Mexico Today –  July 14, 2021
Luis Rubio

 Governing is the art of managing the gap between citizen expectations and day-to-day realities says Argentinean economist David Konzevik. Mexico is a living example of the huge rift between both elements and also of the inability of its government to bridge it. The question here is why.

 Mexico’s most recent midterm election  provides us with a clue to the country’s key problems which several Mexican administrations have avoided for decades.  Independently of the electoral result, the midterms made evident two clear patterns among the Mexican electorate. On the one hand, a recognition of the immense change for good that Mexico has undergone throughout the last decades. One needs to look no further than the impressive urban vote -all the way from Mexico City to the cities in the border with the US- to see an active, demanding and resolute side of the country that fully envisions a promising future. On the other hand, the midterms showed the underdevelopment that continues to be the definitive trait of a large part of southern Mexico and other areas.

In a way, not much has changed since Mexico’s decisive 2018 election when Andrés Manuel López Obrador was elected president. The country exhibits enormous inequality levels which have been exacerbated (not diminished) by the president’s own tendencies. Rather than advancing toward the goals that López Obrador brandished in his campaign, Mexico has withdrawn into itself, and the country’s problems are now more accentuated.

It would be easy to assign the blame for Mexico’s current state to López Obrador only. Yet, that would ignore that the issue at stake are the institutional structures that made it possible for a president to change so many things without any checks and balances. Some Mexicans like what López Obrador has done as president. Other Mexicans disapprove him. Yet, both points of view elude the underlying stumbling block: Mexico does not need a savior or a tlatoani, the ruling monarch of Aztec times. What Mexico needs is a system of government that works, that solves problems and that builds a suitable environment for the country’s development. Such idea implies providing Mexicans with effective services (education, health and public safety) and creating the structures that make long-term development of the country possible.

At the heart of the Mexican dilemma lies the difference between the economic and political reforms that the country undertook during the past decades. Mexico’s economic reforms since the 1980s followed a very well-articulated model despite mistakes and implementation biases. Meanwhile, Mexico’s reforms in the political realm occurred in reaction to other developments and they did not have a sense of direction. Mexico’s political reforms of recent decades were designed to appease political actors and interests starting with the very man who is now president of Mexico and who spent decades in the opposition. These reforms did not built a wide and inclusive system that could encompass all Mexican political forces. The result was what Mexicans have lived through since then: a dysfunctional and distant government that does not serve the needs of the population. In addition, Mexicans live in a divided country where special interests protecting the status quo impede progress of vast regions.

A film about the 1993 Oslo peace negotiations between the Israelis and Palestinians shows the disparity of views between the two sides. The first Oslo negotiation produced agreements on general principles. It was not simple, but what emerged was an outline of what could be worked with. However, it was not until they began to discuss the details -like trash collection or taxes- that Israeli and Palestinian negotiators had to bring down to earth such big general principles so that everyday governance could be achieved. The true negotiation did not start until they approached what makes a country work. The Israeli-Palestinian peace process failed for other reasons. But the example seems highly relevant for Mexico.

Mexico’s process of political reforms never arrived at a juncture like that. Of course, the Mexican political forces reached agreements on electoral matters or on issues dealing with the Supreme Court. One could think other less visible but no less transcendental key agreements like agreeing to an independent Mexican central bank. Notwithstanding this, Mexican political actors never entered a negotiation on issues that really mattered to the population in its day-to-day life.

Among the issues that were never agreed upon during Mexico’s process of political reform were: the relations between Mexican state governors and the federal government, the distribution of state and federal monies and the much broader separate sovereign arrangements between states and the federal government. Mexican political forces never discussed and agreed on a public security system not dependent on the army, the nature of the justice system at the local level, the nature of political parties, the accountability mechanisms for members of the federal cabinet, how to guarantee freedom of speech and the financing of Mexican media. Without coming to an agreement on those “details” it would be impossible to solve “small”, everyday life problems affecting Mexicans like garbage collection and criminal extorsion.

Mexico’s landmark 1996 electoral reform solved a specific problem, but simultaneously created a much larger one. The reform solved the issue of how the opposition could compete for power for opposition through free and fair elections. It did not solved the issue of the way Mexicans would govern themselves. All the different problems that Mexico faces today stem from the dismantling of a one-party political system that controlled everything but which was not replaced by a new one that solved citizens’ demands. Since that moment, special interests from all sides rose to the top and rendered possible the arrival of a hyper-presidentialism with no checks. No country can make progress or prosper under such circumstances.

* Luis Rubio is chairman of México Evalúa-CIDAC and former chairman of the Mexican Council on Foreign Relations (COMEXI).  A Spanish version of this Op-Ed appeared first in Reforma’s newspaper print edition.

 Twitter: @lrubio

https://mexicotoday.com/2021/07/13/opinion-mexico-and-the-art-of-governing/

Mexico Today –  July 07, 2021
Luis Rubio

 No one can mistake the government of China for the government of Mexico. Regardless of their huge historical and cultural differences, both countries are pursuing transformation, each in its own way and style. Whatever the future of the Asian giant holds, the great contrast between the two countries is that the Chinese government has monumental ambitions and is crystal clear on how it intends to achieve them. Anyone who has seen its airports, roads, trains, and especially the increasingly sophisticated products emerging from ifts factories can only marvel at its achievements.

And yet, Stanford University-based researchers Scott Rozelle and Natalie Hell argue that China’s successes in recent decades obscure the enormous challenges facing that nation. Despite being the world’s second largest economy, China still remains, in many ways, an impoverished nation. These authors’ emphasis is not on the visible and successful portion of China, but on its backwoods, where the necessary conditions to escape poverty and underdevelopment are non-existent. In particular, the authors analyze education in China’s rural areas (where hundreds of millions of people live) and conclude that the desired transformation is impossible based on its current educational reality.

The authors’ analysis of China could also be an account of the Mexican reality: success to date is largely due to the availability of cheap labor with few skills, which has yielded extremely high growth rates for several decades. However, only 12.5 percent ​​of Chines workers have a college education, the lowest rate of any nation at China’s level of development. Although it has a theoretically inexhaustible source of cheap labor, China beginning to lose competitiveness due to constant wage increases in the manufacturing sector. In contrast to Korea, Taiwan, Singapore, and other nations that achieved a complete transformation, China has not invested in education and is now paying the price.

The authors’ core argument is that the transition to an advanced economy requires a population with high levels of education, capable of adapting to the changing demands of the labor market in order to raise the economy’s overall productivity levels. The authors differentiate between countries that make these investments in education and those that do not: the former manage to avoid stagnation along the way, the so-called “middle-income trap,” while the latter get stuck and are unable to sustain a growing level of income. The authors point to Mexico as the perfect example of the second case: countries that bet on cheap labor and ended up stagnating along the way, and suggest that China, having undervalued education, is in the same predicament.

Every country has its own circumstances and follows the logic mandated by its realities. In Mexico’s case, one government after another has preferred to use the teachers’ unions to advance its political objectives rather than betting on the country’s development. For some Mexican administrations, these unions have been key to maintaining political control over vast regions of the country; for others they have been nothing more than an electoral tool. Still other more radical political actors are betting on Mexico’s unions and their leaders as the muscle for the day when the “great confrontation” between the forces of good and evil takes place. Regardless of the rationale behind the plans of previous Mexican administrations, the glaring fact is that neither has understood the enormous challenge that shifting from an industrial society to a knowledge society entails. Therefore, betting on Mexico’s educational status quo is betting on poverty.

In the industrial era, what added value was the production process itself, and companies focused on improving production technology and boosting productivity on the factory floor itself (i.e. improving the use of workers’ manual skills). In the knowledge era, the major difference and the space where the greatest value is added is on the creative front, which has to do with process design, software development, and applying the human mind to devise new technologies, all requiring a command of computer skills. In one word: a radically new world. Education ends up being key to incorporating the entire population to the digital world.

