Many political observers are scratching their heads as to why Andrés Manuel López Obrador (AMLO) wants to meet with Donald Trump as his first government to government meeting outside of México. López Obrador has refused to travel abroad during his presidency insisting on holding virtual meetings as he keeps to his promise of austerity measures. Trump and López Obrador are expected to visit sometime in July, although an actual date is yet to be set.
NAFTA 2.0 relabeled as the U.S.-Mexico-Canada Agreement (USMCA) is set to go into effect on July 1. The meeting between Trump and López Obrador is intended to celebrate the new agreement.
Trump has consistently attacked México and Mexicans since launching his presidential candidacy. Most recently, Trump has insisted that the U.S.-México border poses a threat to America because of the Covid-19 pandemic.
The anti-Mexican rhetoric and the wall has many asking why would AMLO want to meet with Trump.
AMLO, for his part, insists that the proposed meeting is about the USMCA because it “benefits” Mexicans. AMLO insists that he must do what “benefits” México, even it means ignoring Trump’s taunts against Mexicans.
The political elite of México is aghast at AMLO’s proposed meeting considering it “inopportune” because of Trump’s ongoing antagonism against Mexicans. Even AMLO’s party, MORENA has decried the meeting. Some are concerned that AMLO’s meeting with Trump will be reminiscent of his predecessor’s, Enrique Peña Nieto meeting, which many argue went badly for Peña Nieto.
To understand why AMLO wants to meet with Trump the reader need not look further than money.
No, it is not about Trump giving money to México nor is it about who is paying for the wall.
Rather, as AMLO points out, the economic interdependency between the United States and México requires a friendly relationship.
Mexico’s three major sources of national income are exports, remittances and tourism. In 2016, remittances surpassed oil as one of the top three revenue sources for México. Remittances are the monies sent from Mexican immigrants living abroad to families in México. That money trickles throughout the Mexican economy.
There is some debate as to whether exports should be counted as a single source of foreign revenues because exports are quantified as several individual categories of products, unlike oil or tourism. However, for the purposes of this post it is useful to look at exports as one category.
For AMLO to deliver on his promises to shore up Mexican income disparity and reduce violence he needs money. He was elected to deliver on those promises.
The National Balanced Budget Rule
México, unlike the United States, has two issues facing its ability to budget national expenses. The president is elected to a one-year term and cannot be reelected. In addition, the legislature is also refreshed each election cycle due to the rule prohibiting candidates from running in two consecutive elections.
The president, in this case AMLO, presents the budget to congress with their specific policy agenda driving the budget. Congress has a limited ability to modify the budget proposed by the president.
Both must adhere to the 2006 balance budget rule that requires the budget to be balanced. The United States congress allows the U.S government to operate on an unbalanced budget through discretionary spending caps. The Mexican government does not have that ability.
Money Is The Issue
Even before the global pandemic the Mexican economy was facing two problems. The first is the drop in oil prices because of the price war between Russia and Saudi Arabia. This was in addition to United States shale oil that further depreciated the price of oil.
Previous Mexican administrations neglected the oil industry and instead focused on NAFTA exports. PEMEX’s infrastructure was neglected because of the policy shifts, dwindling Mexican oil reserves and public corruption.
One of AMLO’s goals was to revitalize the oil sector to create jobs and bring in money. He also hoped to use the NAFTA regime to continue to generate income as well as tourism and remittances. Oil was going to deliver the extra cushion he needed to deliver on his agenda.
The second was the threat of ending NAFTA and thus ending the export economy for México. NAFTA was converted into the USMCA, or NAFTA 2.0 at about the time AMLO was going to take office. Thus, the NAFTA debacle was largely settled for AMLO. But the threat remains in the form of bringing back manufacturing the U.S.
But the global Covid-19 pandemic intervened on the grand scheme. The pandemic not only hurts exports because of reduced consumption, but oil prices plummeted as well, and tourism has all but stopped. The Mexican economy is now dependent on two sources: remittances and exports.
AMLO’s grand income equality agenda is stalled and violence is rising forcing him to redeploy the Mexican military back on the streets, albeit with reduced capability and resources, and in violation of his promise to end the military reign of fighting the cartels.
AMLO’s fear is that Donald Trump continues his America First agenda and forces American companies to retreat back to America. AMLO fears that the continued crackdown on undocumented immigrants will further erode remittances. AMLO fears Trump propping up the American shale oil industry keeping pressure on oil prices.
Most of all, AMLO fears time. AMLO is running out of time to deliver on his ambitious domestic policy of ridding México of poverty. His mandate runs out in 2024.
AMLO needs to kowtow to Donald Trump to keep his dream alive. Even if that means ignoring Trump’s war on immigrants and Mexicans. Even if that means pretending that Trump isn’t telling anyone that will listen that México is paying for the wall. Even if that means that AMLO is doing the dirty work of immigration control for Trump.
A History of Kowtowing To Trump
It is not the first time that AMLO kowtows to Donald Trump. During the migrant caravan crisis, AMLO redeployed the nascent national guard away from their mission to control drug cartel violence towards interdicting migrants on Mexico’s southern border. This left the drug cartels open to increasing violence across México as AMLO wants to deal with drug violence through “peaceful” means and thus took the military out of the drug cartel mission.
The result is the increasing violence across México.
More important is that the national guard’s redeployment stretched meager resources towards addressing an issue that was not Mexican, but rather a U.S. problem, the migrant surges. But by deploying the national guard to interdict migrants, AMLO gave Donald Trump the opportunity to claim victory on the immigration front.
AMLO’s reasoning is that by kowtowing to Trump he can focus on this domestic agenda.
Andrés Manuel López Obrador will meet with Donald Trump to keep his dream of equalizing income disparity in México at the expense of the national pride of Mexicans.