Under its new leader, Mexico set to change
On July 1, 2018, Mexican voters went to the polls. Andrés Manuel López Obrador (AMLO) and his political party, MORENA, scored a landslide victory, garnering 53 percent of the vote. The result is seen as a rebuke to President Enrique Peña Nieto and his political party, the PRI — both wracked by corruption scandals. It can also be seen as a rejection of the political establishment and the open market economic development strategy that has prevailed in Mexico for three decades and one that many Mexicans perceive has not worked for the average citizen.
It can similarly be read as Mexico’s response to the U.S. election of Donald J. Trump, who has dismissed Mexico as a strategic partner on trade, security, energy and other issues.
Trump congratulated Obrador in a tweet and both held a half-hour phone call. This was interpreted as a potential new beginning. But immense challenges lie ahead, because the binational character of the relationship is giving way to two national approaches to foreign policy.
Thus, the central question is, what comes next for U.S.-Mexico relations under two administrations with a more nationalistic outlook? And what does the election of Obrador mean for Texas? These questions are important because the next Mexican president will enjoy overwhelming majorities in both houses of congress and will be able to pursue his policy agenda.
Obrador is not by definition antiAmerican. He has said little about the United States, except that Mexico will no longer be “Mr. Trump’s piñata.” But that seems to be a reference to the Oval Office rather than the United States. Instead, he seems to be pragmatic in his understanding of the importance of the binational relationship on trade and investment, immigration and security. But Obrador is a nationalist and likely to “put Mexico first,” and this can have deep consequences on at least three issues of importance not only to the United States,but also to Texas.
On trade and the ongoing negotiations of the North American Free Trade Agreement, Obrador suggested that he prefers NAFTA to stay, but he also said that no NAFTA is preferable to a bad NAFTA. Some of his advisers have even suggested that a scenario in which NAFTA ends is one in whichObrador is freer to pursue national policies that the agreement currently precludes, including heavier subsidies for agriculture and a more aggressive state-centered rather than marketled industrial policy. This would impact U.S. exports to Mexico — its third largest trading partner, and reduce the importance of our southern neighbor as a destination for profitable investments. Texas stands to lose considerably as its economy is closely linked to the Mexican economy.
On energy, Obrador is not likely to reverse the 2014 energy reform and may even invite additional investment in the sector. But he is likely to take two consequential steps. The first is to prioritize domestic production over imports. He said, for example, that he intends to reduce Mexico’s crude oil exports and step up refining in Mexico and promised to build two more refineries. He may also slow down the auction of oil and gas fields in Mexico. These moves would affect Texas gas and fuel exports to Mexico and reduce business opportunities for Texas companies. Second, he is likely to return PEMEX to a dominant position in the Mexican energy market, forcing foreign companies to do business with PEMEX — a government agency — if they want to do business in Mexico.
On immigration and security, the United States increasingly relies on Mexico to stem the flood of Central American migrants. Since 2015, Mexico has deported more Central Americans than the United States. Under a less cooperative relationship, Obrador could simply stand down on immigration and allow Central Americans to reach the U.S. border, creating a broad immigration crisis for U.S. authorities. Moreover, Mexico is an indispensable partner in stopping illegal drugs from South and Central America. If Obrador ends Mexico’s efforts against drug cartels, as his collaborators’ initiative “Security without War” promises, this could result in a surge of illegal drugs into the United States.
Even so, if drastic changes come to the relationship, they probably will come from Washington rather than Mexico City. But Trump will find in Obrador someone less willing than Peña to bend over backward to accommodate U.S. interests. Still, the two countries need to cooperate on a range of issues, and Trump and Obrador will have to find a modus vivendi or both countries will suffer from unnecessary frictions in what should be a good North American neighborhood. The coming visit by Secretary of State Mike Pompeo to Mexico City should reveal much more on the future tone of the relationship.