China is an authoritarian nation that used all its capabilities to push whirlwind development over the past four decades. If Rozelle and Hell are right, its future will be less commendable than it would appear today, and certainly will fall well short of its ambitions. The problem with Mexico is that, in order to get out of the hole in which Mexicans find themselves, the bare minimum required is to imagine a better future, something that China has in spades, but which Mexicans seem to be denied, at least with the current López Obrador administration.

* Luis Rubio is chairman of México Evalúa-CIDAC and former chairman of the Mexican Council on Foreign Relations (COMEXI).  A Spanish version of this Op-Ed appeared first in Reforma’s newspaper print edition.

Twitter: @lrubio
https://mexicotoday.com/2021/07/07/opinion-unfortunate-bedfellows/

Mexico Today –  July 02, 2021
Luis Rubio

 There’s an old proverb that says that the road to hell is paved with good intentions. Something like this happened to Mexico in the late 20th century with several reforms of its electoral system. The reforms were devised by political actors who wanted to lead Mexico towards, first, political stability (from 1958 to 1978) and, later, towards democracy (starting in 1996). The problem is that those efforts focused exclusively on electoral issues, leaving the matter of how Mexicans should govern ourselves up in the air.

Theory and practice explain the problems Mexicans have experienced in these decades and, also, the rationale behind president López Obrador’s governing strategy. Theoretically, it’s been known for decades that in democratization processes around the world, consolidating a strong and effective government is critical before liberalizing political competition. Constituting a government that can effectively govern and meet the demands and expectations of the population is otherwise practically impossible. Additionally, those countries that achieved successful transitions to democracy also consolidated their rule of law, the crucial framework to curb a government or its bureaucracy’s potential for abuse. Mexico’s grade in these matters is not good.

On the practical side, Mexico has experienced two very successful periods of economic growth with political stability: the Porfirio Diaz era at the end of the 19th century and the hard-line PRI eras, between the 1940s and the late 1960s. Both had as their political earmark an authoritarian government whose only check and balance was the population’s and the investors’ willingness to participate in their own spaces. Both historical moments ended badly due to their rigid structures and processes: when difficulties arose, they were unable to adapt to a new reality. In the Porfirio Diaz era, the challenge was partly political and partly the famine that gripped the country at the turn of the 20th century. Without the slightest flexibility to undergo reform, the Porfirio Diaz era collapsed, opening the door to a civil conflict that decimated the economy and left over a million deaths.

The second moment, in the early 1980s, ended differently, but no less chaotically. After the Mexican economy and politics began to implode in the 1960s, the government sought to artificially extend its validity through foreign debt, encouraged by the expectation of ever mounting oil prices. In the end, the excessive debt brought about a financial meltdown and led to a decade of near hyperinflation in Mexico. The economic reforms that followed solved part of the problem by stabilizing the economy, opening the country to international trade, and building a manufacturing powerhouse in the process.

What was not addressed was the Mexican society’s wish to participate in political decisions and thereby limit government excesses. It’s clear that  president López Obrador believes that building a new era of stability and growth is what Mexico requires, and in his mind this calls for a strong government that limits citizen excesses. That’s why he’s centralizing power and ditching checks and balances left and right. Mexican history gives him formidable hope.

The problem is that the Mexican government is not set up to solve problems, pave the way for growth, or build a platform for development in the next century. Our government, heir to the Porfirio Diaz era and organized under the post-revolutionary pact -with the unequivocal goal of having the revolution do “justice”- is designed to plunder, corrupt, and abuse. Political, union, and business groups in Mexico -and their associates within the political class- are not interested in citizens, workers improvement or the quality of products and services, but rather in ensconcing themselves in a system that yields them rents, sometimes inordinately big.

Mexico’s electoral reforms from 1996 on were accompanied by the assumption that the country’s problem lay in the lack of political competition and that once unfettered, everything else would fall in place. What in fact happened was that electoral democracy was mounted on the existing political system, with its stagnant bureaucratic structures and tangle of interests which continue to benefit at the expense of the country’s full development. Thereby stem the two great evils we face: Mexicans’ frustration as manifested at the polls one election after the next, and the enormous inequality of opportunities and economic possibilities.

The solution that president López Obrador advances will only postpone and heighten the frustration because it doesn’t address it, just attempts to evade it. Instead of confronting the political, bureaucratic, and special-interest structures that rob the treasury blind and maintain half of Mexico mired in poverty, the López Obrador government, like its predecessors, devotes itself to inventing new excuses instead of solutions. What Mexico requires is a transformation of its political system, without which we will never extricate ourselves from the vicious circle we have been in for decades.

* Luis Rubio is chairman of México Evalúa-CIDAC and former chairman of the Mexican Council on Foreign Relations (COMEXI).  A Spanish version of this Op-Ed appeared first in Reforma’s newspaper print edition. 

Twitter: @lrubio

https://mexicotoday.com/2021/07/02/opinion-mexicos-cycle-of-reforms/

www.mexicoevalua.org
@lrubiof

Mexico Today –  June  23, 2021
Luis Rubio 

President Andrés Manuel López Obrador came to power in 2018 with the clear idea that the economic and government reforms economic that previous Mexican administrations enacted since 1983 had to be repealed. In his mind, Mexico’s problems began with those reforms, so repealing them was a must. Since the onset of his administration, López Obrador has nullified or dismantled those Mexican government institutions that he considered unnecessary or restrictive, has concentrated power, and has modified the regulatory framework to accommodate his priorities. This course of action -sometimes following law, sometimes not- has fostered a high degree of uncertainty. This uncertainty stems not so much from the Mexican president’s actions themselves from him being able to modify laws, regulations, practices, contracts, and institutions with no real check or balance.

The ease with which López Obrador is tearing Mexico’s institutional fabric reveals how superficially these institutions were entrenched and their lack of credibility given their lack of relevance for the average Mexican’s daily life. At the same time, however, it evidences the Mexican government’s enormous weakness, as no country can withstand so sudden, radical, and -in some cases- serious changes. Although Mexico is used to the traditional policy swings from one administration to the next -which are a feature of our political system-, the way president López Obrador acted has become a factor of uncertainty and –potentially- instability. This in an era in which the well-being of virtually all Mexicans depends on the deep-rooted supply chains that span the entire North America. The tension between the president’s goals and the requirements for progress is more than glaring.

President López Obrador clearly wants to attract private investment to Mexico, but he is not willing to accept that, in the 21st century, the only chance of doing so lies in creating conditions for investors to do it on their own free will. The possibility of government forcing people –well-off or needy- to save or invest ceased to exist decades ago. Private investment will flow only to the extent that the uncertainty emanating from the Mexican government itself disappears. And institutions are key to creating an environment of certainty. However, that will not transpire as long as the terms set by the government remain anachronistic.

There is one precedent: the nationalization of Mexican commercial banks in 1982 was a violation of an understanding between key actors in Mexican society. The government’s decision to nationalize the banks and more importantly the way in which it was carried out -to spark confrontation and social anger- led Mexico to years of uncertainty, lack of savings and investment, and an extremely precarious economic situation. It took more than a decade to rebuild political understandings that would restore peace between these key actors in Mexico. In the end, the North American Free Trade Agreement (NAFTA) was the institution that sealed those agreements among Mexicans. From the Mexico’s perspective, NAFTA’s true significance was that it tied the Mexican government’s hands, imposing very high prices on any attempted abuse, imposition or nationalization.

NAFTA became the most important institution that Mexico built. From the logic of an open Mexican economy consecrated in NAFTA, other reforms sprang out including those that created the regulatory entities to make them work. For over 20 years, this framework made it possible to give functionality to various markets and activities. Today we know, in hindsight, that the validity and significance of these institutions was due not to the legitimacy they enjoyed, but to the respect that later administrations granted them. The price of removing these institutions will end up being much higher than anyone could have imagined. The cesspool uncovered by president López Obrador isn’t new, but is much more consequential because it cancels Mexico’s future growth.

