Oh, Canada!

Antonio Garza (Mexico, 2002-2009)

Cross posted from Ambassador Garza’s website

On Monday—just over one year since Mexico, Canada, and the United States officially began the NAFTA renegotiations—President Donald Trump announced the “The United States – Mexico Trade Agreement.”

During an impromptu press conference in the Oval Office, Mexican and U.S. officials declared that they had finally moved beyond the thorniest issues including auto content and Mexico’s energy sector and come to a “trade understanding”. It is undoubtedly a leap forward in the negotiations, but it might be wise to hold off on any immediate celebrations.

The most pressing challenge is now Canada’s participation. The Monday press conference had a solidly bilateral focus, with Canada almost completely absent from the festivities. Worse, when the country made an appearance, it was as part of a U.S. threat to push for separate deals. Mexico, on the other hand, sent mixed messages on Canada’s involvement. Mexican President Enrique Peña Nieto repeatedly called for Canada to be re-incorporated into the negotiations, but Foreign Minister Luis Videgaray simultaneously suggested that Mexico may be willing to move forward alone.

Advice to Trump on New Mexico President: Don’t Push Him

Bill Richardson (United Nations, 1997-1998)

Bill Richardson is a former governor of New Mexico and OAS envoy for Latin America between 2011 and 2015.

Cross posted from CNN.

Like President Donald Trump, the new President-elect of Mexico, Andrés Manuel López Obrador, is adding his name to a growing list of elected leaders worldwide who have been swept into office on a trend of populist disaffection with the global political establishment. López Obrador’s decisive win is rattling international investors, Mexican business leaders, and many Americans who are alarmed that a leftist Evo Morales-type leader has suddenly appeared right on our doorstep.

The US-Mexico relationship is at its lowest and most dangerous level in years. Recent US policies advocating a security wall and separation of families at the border, along with NAFTA negotiations on the verge of collapse, have left this once very special relationship in tatters even before the Mexico election. Given these political realities, what should the United States’ position be towards the new Mexican leader, who comes to office with an electoral mandate?

Politics, NAFTA and Security Make for a Bumpy Ride

Antonio Garza (Mexico, 2002-2009)

Cross posted from Ambassador Garza’s newsletter

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In two weeks, North America’s NAFTA negotiators will sit down for the seventh round of negotiations in Mexico City, and Presidents Trump and Pena Nieto have announced that they too will be meeting. The teams will have a lot on their plates, as previous rounds have eked out only slow progress on all the major issues. It is a far cry from this summer’s initial ambitious agenda that promised a modernized agreement by early 2018. Although, it’s not particularly surprising, since opening up an agreement that touches almost every sector in North America’s economies is no simple task and especially so with a U.S. team that is navigating its own domestic landmines and political risk (as I’ve written about previously). We should be preparing ourselves for a much longer timeline than initially expected, with negotiations likely stretching at least through the coming months and potentially into the coming year.

Yet, time is not on the NAFTA negotiations’ side. On July 1st, Mexicans will head to the polls to elect their next president and the pre-campaigns are already in full swing. The top three candidates have been traveling the country to meet with voters and share their campaign promises. Andrés Manuel López Obrador (AMLO) is the current leader with 23 percent of the vote. Best known for his populist platforms and discourse against the political establishment, AMLO has indirectly taken a more moderate position on NAFTA. His proposed economy minister promised to continue NAFTA negotiations and not to trash or restart the modernization process. The other top contenders—PAN party candidate Ricardo Anaya and PRI candidate José Antonio Meade (with 20.4 and 18.2 percent of the vote respectively)—have also made it clear that they would continue the talks. Yet, negotiating a thorny agreement through a political transition is sure to be a precarious endeavor.

Another controversial political issue has been the future of Mexico’s 2013 energy sector opening. While Anaya and Meade have supported the reform, AMLO has been a critical opponent, previously saying that he would roll it back or put it to a referendum. Yet AMLO’s proposed Energy Minister has adopted a less extreme path, outlining his plan to build a Mexican refinery and saying that he wouldn’t tear up existing contracts. Despite the political uncertainty, private sector interest in Mexico’s energy sector has surged. The January 31 deepwater oil and gas round was the largest to date, with investors claiming 19 of the 29 fields and pledging half a billion dollars in cash-signing bonuses. Overall, investment in the sector is estimated to reach $150 billion over the course of the current contracts.

