As some readers may have noted, Mexican president Andrés Manuel López Obrado (AMLO) has refused to recognize Joe Biden until the court challenges are completed. Some believe that AMLO’s slight of Biden will become an issue for the rest of AMLO’s presidency. AMLO’s term ends in late 2024. The economy and Covid-19 will preoccupy both governments for the next two years. For the United States and for México the economic interdependence will alleviate most of the discord between the two governments.
On the surface it may seem like AMLO is still kowtowing to Donald Trump be refusing to recognize Biden. He may be doing so to some extent. That is part of the problem in that AMLO has allowed himself to become beholden to Trump. Both Trump and AMLO were sidelined by the Covid-19 pandemic. AMLO’s ambitious political goals of reforming the Mexican state have faltered because of the economic crisis.
Since the adoption of the NAFTA, and now the USMCA, the economic interdependence between the United States and México has been so intertwined that neither country can afford to drop the other. The U.S. and México are not tied economically at the hip. Neither can afford to divorce the other.
In 2019, México became America’s largest trading partner. With imports and exports totaling over $600 billion, México had surpassed Canada and China. One-third of the world’s total gross domestic product (GDP) resides within the USMCA.
Although there exists a general notion that México remains poor, the reality is that México is one of the world’s “upper middle income” countries in the globe. This is according to the World Bank model of classifying the gross national product. There are seventy-nine other countries classified as such. The United States is classified as one of 80 high-income countries.
NAFTA and its new version, the USMCA has risen the Mexican economy steadily.
It is this economy that AMLO was hoping to capitalize to implement his ambitious reformation plans for México. However, the global pandemic and the migrant crisis derailed AMLO’s plans. AMLO mitigated the migrant crisis by allowing Trump to dictate the use of México’s newly minted national guard to act as an extension of America’s border patrol on México’s southern border. By tasking the national guard away from its intended purpose of controlling drug cartel violence, AMLO instead tasked them to be Trump’s border guards in México. The result being that cartel violence remains a problem for AMLO.
The Covid-19 emergency made matters worse.
It crashed the global economy.
México’s economy is expected to contract by almost 10% in terms of GDP because of the economic slowdown. It had grown an average of 2% previously.
Cross-border trade along the U.S.-México border has significantly declined because of the pandemic.
There has been an almost 20% drop of trade in Laredo this year. In El Paso, trade traffic has plunged by more than 50% through August of this year. Santa Teresa is down by about 24%. Nogales is down by about 17%, while Calexico, California is down by about 15% and Otay Mesa, California is also down by about 13%. Brownsville, Texas is down by 12%.
In August, México lost its first place as the largest trading partner to the United States when China surpassed it. Whether México recovers is yet to be seen.
Part of the crippling effect on U.S.-México cross border trade are the restriction placed by the Trump administration on travel across the border.
According to the Texas Tribune, El Paso officials are predicting a $60 million revenue loss this fiscal year. About 15% of the retail trade in El Paso is from Mexican shoppers. Eagle Pass officials have reported that bridge revenues have fallen by half.
Both AMLO and Biden will be preoccupied with the economic crisis in the coming months. Neither of them will allow AMLO’s slight to interfere with the economic recovery. Additionally Joe Biden is unlikely to address any U.S.-México geopolitical issues in the coming months unless another migrant crisis erupts or the narco-violence threatens the United States.
Categories: Border Economy