Beyond the transcendence of these institutions for the functioning of the present-day Mexican economy, there is another cost more significant in the long term. The erosion of Mexican regulatory institutions also affects citizens who are now realize the devastating capability of the Mexican executive branch for brandishing immense powers with nary a check or balance. The ensuing institutional destruction, which might seem insignificant, has eliminated key mechanisms that have helped in solidifying trust among Mexican society and investors. It turned out that the idea that Mexico had changed -geared to grow and eventually address inequality- was no more than a mirage. Clearly, the López Obrador has other plans, which are at odds with that idea.

The obvious question for Mexicans is how far president López Obrador can go. Will the elimination of the current independent regulatory agencies be followed by new ones with a better social foothold among Mexicans? Once unpunished institutional destruction is in gear, the inexorable question is, what is next?

(Excerpts from Luis Rubio’s newly published Spanish language book: “La nueva disputa sobre el futuro: Ideas viejas para un México moderno”, Editorial Grijalbo).

* Luis Rubio is chairman of México Evalúa-CIDAC and former chairman of the Mexican Council on Foreign Relations (COMEXI).  A Spanish version of this Op-Ed appeared first in Reforma’s newspaper print edition. 

Twitter: @lrubio

https://mexicotoday.com/2021/06/23/opinion-the-mexican-presidents-harm-to-institutions/

www.mexicoevalua.org
@lrubiof

Mexico Today –  June 15, 2021
Luis Rubio

  Citizens spoke loud and clear during Mexico’s midterm election. Now, the entire political system will have to adapt to a new reality. In a show of great wisdom, Mexicans ratified its trust in the the country’s independent elections authority (INE), rejected President Andrés Manuel López Obrador’s excesses, demanded good sense from political actors, and continued its quest for “a change.” By claiming sweeping victories, party leaders demonstrated a total lack of understanding of the moment, unlike president López Obrador, who undertook an attempt to moderate his approach (though it did not last long), in his own peculiar way and without acknowledging the electorate’s message in the polls. It would have been hard to find a better scenario for Mexico, given the country’s polarized and furious climate threatening to reach fever-pitch by the second.

Since 2018, López Obrador outrageously and immoderately milked the election where he was elected president. Surmising an unassailable endorsement by the polls to do and undo at will, he proceeded to turn the Mexico’s clock back 40 years. López Obrador’s persistence and single-mindedness led him to decisively alter the country’s circumstances, to the point of widespread rejection by the middle classes and investors. This was, in fact, a middle-class rebellion in Mexico’s urban areas against the president’s party MORENA.

The electoral result leaves president López Obrador enough elbow room to save face and to be able to argue that his (huge) losses were not so major. He can contrast the 20 percent decrease in members of his party in Mexico’s Lower House of Congress against the growth in the number of state governorships in MORENA’s hands. However, both the election results and the moment in the presidential cycle herald fundamental changes for Mexico.

First, ever since Vicente Fox announced his candidacy to the presidency immediately after the midterm election in 1997, Mexican presidents lost their old instruments to control and postpone the succession process. This will be especially hard for MORENA given its lack of institutional structures and internal discipline which promises constant intra-party clashes. This fact in itself will amplify the already MORENA’s existing fractures, which will inevitably weaken the López Obrador ability to control the succession process or promote new political or legislative initiatives.

Second, although MORENA will govern more than half of Mexico’s states, the potential for intimidation -the president’s main instrument for keeping the state governors in check- will be diminished. Regardless of their party, the 15 new governors -out of Mexico’s 32 states- will enjoy freedoms vastly superior to those of their predecessors.

Third, MORENA will no longer have the supermajority that it had in the Lower House of Congress, nor will it be easy for it to find a “swing” party to push through constitutional amendments. That changes the Mexican legislative dynamic in several ways. Most of all, it introduces an element of instability to the coalition formed by MORENA, the Green Party and the Labour Party (PT). The results encourage these eccentric allies, especially the Green Party -which never misses an opportunity to profit from the political moment- to contemplate different alliances for the future. No less important, the Lower House will become Mexico’s space for political interaction and negotiation that the supermajority previously held by MORENA made impossible.

All of this creates a new environment for Mexico in which visions and proposals that sketch a less contentious and bitter political future could -indeed, should- flourish. To date, Mexican politics has focused on the past: for some, the 1970s, for others pre-2018, despite the fact that not many Mexicans would like to return to those times. The contrast between the 2018 presidential election and the 2021 midterm election makes it clear that Mexicans want to move forward, towards a more cordial future, with greater progress, and a better distribution of benefits. Early in his term, president López Obrador should have undertaken such effort but he was lost in the confrontational strategy that has not yielded Mexicans results, and even less for him as the midterm election result evidenced. In fact, López Obrador’s political future is now in a difficult position: unless he rectifies course, his ambition to go down as one of the great transformers of Mexican history will have vanished.

President López Obrador has been falling into a not unusual paradox, frequent among those who accumulate power without a vision that can attract and marshal the citizenry. The more power he amasses, the less power he can exert. More power could tempt him to follow a more radical route risking crises, thus destroying his whole project. Perhaps there is no better example of this than the risk that Mexico devalues its currency, something López Obrador has said won’t happen. Something similar happens with the idea of extending his six-year term in office. The consequences of trying to break a centuries-old Mexican political taboo would be devastating for the promoter and detrimental for the country.

Three tricky years lie ahead. These could become an exceptional opportunity for reconciliation to lay the framework for a better future. Unfortunately, it is not obvious that there are statesmen -in the López Obrador administration or in the Mexican opposition parties- capable of leading and advancing it. But the opportunity is still there.

* Luis Rubio is chairman of México Evalúa-CIDAC and former chairman of the Mexican Council on Foreign Relations (COMEXI).  A Spanish version of this Op-Ed appeared first in Reforma’s newspaper print edition. 

Twitter: @lrubio

Opinion | Mexico’s next three years

www.mexicoevalua.org
@lrubiof

 Luis Rubio

Today’s the day, the day of the citizenry. The day on which, with their vote, the citizens will individually express their feel for the government and their expectation for the future. There have been few times that a midterm election has been so transcendental, and that is because the President has defined the moment as a dilemma: for him or against him. Rather than a clean and respectful democratic process, he is demanding a response from the citizens that is unequivocal, definitive and one that is obviously in favor of him and him alone.

The responsibility that each of us assumes as citizens is extraordinary: with a single vote each of us must choose our popular representatives and local governors. But, more than that, our vote entails a judgement of the moment in which we are living, our hopes for the future and the best way to attain them. The problem with, and the virtue of, democracy is that these must be expressed in an instant, with a mark on each of the respective ballots. What is interesting in this is that we Mexicans will find ourselves on pins and needles regarding how everyone else votes.

As we near the time to vote, it is essential for us to consider where we are, where we are going, what is next and who offers a greater degree of certainty for advancing toward the desired direction. It is evident that each citizen will evaluate distinct factors when deciding concerning their vote, but there is doubtlessly an array of elements that affect all of us, directly or indirectly, albeit in different ways.

What is exceptional about election day is not the enormous number of posts that will be settled by the citizen vote (the most extensive number to date of this young democracy), but that a midterm in itself commands such great transcendence. In a country of divided government with the president in charge of the Executive Branch, definitory elections tend to be presidential. However, given the personalistic, aggressive, and exclusionary fashion that has typified the government of President López Obrador in its first three years, the question before each voter is whether carte blanche should be conferred on its upcoming, and final, three years, or whether its way of being merits strengthening of the legislative branch to ensure the existence of an effective counterweight contributing to a more balanced country and to a president more committed to the entire citizenry.

Nobody can predict what the future holds. Notwithstanding this, there is not the least doubt that during the last decades the country has had bad governments and some that were mediocre, all promising grand solutions only to end up with shattered expectations and a sea of corruption. President López Obrador made it to the presidency due to an electorate that was fed up, to a greater degree than to the quality of his proposal of government that, in practice, has consisted of nothing other than the concentration of the power in his person.