However, while NAFTA and the energy reform are two major policy concerns, Mexicans are likely paying more attention to corruption and violence levels around the country. In the latest saga, Chihuahua Governor Javier Corral recently emerged as a national voice on corruption after his team began investigating the alleged embezzlement of more than US$12 million in state funds. The money was siphoned off under the previous (and now fugitive) governor Cesar Duarte and allegedly used to fund other PRI politicians’ campaigns. The investigation into the missing money exploded onto the national scene when it began to ensnare top PRI officials and after the federal government responded by withholding from Chihuahua $36.5 million in promised funds. The standoff led Corral to criss-cross the country protesting with a “Caravan of Dignity” and with the federal government finally backing down this past Monday and delivering the money.

These corruption scandals are also taking place in the midst of Mexico’s most violent year in recorded history. The number of homicides in 2017 surged past even the bloodiest years of the Calderón administration with no signs of slowing down. The factors driving the rise in violence are likely sub-region-specific and include everything from group infighting between different factions of the Gulf Cartel in Reynosa, local groups jockeying over lucrative poppy production in Guerrero, or fighting over who gets to sell drugs where in Ciudad Juárez. Yet one thing is clear, there has not been a strong and united federal strategy for lowering the violence. Instead, the response has been reactionary, with security issues failing to garner the same high-level attention as the country’s economic issues.

In the United States, we’ve also been grappling with our own domestic issues that directly affect Mexico. This includes the DACA debate, which will go back in front of Congress next week, and the budget’s emergency funding for the United States’ opioid crisis. Two weeks ago, U.S. Secretary of State Rex Tillerson emphasized the importance of working together with Mexico on many issues. In a speech last week at my alma mater the University of Texas at Austin, Tillerson outlined how the United States can approach cross-border security issues by improving its own drug policies and also by providing Mexico with targeted funding and training. While bilateral discussions may get overheated at times, working together on these and other cross-border issues continues to be the best way to respond to both countries’ most pressing challenges.

NAFTA 2.0: Let the ‘Games’ Begin

Antonio O. Garza (U.S. Ambassador to Mexico, 2002-2009)

Cross posted from Ambassador Garza’s website

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The NAFTA talks kicked off this past week in Washington DC, with negotiators from the three countries outlining their visions for improving trilateral trade. While the mood appeared to be generally constructive, tensions surfaced as U.S. Trade Representative Robert Lighthizer repeated the Trump administration’s focus on reducing trade deficits. The negotiators will sit down next in Mexico City on September 1st to continue hashing out the details on this point and others, but even if they can successfully produce a NAFTA 2.0 by early next year they may still face the biggest challenge of all. As I wrote about for Texas Monthly, the toughest part of redesigning NAFTA may not be determining the agreement’s content but managing the political risk both during and after the process.

With the 23-year old NAFTA in a vulnerable position, it’s worth taking a step back and remembering what is at stake. While far from perfect, the trade agreement guides the cross-border exchange of billions of dollars in agricultural products, motor vehicles, and appliances. It underpins millions of jobs from California to Kansas to Maine, and is the framework for entire industries’ business models. If NAFTA suddenly disappears, it would be impossible for the three region’s economies to exit unscathed. The disruptions that come from businesses’ reshuffling their operations and absorbing higher costs would cause some to shut down and others to pass along the costs to consumers through higher prices. There are ways to gradually adjust the agreement to make it work better for all parties, but this requires using proverbial scalpels to adjust, finesse, and stabilize the agreement, rather than a hammer to smash the parts that aren’t working quite right.

Yet in Mexico, the NAFTA talks are only one of the big news stories, as the country is already beginning its 2018 presidential and congressional election preparations. While the campaigns don’t kick off until next year, Mexico’s National Electoral Institute and Congress have allocated funding for political parties (unlike the United States, Mexico uses public funds for campaign financing), capping off campaign financing at the highest levels ever. There is a general sense that Ándres Manuel López Obrador is the frontrunner, but the jockeying among presidential hopefuls in the PRI and PAN parties is just beginning. For those reading the political tea leaves, changes in President Enrique Peña Nieto’s PRI will now allow individuals from outside the party to become a presidential candidate, in a move that would appear to favor the current Finance Minister Jose Antonio Meade. But with just under a year to go and a deep bench of contenders, there surely will be many twists and turns to come.

For those of you in South Texas or interested in local border issues, it’s worth tuning in to two upcoming construction projects. The first project is for a section of border wall that will cut straight through cross-border Santa Ana Wildlife Reserve and the second are LNG export terminals set to be constructed in the Port of Brownsville. These projects raise significant economic and environmental issues, and unfortunately—as I write about here—local residents’ voices and concerns have so far been given short shrift.