden now finds himself facing a challenge that has bedeviled presidents and Congress for decades: how to reform an immigration system that everyone agrees is broken, but which no one can agree on how to fix.
The problem is, in principle, straightforward: On the one hand, most Americans recognize the need to control immigration into the world's most prosperous country. But on the other, the US has a long border that is difficult to secure, many businesses that are eager to hire undocumented workers, and millions of people living in countries to the south who see the perilous trek north as their only way out of a life of poverty and violence. As a result, for decades the US' two major political parties have decried the treatment and processing of illegal immigrants, while the increasingly dysfunctional legal immigration system serves the needs of no one.
The issue has become a true third rail of American politics, inflaming partisan passions like almost no other. As the share of Americans who are foreign born returned to historic highs after a decline in the 1970s and 1980s, concerns about immigrants putting downward pressure on American wages and accelerating a rapid pace of cultural change primed a generation of voters to be receptive to a message of shutting down the border. Recent polling from Pew found that 68 percent of Americans believe it is important to increase security along the US-Mexico border, though that number rose to 91 percent among Republicans (versus 49 percent of Democrats). It also found that 83 percent of Republicans supported increased deportations (31 percent for Democrats), while just 48 percent of Republicans supported establishing a path to legal residence for illegal aliens (compared to 82 percent of Democrats). Tapping into this backlash was, of course, critical to Donald Trump's success in 2016 and his continued appeal among GOP voters.
The Democrats, meanwhile, generally support more immigration on humanitarian grounds and because they see Hispanic voters as a key part of their coalition. Unions, another important Democratic constituency, welcome new low-wage workers as potential future members.
And so where Republicans put a focus more on border enforcement and, in the pre-Trump era, meeting labor shortages, Democrats emphasize broader pathways to legal entry and permanent citizenship. The two sides cannot agree on how to make it all work together.
The current crisis at the border has sent both sides to their familiar partisan corners. Republicans, and even some moderate Democrats, say the recent increase in asylum seekers is due to Biden's promises of looser immigration policies. This narrative is supported by press reports of Mexican officials and migrants who say that Biden's message of more humane treatment for migrants is one reason they set out for the US.
Meanwhile, the large number of children seeking asylum has stretched the capacity of the system to quickly process them, resulting in unaccompanied minors being housed in immigration centers that Democrats decried during the Trump administration, prompting calls from Democratic lawmakers to quickly expand processing capacity.
With Democrats in control of the White House and Congress, isn't this an opportunity for them to pass the reform they want? Not really. The issue is too toxic and there are divisions within the Democratic party itself — progressives who want to ease the admission of migrants and some moderates whose position is closer to that of the GOP.
Democrats in the House last week in fact declined to take up a comprehensive immigration solution, agreeing only on narrower legislation that would create a pathway to citizenship for residents who were brought to the US illegally as children (the so-called Dreamers) and farm workers. Both of these bills attracted bipartisan support in the House but they are unlikely to find a 60-vote supermajority needed for passage in the Senate, where even Republicans like Texas's John Cornyn or South Carolina's Lindsay Graham who favor a path to citizenship for Dreamers will condition their support for the bill on including other things, such as increased border security or a nationwide, mandatory use of electronic verification of citizenship for new hires. Neither of these policies are acceptable to enough Democrats to forge a compromise solution.
So Biden's hands are tied. As he takes executive action to accelerate the housing and processing of the surge in juvenile migrants, he will probably encourage more of them to come, fueling Republican criticism that he supports open borders — a message that the GOP would love to take into the midterm elections next year. But if Biden instead takes the path of former president Barack Obama and increases deportations to discourage migration, he will come under attack from progressives in his own party who will accuse him of turning his back on a pressing human rights issue.
In this context, the White House appears to be hoping that it can outsource some of the enforcement to Mexican authorities. But with larger numbers of desperate people arriving daily, little light at the end of the legislative tunnel, and midterms looming next year, this could shape up to be a defining crisis for Biden.
Jon Lieber is managing director of Eurasia Group's United States Practice and host of GZERO's US Politics In 60 Seconds.
The road ahead for US-Mexico relations
With a new American president in office, US-Mexico relations face a turning point. Can Mexico's populist leader Andrés Manuel López Obrador, also known as AMLO, forge the same bond with President Biden as he did with former President Trump? And how will that dynamic impact immigration reform in the US. These questions come at a critical time for Mexico, as it scrambles to regain control of rampant violence and a raging pandemic.
Watch the GZERO World episode: Can AMLO Live Up to Mexico's Critical Moment? Jorge Ramos Discusses
Can Biden work with López Obrador on meaningful immigration reform?
Can President Biden work with Mexican president López Obrador to pass meaningful immigration reform for the first time in decades? Acclaimed journalist and Univision anchor Jorge Ramos thinks there is a path, but it requires a certain baseline understanding. "There has to be an immigration plan that includes the fact that one-to-two million immigrants are going to be coming every single year to this country. Those are the facts, like it or not." With tens of thousands of Central American migrants amassing just south of the US border, many living in squalid conditions, Ramos argues that Biden must act swiftly but also shrewdly. He spoke with Ian Bremmer on GZERO World.
Watch the GZERO World episode: Can AMLO Live Up to Mexico's Critical Moment? Jorge Ramos Discusses