His program of government is reduced to three infrastructure projects of doubtful relevance and a mechanism of cash transfers to his clienteles. Instead of seeking the way to generate an economic platform that permits the production of wealth and good and permanent jobs for balanced development and better income distribution, his vision is limited to handing out money without producing anything. The rhetoric can disguise many governmental acts, but does not engender incomes or permanent jobs, the latter the only means of emerging from the current paralysis, poverty, and inequality.

At the beginning of this President’s six-year term, I published a book in which I began by saying that the President had correctly identified the three principal problems confronting the country: the low economic growth rate (on average), the poverty and the inequality. However, I wrote, his proposal for tackling these was erroneous and it would fail because he would not recognize nor accept that the problem lies in the conditions under which a huge part of the population lives and that it is those conditions and circumstances that should be attacked. In place of that, the President has devoted himself to attempting to recreate the fantasy of an idyllic world that came to a halt, not by the design of those whom he calls adversaries, but because of the lack of vision of his predecessors who ended up in the doldrums, as he will, because they refused to address the problems of the reality of today.

The sharp contrasts that are the trait of Mexico today can be resolved and President López Obrador possesses the legitimacy to face up to them, but his project is blind to the political and economic reality, as well as the enormous complexity, of Mexico in the 21^st century and the tremendous potential of the citizenry in all corners of the country. Returning to the impoverishing authoritarianism of the past will achieve nothing more than destroying what little advancement there has been, without building anything better along the way. But the President is not willing to consider alternatives, even those that fortify his probability of effectively eliminating those ancestral ills.

Faced with this, the citizenry must opt today, with its vote, between ratifying the path adopted by the President or constructing another way out in the form of effective counterweights that compel the population to assume its own responsibility implicit in that definition of the country’s future. Let us vote!

www.mexicoevalua.org
@lrubiof

WILSON CENTER, Mexico Institute
6/1/2021

  By Luis Rubio

An old aphorism holds that nostalgia is not what it used to be. However, it constitutes a heavy burden that never quite disappears. Two sources of nostalgia cloud Tyrians and Trojans in current Mexican politics. AMLO leads with his nostalgia for the 70s, the idyllic moment in his memory when everything was marching wonderfully and, in his words, where people “lived well.” Recreating that idyllic past became his mantra and the raison d’être of his government. But other nostalgic people want to return to 2018 when everything was fine in their own mythical image. For this other group, everything worked immaculately until today’s President López Obrador arrived to spoil it. Like all myths and all nostalgia, both are false archetypes that will never produce a better future.

The presidential project is leading Mexico to a caricature of the PRI past, albeit a dangerous caricature. The presidency of yesteryear was most powerful since it had instruments at its disposal, beginning with the PRI itself, which conferred upon it a structure of political control that facilitated the effective implementation of governmental decisions. But the PRI was not a mere malleable mechanism that simply responded to the president: it was a bargaining apparatus that, in some sense, could limit the worst excesses of the presidents. There is no such mechanism today, and the president acts as if there is no limit to his power. Of course, reality is an inescapable counterweight, but its impact is often delayed. The question is how severe the damage inflicted by a hyperactive president will be, particularly as he believes that he can dismantle what has been built by an entire society over time without consequence.

The group of nostalgic people about the near past is scattered and shapeless. Although some of those who seek to organize the political parties and groups opposing the current government to form a common front raise the notion that all that has to happen is a return to 2018, many long for that idea and harbor the hope that on election day the return to the much-desired stadium will begin. Among these are activists from the various opposition parties, people in business, and not a few opinion-makers. The problem is that there is nowhere to return to: first of all, that past was not as commendable as these advocates now want Mexicans to believe; and second, the mere pretense of returning entails contempt for the millions of voters who in 2018 spoke out clearly against the status quo ante. For me, there is not the slightest doubt that the vote that elevated López Obrador to the presidency was much more a rejection of what already existed than an endorsement of a project that had no structure or plan beyond nostalgia.

The country was not going well. The two moments of great expectations -first with President Fox (2000) and then with Peña Nieto (2012)- ended in a huge disappointment that translated into democratic disenchantment. Precisely the values ​​that López Obrador knew how to capitalize with enormous skill, partly because of his biography, but much because he managed to convince an electorate fed up with promises without positive results that the problem was the person: AMLO would be different because he was not corrupt, not because he had a better plan to move ahead.

 There is nowhere to return to, but, as of yet, there is no alternative project that is positive, hopeful, and viable in the current Mexican scene for the electorate to envision a better future. The highest cost of the failures of the reforms in recent decades and, especially, of the unfulfilled promises so far this century is that the willingness to visualize opportunities, debate proposals, and reach solutions without attacking and disqualifying other people or views has disappeared.

It remains to be seen how the current government will end. As in all administrations, the first couple of years fly without too many setbacks because the hope persists that their plans and decisions will translate into positive results. Soon, however, things change, as it is already beginning to happen to the current government. Hopefully, the damage that this government will cause will not be worse than what has already been, but there is no way of knowing since the destructive capacity of the president and his activist groups is vast.

After the 1982 debacle, in which another failed president tried to repair (or hide) his mistakes by expropriating the banks, it took more than a decade for the country to return to the path of growth and trust. This was achieved thanks to some reforms, but above all to the willingness of the United States to support the Mexican process of change through NAFTA. That option no longer exists today because it was exhausted due to the lack of deep reforms and results, the very same that discouraged the electorate and led to today’s government.

The future lies looking ahead, not in the past. The coming election of June 6 is critical for there to be a future because without counterweights Mexico will end up in the doldrums. But a promising future will only result from a hopeful and realistic new vision, the opposite of the nostalgia that today reigns in the government and the opposition. The “nostalgia trap,” García Márquez wrote, takes away the bitter moments and paints them in another color. But it is still a trap.

Luis Rubio
Mexico Institute Advisory Board Member; Chairman, México Evalúa; Former President, Consejo Mexicano de Asuntos Internacionales (COMEXI); Chairman, Center for Research for Development (CIDAC), Mexico

https://mexicoelections.weebly.com/op-eds/mexican-nostalgia

Luis Rubio

Next Sunday will be a key day for the future of Mexico. It is the day on which the electorate will decide whether it will vote for the existence of counterweights to power or whether it will ratify the course that, step by step, the president has been leading Mexico toward the total concentration of power on a sole person who, in a single instant, could convert it into tyranny. For Karl Popper, one of the great philosophers of the XX century, what is essential for democracy is that the government not abuse the citizenry, thus the existence of checks to power. The nodal question for the voters is whether it will be possible to render this minimal definition of democracy effective.

What is at play next Sunday has nothing to do with President López Obrador, his attributes or style of government. The essential principle of democracy rests on the existence of checks on power son that nobody could abuse, regardless of his or her values or objectives. The issue has everything to do with the type of country that Mexicans want to experience and with the sources of certainty that are necessary for guaranteeing political stability and economic viability. The decision-making manner of the president, his constant warning to his party’s benchwarmers regarding not “changing even a comma” of his legislative bills, and his threatening discourse against the Supreme Court justices depict a leader who wants all the power for himself without relinquishing any space to the cardinal function corresponding to each of those branches of government, as counterweights and as protectors of last resort of the essential rights of the citizenry.

Voting for the Morena party or its acolytes implies advancing toward the risk of tyranny. Neither more nor less. On ratifying the Morena majority, the world changes because nothing that existed prior to that will continue to be valid. Throughout the last two and a half years, Mexicans have been observing that, one step at a time, liberties have come to be restricted or jeopardized, the arbitrariness of the government’s acts increases, legislation is modified without the slightest attempt to court the opposition toward arriving at a consensus, or widespread support for the presidential initiatives and decisions are made that directly affect the creation of new enterprises, sources of employment or opportunities for the country’s development. In a word, the country has been losing the few sources of certainty that there were, as keenly reflected in the meager performance of the economy across the board and in the current unemployment levels.

