The Ticking-Bomb on the Southern Border

Those who observe Mexico and Mexican politics normally comment about the inherent nationalism that Mexicans tend towards. Sovereignty is on the lips of the Mexican politicians because the Mexican people have an inherent fear towards the giant to the north. Many, wrongly assume, that Mexican nationalism is a result of the many US invasions of Mexico and the lost territories. Although it is part of the Mexican psyche, it diminishes as new generations of Mexicans assert themselves economically and politically. This sense of nationalism is either lost with the outsiders looking in, i.e. the tourists in Mexico or they have a peripheral sense about it.

Mexican nationalism is often characterized as part of the unresolved loss of half of Mexico during the last US invasion. Unlike the United States, Mexicans are hampered by their sense of history. Mexicans look at the past as a guide to the future. The US, on the other hand, is a country dominated by a mentality of looking to forge new paths unhampered by the past. (credit Octavio Paz for articulating this) But it is not the loss of territories that Mexicans are consumed by, but rather the more recent history of the giant to north hampering Mexico’s progress.

There is corruption in Mexico and although it contributes greatly, it is not the only thing that hampers Mexico’s development. The giant to the north is also the problem.

Prior to 1976, Mexico, as a national policy, looked inward. It kept its economy isolated from the rest of the country. Mexico feared being lost if it opened itself up to the rest of the world. Buying cars or other consumables in Mexico, at that time, was expensive and availability was lackluster at best.

However, the Mexican Peso was stable. It was kept at $12.50 pesos to the dollar for over 20 years. The colossal to the north was both admired for its economic prowess and state-of-the-art consumables. But the fear of being gobbled up by the giant to the north was ingrained deep in the psyche of the Mexicans.

And then oil became a key national export for the Mexicans. The Mexican Peso was released from its artificial rate and allowed to free-fall against the US dollar. It jumped to $22.50 per dollar and by 1982 it was $148 for each dollar. Mexicans lost their savings and the Mexican economy went into tailspin. By 1993, the Mexican Peso was over $3,000 to the dollar leading to the financial creativity of creating the New Peso to float on the world markets on a more palatable exchange rate of 10-to-one.

The decades-long financial crisis created the technocrats, a financial class of Mexicans that took control of Mexico’s economy. They, along with Ronald Reagan, George H. W. Bush and Carlos Salinas de Gortari embarked Mexico upon a globalized economy. It wasn’t easy and the work has continued since NAFTA was launched in 1994. NAFTA has been controversial in both the United States and Mexico. Among the fears many Mexicans had was the decimation of the rural agricultural markets that had been part of the backbone of the Mexican existence for hundreds of years. They were right, the US mechanized agricultural industry destroyed the native Mexican agricultural industry.

The other fear for the Mexicans was the destruction of the Mexican culture by the consumer US culture. The siestas were almost immediately replaced with long hours at the maquila plants that began to dominate the Mexican landscape. The Tacos Beatriz were soon overwhelmed by the numerous McDonald’s that took over the country.

Although the hate for NAFTA is still overwhelming in Mexico, a funny thing happened, Mexico’s economy somewhat stabilized after the década perdida, or the lost decade of economic chaos. Mexico’s economy remained stagnant but stable. Mexico did not have any bank failures during the 2008 world-wide economic crisis. But the disparity in the population and the national growth rate has kept Mexicans in poverty. Trickle down economics allowed Mexico’s economy to move away from its dependence on the dwindling oil supplies and move towards a more diversified economy.

Today, Mexico has free trade agreements with 45 countries.

But the giant to the north is still too overwhelming for Mexico. Although Mexico embarked upon diversifying its economy by globalizing, it nonetheless became dependent on its worst nightmare – the United States of America.

It wasn’t intentional and as the 45-country list proves, Mexico did its best to diversify and not become dependent on the US.

Unfortunately, a globalized economy has a few dictums that are set in stone – just-in-time inventories and the mechanics of supply chains. Many understand that labor costs and looser environmental controls are magnets for manufacturing. But there is another stronger necessity, keeping costs down by producing just enough inventory to supply the need but not too much for it to languish unsold. The just-in-time inventory relies on a supply chain that delivers the products to the consumers at the time of the purchase. Logistically, Mexico was perfect for the largest consumer market in the world because the logistics of transporting a car, for example, across the border is much easier and cost effective then to put it on a container ship and wait for the car to make the trip across the ocean.

As a result, although Mexico has agreements with 45 other nations, logistically it has only developed the US market, both because of proximity and costs. A railroad track is much less expensive than a massive cargo ship traversing the ocean.

Mexico clearly understood this as it embarked upon opening its economy to the rest of the world but it has taken too much time to server the dependence on the largest economy in the world.

Neoliberalism is characterized by a small government, low taxation and an open economy. Many Mexicans today feel that the Mexican government does not do enough for the population. Social services are few and the basics are almost nonexistent. The rule of law is lackluster at best. Although corruption plays a part, the leanness of the Mexican public sector operating budget is also to blame.

Less government equals less ability to provide basics and social services as well as an inability to strengthen the anti-corruption infrastructure. Add to that the colossal to the north and Mexico is faced with three monsters at the same time. The dependence on the northern monster, the historical monster keeping Mexicans preoccupied with the next crisis, and an entrenched political culture of corruption that imposes its power through the subterfuge of misdirection and propaganda.

