With a new trade deal almost in place, U.S. private capital, with energy companies in the vanguard, could be poised to inject billions of dollars into Mexico’s wobbly economy.
The resounding December vote by the U.S. House of Representatives in favor of the United States-Mexico-Canada Agreement (USMCA) — the former NAFTA — and the announcement of a renewal of Washington’s América Crece/Growth in the Americas initiative comes as welcome news to Mexico, which saw no economic growth in 2019.
In a letter to the lawmakers ahead of the USMCA vote, Tom Linebarger, chair of the trade and international committee at the Business Roundtable, a lobbying group for blue-chip U.S. companies, said that 12 million U.S. jobs and $1.4 trillion worth of trade with Canada and Mexico depended on their vote.
Even though it won an overwhelming majority, the vote was preceded by months of tense negotiations between the Democratic Speaker of the House Nancy Pelosi and senior administration officials.
The Mexican position on energy was not at issue. Mexico insisted, as it did under Nafta, on reserving its “sovereign right to reform its Constitution and its domestic legislation” — in other words it can, whenever it wants, decide to reverse the 2013 energy reform or, indeed, to make it much more radical.
In addition, as in tablets of stone, Mexico “has the direct, inalienable, and imprescriptible ownership of all hydrocarbons in the subsoil of the national territory.”
But, as thorny issues such as the U.S.-Canada dairy trade and intellectual property rights in the digital age were resolved, the core of negotiations centered on the auto industry, where President Donald Trump’s claims that the enormous gap between labor costs in the U.S. and Mexico made a nonsense of fair trade.
By a very fortunate coincidence, Trump’s claims were warmly welcomed by the Mexican side in the negotiations. Mexican President Andrés Manuel López Obrador has long called for a labor reform to boost the long-held, but almost never previously realized, aspirations of Mexican workers to have similar pay and conditions as those of the nation’s trade competitors.
“Mexico was ruled by a one-party political system for most of the last century,” Roberto González Amador, economics editor of the daily La Jornada told NGI’s Mexico GPI. “The result has been that nearly half of the nation’s workforce is what is known as informal. What that means is low wages — or none at all in some cases, where tips are the only source of income — long hours and few, if any vacations.”
Labor leaders, by contrast, have large incomes. Only now, some are having to relinquish their huge privileges. In 2019, Carlos Romero Deschamps was unseated as leader of the union of state oil behemoth Petróleos Mexicanos (Pemex) after decades of living lavishly.
The U.S. Senate has yet to approve the USMCA — known in Spanish as T-MEC — but it is expected to be a shoo-in.
Ambitious or not, the USMCA was hailed by many of his political opponents as a triumph for López Obrador. Luis de la Calle, who was a leader of the Mexican team that negotiated Nafta in 1994 and has been a sharp critic of the president, praised what he called his statesmanship in boosting Mexico’s international standing in trade relations.
In the Hispanic world’s arguably most prestigious newspaper, Spain’s El País, journalist Carlos Serrano described USMCA as “a magnificent opportunity for Mexico” to recover its share of the U.S. market that had lost in recent years to China. Now is the time, when relations between Washington and Beijing have been strained recently, for Mexico to recover the lost ground, Serrano wrote.
What does seem sure is that Trump and López Obrador are strange bedfellows. Each is accused by his critics as being populist. Trump is perceived to be on the rightwing of the political spectrum and López Obrador the radical left.
After a somewhat strained telephone conversation in 2018 with Mexico’s ex-president Enrique Peña Nieto, architect of the energy reform, Trump is reported to have commented to an aide: “I think I prefer the communist.”
The quip was not politically astute: López Obrador is no Marxist. But both leaders appear to have some sort of chemistry in common, which is just as well. While the economies of the U.S. and Canada have seemed to align, Mexico is much more of a laggard than it was in 1994 when the tripartite alliance was formed. Then, officials of the U.S. and Mexico, forecast that the prosperity gap between the two nations would be narrowed by Nafta. But it has widened, and sharply, while many other countries have left Mexico well behind in the prosperity race.
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