The president has done everything possible to convert this election into a referendum of himself. He does this because he wants to exploit his personal popularity as a calling card so that voters arrive at a decision at the ballot box, with no meditation whatsoever, in favor of the candidates of the party that does not “change even a comma” of the presidential initiatives. Each citizen should ask themselves where the logic is in electing representatives whose sole undertaking would be to occupy their seat in the House to raise a finger when instructed by the Head-of-State. As citizens, the key lies in there being the conditions that impede excessive or absurd decisions that negatively affect the people’s and the country’s well-being and for which the only thing that works is the existence of effective counterweights. There is no other way.

His decisions, above all his way of arriving at them, explains why it is so important for counterweights to exist. Each of his initiatives and actions have acquired a personalistic logic, a desire to recover an elusive past, and an implacable fancy for nurturing his clienteles. Every time I think about his mode of acting and coming to decisions, I imagine merchants who promise miracles impossible to come true.

So suggests the following anecdote:

In his comedy “The Knights”, Aristophanes presents the Athenians as a fundamentally good but bewildered old man who was tricked by the demagogue Cleon. The wise men of the epoch opted to postulate a sausage maker (the most repugnant profession imaginable) to run against Cleon in the popular vote. The two candidates sustain a public debate, in which the sausage stuffer shows himself to be even more vulgar, swaggering, egotistical and loutish than Cleon, accusing the latter of preposterous crimes and finally winning the debate by pledging free gifts that could never be defrayed by public funds.

The central characteristic of the government has been great and fallible promises focusing on grand projects (such as the Airport, the Train, and the Refinery) and his interminable thirst for increasing transfers to his clienteles which, as Aristophanes insinuated, cannot be fulfilled. The existence of counterweights would have thwarted those excesses.

An open and democratic society endures and is nourished by the existence of diverse positions and opinions, a principle that López Obrador rejects out of hand. He fights every day against what, as Garganella says, is a fundamental factor of development: the right to protest and to find fault because this has to do with basic rights that permit maintaining the society and its qualities alive. The President has been eroding citizen rights one by one.

This election will decide whether he will continue abusing the citizens’ rights or whether he will be required to negotiate, as in any democracy, his priorities and actions with the representatives of all Mexicans, rather than merely imposing them upon those of his own affiliation.

www.mexicoevalua.org
@lrubiof

Luis Rubio

An old aphorism holds that nostalgia is not what it used to be. However, it constitutes a heavy burden that never quite disappears. There are two sources of nostalgia that cloud Spartans and Trojans in current Mexican politics. The president leads with his nostalgia for the seventies, the idyllic moment in his memory when everything was marching wonderfully and when, in his words, the people “lived well.” Recreating that idyllic past became his mantra and the raison d’être of his government. But there are also other nostalgic people, those who want to return to 2018 when, in their own mythical image, everything was fine, everything worked immaculately until today’s President López Obrador arrived to spoil it. Like all myths and all nostalgia, both are false archetypes that will never produce a better future.

The presidential project is leading Mexico to a caricature of the PRI past, albeit a dangerous caricature. The presidency of yesteryear was most powerful, since it had instruments at its disposal, beginning with the PRI itself, which conferred upon it a structure of political control that facilitated the effective implementation of governmental decisions. But the PRI was not a mere malleable mechanism that simply responded to the president: it was a bargaining apparatus that, in some sense, could limit the worst excesses of the presidents. There is no such mechanism today and the president acts as if there is no limit to his power. Of course, reality is an inescapable counterweight, but its impact is often delayed. The question is how serious the damage inflicted by a hyperactive president will be, particularly as he believes that he can dismantle what has been built by an entire society over time without consequence.

The group of nostalgic people about the near past is scattered and shapeless. Although some of those who seek to organize the political parties and groups opposing the current government to form a common front raise the notion that all that has to happen is a return to 2018, there are many who long for that idea and harbor the hope that on June 6, election day, the return to the much-desired stadium will begin. Among these are activists from the various opposition parties, businessmen, and not a few opinion-makers. The problem is that there is nowhere to return to: first of all, that past was not as commendable as these advocates now want Mexicans to believe; and second, the mere pretense of returning entails contempt for the millions of voters who spoke out clearly against the status quo ante. For me there is not the slightest doubt that the vote that elevated López Obrador to the presidency was much more a rejection of what already existed than an endorsement of a person or a project that had no structure or plan beyond the nostalgia and its rhetoric.

The country was clearly not going well. The two moments of great expectations -first with Fox and then with Peña- ended in a huge disappointment and disenchantment that translated into frustration and discouragement. Precisely the values that López Obrador knew how to capitalize with enormous skill, partly because of his own biography, but much because he managed to convince an electorate fed up with promises without positive results that the problem was the person: he would be different because he was not corrupt, not because he had a better plan to move ahead.

There is nowhere to return to but, as of yet, there is no alternative project that is positive, hopeful and viable in the current Mexican scene for the electorate to envision a better future. The greatest cost of the failures of the reforms in recent decades and, especially, of the unfulfilled promises so far this century, is that the willingness to visualize opportunities, debate proposals and reach solutions without attacking and disqualifying other people or views has disappeared.

It remains to be seen how the current government will end. As in all administrations, the first couple of years fly without too many setbacks because the hope persists that their plans and decisions will translate into positive results. Soon, however, things change, as it is already beginning to happen to the current government. Hopefully, the damage that this government will cause will not be worse than what has already been, but there is no way of knowing, since the destructive capacity of the president and his activist groups is vast.

After the 1982 debacle, in which another failed president tried to repair (or hide) his mistakes by expropriating the banks, it took more than a decade for the country to return to the path of growth and trust. This was achieved thanks to some reforms, but above all to the willingness of the Americans to support the Mexican process of change through NAFTA. That option no longer exists today because it was exhausted due to the lack of deep reforms and results, the very same that discouraged the electorate and led to today’s government.

The future lies looking ahead, not in the past. The coming election of June 6 is key for there to be a future, because without counterweights Mexico will end up in the doldrums. But a promising future will only result from a hopeful and realistic new vision, the opposite of the nostalgia that today reigns in the government and the opposition. The “nostalgia trap,” García Márquez wrote, takes away the bitter moments and paints them in another color. But it is still a trap.

www.mexicoevalua.org
@lrubiof

Luis Rubio Ph.D.
Chairman, Mexico Evalua
Woodrow Wilson Center Global Fellow

The US-China-Mexico Triangle: a strategic assessment

 Testimony Before the U.S.-China Commission Economic and Security Review Commission
May 20, 2021

After four decades of extraordinary transformation, no one can doubt the enormous ambitions of China as a world power. This transformation was dramatically aided and abetted by the retreat launched by President Trump over the past four years, leaving it fertile ground for the political and strategic, as well as economic, expansion project it is building throughout Asia and Africa. Its aspiration to recoup its importance as a world power has further reached Latin America, where its presence has grown exponentially over the past two decades.

Mexico has been spared much of that process, and thus constitutes an odd character in this general picture. However, in a rapidly moving world dynamic, this picture has begun to change, and it is Mexico, not China, that is introducing new elements into the bilateral relationship. Yet more important, it was Trump’s threat to do away with NAFTA that triggered Mexico’s approach to China.

NAFTA’s importance for Mexico can hardly be overstated. More than a trade agreement, NAFTA was the main source of legal and political certainty for the country’s development ever since it came into force. In a country with a weak legal system and similarly frail institutions, and a propensity for every new government to attempt to reinvent the wheel, NAFTA became a bastion of legality and thus certainty for the future. Although not perfect and surely in need for an upgrade, the trilateral trade agreement that came into operation in 1994 was critical in compelling Mexico’s governments to stay the course in economic policy and pursue the gradual integration of the three North American economies. USMCA upgraded NAFTA but stripped the legal components inherent to the earlier trade agreement that made NAFTA so transcendent. In so doing, it opened up a Pandora’s box, which has a lot to do with how Mexico began rethinking its relationship with both the US and China.

