Foreign Policy is Domestic Policy

Luis Rubio

The letter sent by President López Obrador to President Trump can have many readings, but one great certainty: it is a document designed from and for domestic political purposes and, in those terms, it has been a great success. In addition to the popular support behind the president, which has been massive from the beginning, he can now boast of having the sympathy, if not necessarily the recognition, of a large part of society -businessmen, opinion leaders and critics- who have not been close to him. The success is remarkable. Capturing the new tone, one commentator said that “Trump managed to turn AMLO from a leader into a statesman.” The support is undeniable. The question is whether that solves the problem.

The context is fundamental: in the ten months that AMLO has (de facto) governed, the central characteristic has been confrontation in a highly divided country. The attack strategy used by the president has paid off, but it has been sustainable only because the international financial markets, in contrast to other eras of the country’s politics and economy, have been indifferent to internal discussions. While exports keep flowing, the interest rate differential remains high and the rating agencies ignore their own admonitions regarding the Dos Bocas refinery and the Mayan train, portfolio investors see no reason to change their strategy, which has been very profitable to date. Trump’s recent actions might well change that equation, as the downgrade of Mexico’s debt illustrates.

In “One Hundred Years of Solitude,” Gabriel García Márquez, a bit like Plato, creates characters that inhabit parallel worlds that, although they are seen, never come close. The famous magical realism described by the Colombian authror does not seem very distant from the events of the last days. Trump, another character of an equally sorcerous realism, managed to combine two obsessions in a catastrophic way for Mexico. His prejudice that trade deficits are bad and harmful to the economy is well known, but now he combined it with the issue of migratory flows, perhaps the most transcendent element in his 2016 electoral strategy. It is clear that, for Trump, the latest threat is a perfect foundation to launch his campaign for re-election. Each side in its own magical realism.

Whatever the future of the tariffs or the campaign, the impact on Mexico could be enormous. The true asymmetry in the relationship does not lie in the power of each of the two governments, but in the disproportionate impact that any measure coming out of the US government has on Mexico: while a Mexican-government decision amounts to nothing more than a little whisper -a drop in the bucket- to the American economy, almost any action by the US government has inordinate consequences for Mexicans. The sheer threat of tariffs caused a devaluation of more than 3% in one day, a pattern that has been not only historical, but especially characteristic of Trump’s actions since his presidential campaign three years ago.

The problem with Trump’s most recent tactic for Mexico is that it attacks, at one blow, the three key elements of the country’s stability. First, his threat of imposing increasing tariffs, damages the export sector, Mexico’s foremost engine of growth; second, the instability of the exchange rate that the tariff threat has generated reduces the attractiveness of portfolio investing in pesos now with a reduced differential in the peso-dollar interest rate; and, thirdly, the pressure on the rating agencies can only increase, since two of the key vectors in their considerations -the infrastructure projects that they consider impossible to finance and the exports that guarantee the flow of dollars- now play in the opposite direction. And the worst thing is that there is not much that the Mexican government can do about it in the time allotted.

At the same time, all Mexicans know that their government has been promising actions and responses to the migratory flows for decades and has done nothing about it. Throughout that time, the promises flowed but the actions were non-existent; since there were never any consequences to inaction, Mexicans always pretended that this was nothing more than a game of mirrors. The extreme was the current government that not only did the same as its predecessors, but also granted work and transit visas to migrants, creating an incentive that led to a sudden and huge growth in those flows. At the worst moment: with Trump.

The moment is propitious for a re-channeling of internal politics. The president has managed to generate, largely thanks to Trump, a truce in domestic politics, which confirms his own saying, even if in reverse, that the best domestic policy is the best foreign policy, a frequent recourse of past Mexican governments in cases like Cuba. The opportunity in the president’s hands is extraordinary: he now has the upper hand and could use it to either persist in his divisive strategy, which would be certain to provoke the rating agencies, or he could use it to redefine his strategy as a leader of all Mexicans, making it possible for himself to become the transformative factor that the country needs and with which he has long dreamed. The opportunity is unique and extraordinary and, hopefully, it could help prevent the worst consequences that the conflagration of Trump’s actions and AMLO’s current government strategy would otherwise bring.