Most anyone today would tell you the Carlos Salinas de Gortari is one of the worst presidents, if not the worst, of Mexico. This is both from Mexicans and from people from other countries. His legacy is still controversial but the fact remains that he is the single most important element to NAFTA and neoliberalism for Mexico. Today, Enrique Peña Nieto suffers from some of the lowest popular ratings of his presidency and of other Mexican presidents. Today, he is vilified across Mexico.

However, Peña Nieto imposed some draconian measures that further moved Mexico away from its dependence on oil towards the larger globalized market place. Today, about 20% of Mexico’s economy is dependent on oil. Peña Nieto also took on rampant corruption in the Mexican educational system which has led to greater adversity from an entrenched corrupt system that wants to keep its power in place. The Mexican telecom system is about to be opened up as well, creating more economic opportunities but threatening the entrenched oligarchy in Mexico.

Contrast the oil reality in Mexico with the one in Venezuela, which has been in serious economic turmoil since at least 2014. Venezuela embraced a nationalistic mentality on focusing internally and antagonizing the free market world. The government of Venezuela embarked upon huge spending on social welfare programs funded by its oil economy. Venezuela’s economy is over 90% dependent on its oil exports. Except that the oil markets have been in turmoil since 2014. Crashing oil prices and overspending on social welfare programs has led to a chaotic country. Food supplies are expensive and consumables are unattainable for many in Venezuela today. The country is in crisis.

Imagine that instead of Venezuela it was Mexico? The difference is that Venezuela is not on the border with the US.

But, Mexico has diversified its economy away from natural resources and has kept government spending to bare minimums. As Mexico moved away from its dependence on oil it became more dependent on the giant to the north.

This was the fear that kept Mexico seeking more and more free trade agreements since NAFTA. Mexico understands it need to diversify but the reality is that it is easier to sign agreements then to change the limitations of logistics.

Neoliberalism allowed Mexico to develop and modernize as well as to weather international crises across the globe. It wasn’t easy or the best outcome but it has kept Mexico from becoming Venezuela.

But neoliberalism might now become the greatest threat to Mexico’s future, possibly its sovereignty and threatens to create a dangerous situation for the United States.

All because one element was thought impossible to become a reality – the election of Donald Trump.

The election of Donald Trump has put Mexico on the verge of economic collapse. It has created a scenario where the US would have to deal with a Venezuela right on its doorstep.

The most poignant thing about this issue is that Donald Trump has embarked upon a national policy of looking inward and closing off its economy to the rest of the world. The nationalistic fervor of the Donald Trump presidency sees the United States as first and the rest of the world as second.

It looks good on paper and across television screens but the world is made up of dynamic intertwined pieces that each has a cause and effect. As Trump moves one piece over, another collapses to replace it. Donald Trump is under the belief that forcing companies to abandon the global economic engine would result in greater job opportunities and that the consequences of this would only be felt by the Mexicans.

Under the US first doctrine, the consequences be damned because it is Mexico’s problem, appears to be his thinking.

Yet, this doctrine ignores a very fundamental problem. Will a wall, however large be able to contain a large population totally in chaos because the economy collapsed? Likely not because chaos removes all barriers. In times of crisis, it’s not about whether it is possible, but rather because survival demands it. A wall, no matter how tall, is just an obstacle to overcome. Survival overcomes all obstacles because it demands it.

Enrique Peña Nieto, for all of his faults, which are many, has a serious crisis on his hands. On one hand his ability to govern is being hampered by the political rhetoric of building a wall forcing Mexicans to put nationalism first over sanity and at the same time he is dealing with an economy that is on the verge of collapse.

This is the reality that Donald Trump is creating. For the many people who have called Mexico a failed state, that reality is about to become real. At that point, what will Donald Trump do?

Deploy troops to the US-Mexico border? As the chaos increases, will he order troops across the border?

Now look at all of this through Chinese, Russian and jihadists eyes. Do you now understand the inherent dangers?

It is not too late for Donald Trump to turn back the tide. Mexico has proven itself to be resilient. However, even if it survives the current financial crisis, the ongoing Trump attack upon Mexico has taken its toll on the people and on the government. Nationalism is taking over pragmatism and resentment is fostering the reemergence of AMLO.

Andrés Manuel López Obrador is as left as Nicolás Maduro, a disciple of Hugo Chavez, the architect of the crisis in Venezuela. Maduro, like Donald Trump, uses nationalism and channels populism to keep himself in power. Maduro rules Venezuela by decree. Venezuelans today are rioting for lack of food, rising prices on commodities and sky-high crime rates. Both Chavez and Maduro depend on nationalism, i.e. country-first dictums to keep opposition at bay. Just like Donald Trump is now doing. When those fail, they resort to conspiracy theories to distract from the crisis facing Venezuela.

As Peña Nieto continues to lose credibility in his ability to deal with Trump, AMLO will continue to rise as the next potential leader of Mexico. This, in itself, would also create a Venezuela-like crisis right on the US southern border because AMLO, like Trump wants nationalism first and other countries second. This time, however, there would be no buffer between the US, and the country in crisis.

Are you ready for this eventuality?

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