Three elements were changed in the renegotiation of NAFTA. First, the new agreement was stripped of the legal protections to investors in the industrial sector, Mexico’s largest engine of growth; second, USMCA expires every six years, which means that it does not provide long term certainty. Much more important, the mere fact that the United States was willing to do away with the main source of stability and certainty for Mexico’s gradual evolution towards an open market economy and a thriving democracy, radically changed the political equation in Mexico. In one word, NAFTA was a straitjacket that forced Mexican governments not to stray away from the established course. By threatening NAFTA, President Trump unleashed a series of forces that had long wanted to distance Mexico from the US. For President López Obrador, Trump’s actions constituted the opportunity to rethink Mexico’s standing vis-à-vis the world as well as its long-term perspective without being blamed for it.

Mexico and China in a geopolitical context

Mexico is located in a geopolitical zone distant from that of China, which has conditioned much of the historical nature of the bilateral relationship. In plain terms, this has entailed a cordial diplomatic relationship but not close political or diplomatic ties. The paradox in recent years is that it was the attitude of the U.S. that began generating a mutual incentive to explore common alternatives. In addition, since 2018, a change in political vision in Mexico has helped advance a radically new perspective on what can be termed a new “geopolitical triangle,” namely: the US, China, and Mexico.

Historically, Mexico always sought diversification away from the United States. However, since the mid-1980s, Mexican governments began to realize that it was closeness to the US that could help Mexico achieve its development goals. This despite the obvious cultural, economic, political, and historical differences and contrasts that characterize these two nations.

For three decades, both nations, the United States and Mexico, worked together to address the multiplicity of issues that characterize the mutual border and that inevitably are the source of potential conflict. In this vein, two mechanisms were agreed upon in 1988 that made it possible to address problems without generating diplomatic crises. One was a common vision about the future (one of eventual convergence), regardless of the differences in perception about the implied timeline to reach it. The other was an agreement on the principle of compartmentalization, which allowed managing this complex relationship without causing endless conflict and the publicity that this brought with it. This worked well until Donald Trump’s arrival to the White House in 2017.

President Andrés Manuel López Obrador has long been a critic of both the economic policies of the previous decades and of his nation’s closeness with the United States. In the absence of a change in America’s position on NAFTA, his options to shift course would have been limited. However, his coincidence of vision with President Trump gave him the opportunity to devise a potentially new course for Mexico.

To begin with, the two presidents had in common a stark disapproval of the two principles that had prevailed in the management of the bilateral relationship since the 1980s. They disagreed on both the common vision and the principle of compartmentalization. In fact, they implicitly agreed on the opposite: distancing the two nations from each other and, rather than addressing the inexorable manifestations of conflict that stem from such a complex border, they sought to avoid the conflict altogether by negating its existence.

For Mexico’s President, that was an ideal arrangement, for it matched with his objective to reenact the old, twentieth century Mexican principle of distancing the country from the United States. Implicit in that perspective is the objective to diversify relations with other nations, especially with China and Russia. This is not a power play or a strategic, geopolitical ploy, but a domestic-driven objective of maintaining internal unity through opposition to the neighbor to the north. This is an old tactic that, for many years, served a useful political purpose. It is doubtful that, given the depth of the bilateral relationship both at the economic and peoples’ level, such a strategy could deliver any visible benefits.

On China’s side, it is important to realize that, as clear in its objectives and policies as China might appear, its actual behavior is, in the words of Philip Orchard,[i] “an odd combination of rising confidence and a permanent crisis mentality.” This impacts its behavior on a permanent basis and, as it pertains to Mexico, is probably an important source of the ups and downs that the bilateral relationship shows. Obviously, it also impacts everything else it does on every issue and front. However, this does not alter the relatively modest objectives of the current Mexican government, which largely sees China as a vehicle for its domestic agenda.

China’s perspective on Mexico

China has long had a keen geopolitical perspective on Mexico. If one looks at the investment patterns of its companies or at its diplomatic overtures, what is noticeable is the fact that these are few. Compared to Brazil or Peru, to cite two obvious examples, China has understood Mexico as part of what could be termed the American sphere of influence, and thus not a country of prime interest, despite its relative size.

Two circumstances altered this picture: on the one hand, the new U.S. tone under the Trump administration, which re-opened discussion within Mexico concerning the elevated concentration of economic ties with the U.S.  It is important to state that this rethinking took place before President López Obrador came into office. The context was a series of protectionist actions by the Trump administration and, especially, the threat to cancel NAFTA, that triggered demands to review the country’s national priorities.

On the other, on China’s side, its new assertiveness stemmed from its drive to exploit what it perceives to be growing American weakness. Establishing new geopolitical realities thus became its own national priority. China’s clarity of vision contrasts with the lack thereof in the United States and, as it pertains to Mexico, has provided an opportunity for Mexico’s government to attempt to diversify. Yet, if one looks at the numbers, these diversification efforts are tiny, inconsistent, and much more symbolic than substantive. Also, they are probably not devoid of potential opportunities for corruption.

Mexico has had a long relationship with China: from the establishment of diplomatic ties in 1972, the political relationship has been profound, albeit not so the economic one. Despite Mexico being the second largest Latin American economy, its trade with China is one of the smallest with the Asian giant. In 2018, two-way trade between both nations amounted to US$90 billion. China was Mexico’s fourth biggest export market in 2014 and second biggest import trading partner. Mexico’s exports to China amount to US$5 billion each year while Mexico’s imports from China amount to US$66 billion with a difference of US$61 billion in China’s favor.[ii] Several Chinese multinational companies operate in Mexico such as Hisense, Huawei, JAC Motors, Lenovo and ZTE.[iii] At the same time, several Mexican multinational companies operate in China such as Gruma, Grupo Bimbo, Nemak and Softtek.[iv] At more than US$677 billion in yearly two-way trade across the US-Mexico border, these figures dwarf Mexico’s economic ties with China.[v]

China’s ambitions in the world include Mexico, but it is only lately that Mexico began courting Chinese investment. Although the numbers are small, their relevance is political. The Mexican government has contracted Chinese firms to participate in the construction of the flagship Maya train project and the Dos Bocas refinery, while China’s State Power Investment Corp. has acquired Mexico’s largest independent renewables company. In previous years, Mexico contracted a Chinese company to build a fast train between Mexico City and Queretaro, but the project failed, as did a trade center, Dragon Mart, in Cancun.

Beyond the stable, albeit shallow, political and diplomatic bilateral ties, the China-Mexico relationship ought to be understood within a US-China-Mexico triangle. It is the Unites States that, indirectly, implicitly, and usually without realizing it, drives the relationship. On the Chinese side, China benefits by challenging the American hegemony in the region, and, on the Mexican side, it fuels its drive to diversify away from the United States, though, so far, mostly in a symbolic way.

NAFTA -now USMCA- and China

Mexico’s composition of trade does not lend credence to the notion that China has been using Mexico’s duty-free access to the United States as a vehicle to sidestep existing restrictions imposed by the US to Chinese exports. In addition, not all of Mexico’s exports to the US enter as tax-free goods: major industrial companies, especially those involved in integrated supply chains, have become extremely deft at separating their intra-company exports that comply with the rules-of-origin required by USMCA from those that do not, the latter paying duty on entering the US. Some of those exports go through as items within the USMCA rules, others go through normal trade rules, paying their respective duty.

For its part, China was the United States’ main trade partner in 2018, accounting for 15.7 percent of the total US trade. It is the top supplier of the US economy, with a 21.1 percent share of all US imports, up from a share of less than 3 percent 30 years ago. However, China buys only 7 percent of that country’s exports. This difference resulted in a trade deficit of close to US$415 billion dollars in 2018.

During the first quarter of 2019, Mexico surpassed Canada and China to become the top trade partner of the US, with 15 percent of the total US trade. China’s share was down to 13.1 percent during the same period in 2019. The US allocated 6.4 percent of its exports to China during the first quarter of 2019, a number that is 1.6 percentage points below that of the same period in 2018.

