All societies face risks, but the risk that Mexico and Mexicans confront today is immeasurable, above all because it is self-inflicted. Mexico and the U.S. are advancing in the direction of a potentially uncontainable train wreck that, with enormous ease, could lead to the cancellation of the principal engine of the country’s economy.
The scene is not at all difficult to visualize. On the Mexican side, the government is preparing itself for war with its sparce arsenal. With the knowledge that its stance contravenes the content and spirit of the existing trade agreement, the United States-Mexico–Canada Treaty (USMCA), which links the three nations economically, the president is absolutely unwilling to alter the electricity-related legislation that is the motive of the dispute. Consequently, in his logic, the only way out is to go to war: thus, the recent changes in the Ministry of the Economy.
On the American side, President Biden has tolerated one after another of the pranks that President López Obrador has pulled on him; the question is whether the midterm results modify this circumstance. Trade negotiations must be ratified by the U.S. Congress, while the Office of the Trade Representative, an entity created by the Congress, but which belongs to the Executive Branch, reports to both. This circumstance obliges it to act and confers great latitude with respect to the administration. In a word, the key decisions of following or not the constitution of a panel for resolving the controversy, while subject to political criteria, depends substantively on that entity and not solely on the president’s objectives. Additionally, the new political circumstances for President Biden, who came out better than expected from the midterms, could be defining for the bilateral relationship, given that it could determine whether President Biden will run for re-election. Incumbent upon that scenario, released from the burden of having to deal with multiple flanks, Biden could opt for no longer allowing the continuation of the abuses foisted on him by President López Obrador.
The Mexican Government appears to be blind to the transcendence of what is at play with its (pathetic) defense of an autarkic regimen in electric issues. When the new Minister of the Economy was formally appointed, the President stated that: “We are no more under the conditions of maintaining the same neoliberal policy that had the government sequestered. Imagine 36 years of dominion of neoliberal policy.” Just imagine! Thirty-six years of lower prices for consumers, greater economic and political freedoms, certainty regarding the availability of energy and better-quality and better-paid jobs. Just imagine!
It is obvious that everything was not good during the last decades, but (nearly) everything that was good, in economic concerns at least, took place during those decades, thanks to the reforms undertaken and the Free Trade Agreement, NAFTA. After decades of crises every six years, the country achieved many years of stability, sufficient international reserves to avoid recreating the years of crisis that preceded it, and a growing export sector that guarantees the country incomes, jobs, better salaries and foreign currency.
Placing at risk the instrument that has afforded the country these opportunities constitutes a senselessness that can only be understood from a dogmatic ideological posture, blind and perverse. USMCA is crucial for guaranteeing access of exports that, due to the indolence of one government after another (exacerbated by the current one) became the sole relevant engine of economic growth. Instead of worrying about opening spaces for investment in the domestic market and generating conditions for a better distribution of the benefits, the country remained limited in its potential for development to this unique instrument that enables Mexican economic activity. In addition to that, on undermining private investment in energy, the government shut off one of the sources of greatest growth potential that also is crucial for attracting investment in other sectors. From indolence Mexico passed to negligence and from there to an intensifying risk of instability.
The president is vexed by the technocrats, those who know the factors that make possible the development of the economy. But affairs of trade and investment are absolutely technical and require personnel trained and experienced. What lies in the balance is monumental: beyond the question of the current controversy and the likely panel to settle this controversy, disputes with European and Asian nations with respect to the same issue regarding electricity loom in the horizon; then come the lawsuits of the private companies, whose criterion is not that of obtaining compensation for their investment, but rather for the cash flows that they are (or would be) no longer receiving. That is, the matter in financial terms could easily end up as an exorbitant amount. Unless the president wishes to become a universal pariah (e.g. The IADB), with what that would imply in terms of incomes for the population, the issue merits care and a very different approach from than the one he is assigning to it.
It is natural for a politician to consider that all conflicts can be settled on those terms, but not on these issues, which are technical and call for less dogma. The government is playing with fire without realizing that fire burns. Everything to it seems simple and hand-in-glove with an easily executed political solution. This time certainly not.
a quick-translation of this article can be found at www.luisrubio.mx