In terms of imports, during the first quarter of 2019, 17.7 percent of US imports came from China, down from the 20.5 percent registered in 2018. The 2.8 percentage point’s variation in the demand for US imports equals 16.76 billion dollars, which is more than the total exports from Vietnam, the seventh largest US supplier, during the first quarter of 2019. In 2019 Mexico grew its share as a US supplier, reaffirming its position as the second largest supplier worldwide, with a 14.5 percent share of the total US imports.[vi]

The dynamic of North American trade over the past three decades has involved the rapid development of vertically integrated supply chains. These “strengthened the competitiveness of U.S. companies and helped Mexico accelerate its diversification of exports and imports. Vertical specialization was used in manufacturing production maquiladoras (Mexico’s export-oriented assembly plants) across the U.S.-Mexico border: maquiladoras use large amounts of imported materials produced in the United States and assemble them into the final product, and then export most of the final product back to the United States with duty-free status. Vertical specialization has allowed the United States and Mexico to leverage their economies by collaborating in the manufacturing and assembly of various products, including automobiles, computers, and electronics. Mexico is now one of the largest auto manufacturers in the world, producing almost 4 million cars per year.”[vii]

The original Transpacific Partnership (TPP) was meant to address two objectives: one was to upgrade NAFTA without focusing on a direct renegotiation among its three partners. The other was to effectively, create a free trade zone in the Pacific region to strengthen America’s ties with its Asian trading partners other than China. TPP entailed a strategic vision that matched the notion of an American-led world order of yesteryear. By abandoning it, the US wasted a major opportunity to achieve these two key objectives. Four years later, the political context has changed, but not the transcendence of the original goals, in both the Pacific region as well as in North America.

As it pertains to Mexico, no objective assessment of the trading and investment patterns of Mexico with the rest of the world could conclude anything other than its primary trading and investment relationship is with the United States. The aim of developing and expanding new markets is natural, but given today’s integrated supply chains, there is nothing that suggests that the essence of these facts will be altered anytime soon.

Despite what some Mexican politicians might claim in their rhetoric, the fact is that the US constitutes the main engine of growth of Mexico’s economy and its strongest source of stability, both economic as well as political. More important, the closer and deeper the level of integration, the more difficult it becomes to alter these patterns. Furthermore, USMCA would not have been concluded without the active participation of President López Obrador. This was the case both to conclude the negotiations themselves, when he had just been elected president, but before his inauguration, and later, during the process of its ratification by the US Congress. Hence, it is critical to separate rhetoric from substance and, no less important, preferences from realities.

China’s influence in Mexico

China and Mexico have increased cultural and political exchanges in the past two years. Although the leaders of both nations have paid visits to each other for many years and signed cooperation agreements of various types, it is only recently that Mexico has made a concerted effort to upgrade such ties. The driving force for these ties is twofold: one, as has been mentioned, is a belated response to Trump’s degrading of NAFTA; the other is a politically motivated attempt to distance Mexico from the US. The numbers show that this remains largely a symbolic relationship, but China is a long-game player and may be hoping to take advantage of the current nature of Mexico’s government to increase its influence over the long term.

Roman Ortiz argues that “A significant increase in Chinese influence over Mexico would have strong implications for U.S. security. Washington has, until now, maintained a ‘special relationship’ with its southern neighbor in terms of security cooperation.”[viii] Limited economic ties have meant weak political relations between the two countries, and while Chinese and Mexican leaders have exchanged visits periodically, diplomatic dialogue has lagged behind that of other Latin American countries. Although Mexican government officials have called for a strategic partnership with China, the foundations for such a venture are weak. However, they do signal the underlying intent and that is what ought to be considered relevant from a strategic perspective.

Much more important than trade or cultural penetration, China’s influence in Mexico is particularly significant on two fronts: as supplier of inputs to the illegal drug industry often based in Mexico, particularly fentanyl; and as an illegal point of entry by Chinese migrants into US territory.

Chinese migration to the US through Mexico has grown exponentially over the past decade. Detentions at the border increased from 48 to 752 from 2015 to 2016, while the estimated illegal Chinese population in the US, the third largest, was assumed to be of three hundred thousand in 2016.[ix] These numbers would appear to be minor when compared to other nationalities, but it is their link with organized crime that is relevant.

On the drug front, Mexico has long been the largest single avenue of entry into the United States. Starting with marijuana produced in Mexico, almost a century ago, the Colombian mafias introduced cocaine since the 1950s. In the 1990s, Mexican criminal organizations took over the distribution business of South American drugs into the American market. In response to changing US demand, they have moved to synthetic drugs in the past decade. In contrast with marijuana, which was grown in Mexico, the only thing Mexican about synthetic drugs is the fact that they are manufactured in Mexico with mostly foreign raw materials, most of them of Asian origin, China being an important supplier. The significance of this is that the laboratories that produce these drugs establish themselves in Mexico since they face less risk of police interdiction than they would in the US. The latter touches at the core of Mexico’s vulnerability in this and other areas: lack of governance.

China has long seen Mexico through a geopolitical lens and acted that way: understanding that this is a triangular relationship regardless of temporary swings in mood by any of the parties involved. However, should the structural factors that tie the US and Mexico continue to weaken, it is to be expected that China would continue responding to Mexican overtures and exploiting every opportunity that presents itself.

The structural factors in the triangular relationship

China’s attractiveness to Mexicans stems largely from its size and exceptional ability to transform itself into an economic powerhouse in a generation. Not being the United States, Mexico’s powerful neighbor, adds to the picture. Much more significant is that Mexicans see themselves in the Chinese mirror and see, with envy, the lost opportunity that it has become. Very few Mexicans understand China or its nature. Yet, it stands out as a successful nation, which many Mexicans would therefore want to imitate.

Mexico’s attractiveness to China is twofold: on the one hand, it is a large country and a significant consumer market. On the other, it is another road of access to the largest market in the world.

Whatever way one sees it, the biggest factor in this relationship is neither Mexico nor China, but the United States. For different reasons, both China and Mexico see opportunities in each other that stem from the fact that the US is a natural and inevitable vertex in this triangle. And yet, the structural factors in this triangle make it clear that the drivers of this relationship are and will remain weak for a long time:

• In contrast with the United States and other developed countries, China is a nation that competes with Mexican products in the most diverse sectors; in fact, it has displaced entire industries, such as footwear, clothing, textiles, toys, and electronics.
• Mexico and the US produce different products (or similar products at different stages of the production process), thus sustain a naturally complementary economic relationship.
• As China reorients its economy towards consumption, the competitive nature of the Mexico-China relationship might diminish, which might open up opportunities for Mexican exports to its market.
• The size of the Chinese market today is unmatched by any other. India’s might one day be larger but, as of today, expanding into the Chinese market represents a potentially unique business opportunity.
• In economic, political, and military terms, China is a rising power that, in the long run, could rival the United States.
• In its consolidation process, China is building what has been called a “logistics empire,” through the construction of the One Belt, One Road initiative, to which it plans to dedicate hundreds of billions of dollars in the coming decades. Beyond logistics, it is a strategic project that entails top-down decision-making ability which contrasts with the decentralized nature of the United States.
• Some Latin American countries have been important factors in China’s growth plans, both as originators of raw materials and as markets. The rise and fall of economies like the Brazilian one in the last three decades exemplify China’s modus operandi: the Chinese remain a transactional power.
• China, as an emerging power, is challenging the so-called “world order” established after World War II, generating fear and rejection in the Asian region. There too, the United States is the factor of power that is being challenged.
• China’s strengths are obvious, but so are its weaknesses. It is a nation that has grown rapidly, but still suffers from the contradictions inherent to a country with extraordinary internal contrasts, an ageing population, and an authoritarian political system. Its challenges facing the future remain vast, both in terms of political stability as well as in surpassing the so-called middle-income trap, but so far it has proven capable of surmounting them. Should it succeed without altering its political system, the lesson to the rest of the world would be extraordinary, to the detriment of democratic systems.
• In contrast with other Latin American nations, especially Argentina, Brazil, and Peru, Mexico has not been a significant exporter to China. The latter results, first and foremost, because Mexico’s economy is not a relevant producer of raw materials, grains, and foodstuffs. On the other hand, China operates under a clear geopolitical conception and does not deviate from it. From this perspective, its distance from Mexico (leaving aside failed projects such as the Querétaro-Mexico fast train and the Dragon Mart) is explained more by the closeness that Mexico has with the US economy -that is, a geopolitical logic- than a strictly pecuniary one.

China unleashes passions in Mexico. Some see it as a model to be imitated, others as a threat to their markets and the country’s wellbeing. Beyond emotions, the structural factors of this triangle explain why Mexico’s economy is so tightly aligned to the US. Politics, however, could distort the economic rationale.

The true challenge that Mexico faces has nothing to do with China or with the United States. It has to do with its own weak system of governance that produces frequent crises, those that NAFTA was meant to allay and did successfully for decades. In the absence of that anchor of stability, Mexico would have to develop its own sources of trust and stability. From this perspective, it is critical to understand that Mexico’s problem is not corruption, drugs, or violence, but the lack of governance duly anchored in the rule of law. NAFTA was meant to help advance and strengthen the rule of law, which it did, albeit for the modern economy only. The so-called “China card” is not more than a symptom of the absence of a proper structure of governance and legality.

Conclusion

Mexico’s aims in its overture to China are limited and more emotional than substantial. An objective assessment of the three bilateral relationships in this triangle reveals that both China and Mexico are exploiting an American vulnerability, albeit with different goals. There is no reason to conclude that there is, as of today, a concerted strategy to profoundly change existing patterns in this triangle anytime soon.

Mexico’s government is exploiting the current situation to distance Mexico from the United States, at least politically, to satisfy an ideological view as well as internal politico-electoral objectives. As such, it represents a small danger to the United States. However, should this turn into a pattern, the long-term implications could become important. Thus, the main conclusion is that it is the US-Mexico relationship that needs addressing, for China is not a challenge at this juncture.

Most important, in contrast with China’s keen geopolitical eye on every action it takes, Lopez Obrador has much more limited aims and those relate to being left alone by the Americans, not leading an earth-shattering break like Cuba or Venezuela did in their time. In fact, the only way a strategy meant to really transform the China-Mexico relationship would succeed is if were conceived within the relationship that Mexico currently has with the United States.

In other words, any future relationship would probably be within the US-China-Mexico triangle, which could easily be expanded depending on the way the US-China relationship itself evolves. By the same token, it is obvious that Mexico could be a natural beneficiary of disinvestments in China, but the Mexican government is doing absolutely nothing at this time to make this possible or help it along.

But the truly relevant strategic piece in the US-China-Mexico triangle is the United States itself, which has been absent for the last four years and shows no sign of realizing the challenges it faces in its southern border and is oblivious to the (relatively easy) alternatives at its disposal.

Recommendations for Congressional Action

Rationale

Two forces attract a Chinese presence in Mexico. One is the nature of the Mexican political system, where President López Obrador is looking to distance Mexico from the United States, even as he weakens internal checks and balances; the other is the transactional nature of the Chinese government. The connection between the two is an extremely weak system of government and governance which was designed, whether intentionally or not, to function through a network of corruption that made the government work. It is in this context that NAFTA was such an important factor in the gradual process of reform that the country was undergoing. The core of my recommendations has to do with the quality and strength of Mexican governance, for therein lies the key to a stronger southern neighbor and border, as well as a lesser participation of China in the region.

1. First and foremost, strengthen ties between the two countries

The strongest supporters of democracy in Mexico are also the most reliable friends of the United States. Many of them are former students of American universities. The virtuous circle never fails, and it must be deepened and expanded in every area of life and the economy. There is no better antidote to Chinese interference than a citizenry that feels comfortable with its neighbors, on both sides. Hence, getting Americans and Mexicans to know each other better and eliminating sources of conflict is in both nations’ long-term interest.

Support all and every effort to continue reducing and eliminating obstacles to trade, investment and overall economic integration. Reinforce the supply chains among American and Mexican companies on both sides of the border. Help all efforts to increase students studying in each other’s country and increase scholarships to that effect. In a word, help both societies appreciate the others’ virtues. Foster active exchanges among judges, justices, legislators, regulators, and mayors. Promote workshops among teachers of both nations and fund cultural exchanges among actors, cooks and academics.

1. Help strengthen Mexico’s institutions

Mexico’s traditional political system was based on a strong presidency and a powerful political party that served both as a mechanism to channel disputes and conflict as well as a counterweight to the executive. Over the past three decades, a new system began to develop without a preordained design, but with a strong institutional and transparency bias. Since the 1990s, a strong credible supreme court was developed with proper anchors of independence and autonomy. A similarly autonomous national electoral authority and its respective tribunal was consolidated. An entity to make functional the freedom of access to information was founded, as were human rights commissions, a competition commission, a telecommunications commission, and several regulatory entities for the energy sector. These institutions gained standing and credibility over time. As of two years ago, all of them are under attack. Some have been eliminated, others neutralized, and most have been packed with individuals who are loyal to the president and usually neither independent nor technically competent.

Help strengthen these institutions and entities by exposing their growing weaknesses and supporting independent non-government organizations that are in the business of assessing, exposing, and improving the quality of these institutions and provide them with strong political backing. Foster and fund the training, professionalization, and capacity building of analysts and activists in the anti-corruption and transparency fields, preferably by observing best practices and ethics in American public and private institutions.

1. Help the adoption of digital technologies that do not support authoritarian practices

China’s (and other) technologies are a perfect match for a government bent on exerting increasing control over the population. These technologies have been used to persecute political rivals, independent institutions, and reporters. Instead of persecuting and prosecuting criminals and organized crime in general, these technologies have been diverted to use against political rivals and independent entities.

Support local and international efforts to combat the use of these technologies, expose their existence and help the growth of a strong liberal-democratic citizenry. Support independent institutions in the human-rights arena, those advancing democracy, and, especially, those developing better governance practices.

1. Support the fight against corruption, authoritarian technologies, and insecurity

As I argued, Mexico’s true challenge is one of governance. The efforts of the past three decades to develop a modern system of government, accountable to the people, failed because the core of the old political system never changed, the nature of its pervasive corruption (from the bottom up) was never altered, and all efforts to improve security and the system of justice never took root as they did not address the needs of the population. Instead of anchoring security from the lowest municipal level to the federal government, all effort, many of these actively supported by the US, were imposed from above, using the army rather than investing in local police forces and the local justice system. In a word, as imaginative and well-meant as many of those efforts were, none recognized that the problem was the basic structure of governance of the country.

***

China is an active player because it supports the status quo: sells technologies that can be used to control the population; and is willing to employ corruption methods to advance its objectives (and, in that, matches the nature of Mexico’s political system and practices). It finds in Mexico a potentially rich environment for its expansion because of the country’s weaknesses.

Mexico is a weak link in the North American region. Supporting a rapid transition to a stronger democracy is in the United States’ best interest not only to limit the growth of China’s presence in the country, but also to reinforce the North American region and the US’s weakest border. A more democratic and open Mexico was at the core of the NAFTA project. It is high time to rethink it and develop a more forceful approach to reach the objectives that are today as valid and relevant as they were when that program was first conceived in the 1980s.

Bibliography

Agendasia and Comexi, Hacia una agenda estratégica entre México y China, Comexi, México 2019 http://consejomexicano.org/?s=seccion&id=58

De la Calle, Luis, Tensiones Comerciales EEUU-China: Impacto sobre México, Comexi, Mexico, 2020, http://consejomexicano.org/index.php?s=contenido&id=5700

Ortiz, Roman, Mexico, China & the US: A Changing Dynamic, https://www.americasquarterly.org/article/mexico-china-the-us-a-changing-dynamic/

Runde, Daniel F, Sandin, Linnea, Opportunities for the U.S.-Mexico Economic Partnership under the Biden and AMLO Administrations, https://www.csis.org/analysis/opportunities-us-mexico-economic-partnership-under-biden-and-amlo-administrations?gclid=CjwKCAjw7diEBhB-EiwAskVi1-70ZwPp-KSh80y7CeG7Yx1T92OjQb-qTQoc4KmmVGucnUyyFZFG1xoCfbkQAvD_BwE