According to President Donald Trump, Mexico is “beating the US badly on trade” and a big part of the reason is Nafta. In truth, however, the real question is not why Mexico has benefited so much from Nafta, but rather why the economic benefits have been so small.
Of course, as President Trump likes to point out, it is certainly the case that Mexico’s trade surplus with the US has ballooned under Nafta. When the treaty came into force in 1994, Mexico actually ran a small annual trade deficit with the US of $1.3bn. But by 2015, this had shifted to a surplus of $67bn. What’s more, while the US runs a surplus in services and also earns significant sums on its investments in Mexico, these are more than offset by the outflow of remittances from Mexicans working north of the border. All told, Mexico’s current account surplus with the US was around $75bn in 2015. Read more
President Donald Trump laudably committed to making the US more secure, to better protecting the country against physical, economic and other threats which could be transmitted to it from Mexico.
In the 23 years I have worked in the defense sector, a fundamental and almost universal lesson is that security depends on cooperation, more than on any physical asset. Without the cooperation of the population, not even the most precise sensors and lethal arms can defeat an insurgency. Without interagency and international cooperation, actions against transnational criminal organisations only displace the threat. Read more
There’s little doubt that Mexico’s government and private sector have been working overtime to increase global trade.
A recent report by the World Economic Forum and Bain & Company spelled out a host of efforts either completed or underway. Among the many: the Secretary of Economy (SE) eased the import-export process and lowered the transaction costs associated with importing goods that are inputs for export products. The Mexican Tax Administration reduced the time it takes to issue import-export permits and simplified the tariff code identification system. Read more
As 2015 draws to a close, Mexico and the UK can look back on 12 months of enriching exchanges as part of their Dual Year, originally conceived as a cultural initiative but subsequently expanded far beyond to areas including trade, investment, tourism, education, science and innovation.
Throughout the “Year of Mexico in the United Kingdom” and the “Year of the United Kingdom in Mexico” both countries have combined efforts and seized an historic opportunity to consolidate economic progress. Two main goals have been achieved: the doubling of bilateral trade to $7bn, and achieving the figure of half a million Britons travelling to Mexico yearly, a number that, taking into account the importance of tourism for the Mexican economy, has resulted in a windfall of $17.5bn. Read more
Reform is a pressing need across emerging markets, especially as global demand remains weak and rising US interest rates threaten to increase funding costs. For countries to revive growth, they will need to create a more favourable environment for business. Politicians in many countries acknowledge this and have put structural economic reforms at the heart of their governing agenda.
But everywhere the outlook for reform is heavily dependent on political leadership and the larger political economy: where leadership and popular support for reform is strong – as in India – the outlook is positive; but where politicians are more interested in power than leadership – such as in Turkey and South Africa – the prospects for positive change are dim. Read more
By Eric Farnsworth, Council of the Americas
July was bad for Mexico, the month ending with news of a gangland-style murder of journalist Ruben Espinosa and four others in Mexico City. It was the latest in a lengthening line of journalists targeted and killed for their profession — 370 over the past 10 years, according to the Committee to Protect Journalists.
Coupled with the spectacularly embarrassing escape of drug lord Joaquín “El Chapo” Guzmán from his maximum security prison cell, as well as perceptions of corruption and self-absorption that continue to swirl around the ruling class, the political mood has turned sour. Headlines proclaiming that the 2012 election of President Enrique Peña Nieto would usher in “Mexico’s moment” seem long ago and far away. Read more
On Wednesday July 15, Juan Carlos Zepeda, the president of Mexico’s National Hydrocarbons Commission (CNH), announced the results of bidding for exploration contracts in 14 shallow water blocks in the Gulf of Mexico, the first time in over 75 years that production-sharing contracts have been awarded in the country. The results were eagerly awaited by energy industry analysts the world over. As the envelopes began to be opened, the president’s office and the CNH tweeted an inforgraphic stating that the process would be deemed a success if four to seven contracts were successfully awarded. Read more
For much of the past two decades, Brazil and Mexico seemed at times to be on a collision course. Diplomats from Latin America’s two largest nations were often preoccupied, if not obsessed, with a competition for an elusive role as regional leaders and players in the post-Cold War shifting global scene. The 2013 battle for the post of director general at the World Trade Organization, won by Brazilian diplomat Roberto Azevêdo over Mexican Herminio Blanco, a former trade minister, left plenty of hurt feelings. Ironically, the dispute for influence also led to convergence. The 2011 creation of the Community of Latin American and Caribbean Nations (CELAC), proposed by Mexico to affirm its Latin American identity and counter a perceived Brazilian effort to separate it from the region, was warmly embraced in Brasília as a way project leadership by promoting formats that excluded the US. Read more
On June 7, Mexican voters will go to the ballot box in mid-term elections that will be viewed as a test of the Enrique Pena Nieto presidency and of the ruling PRI party. Despite the many challenges facing the government, it is likely that the president and his party will pass that test by winning a majority in the national Chamber of Deputies, as well as a number of gubernatorial races across the country.
However, a few weeks after the electorate takes to the polls, the government faces another, more demanding examination of its most important achievement thus far: the opening of the nation´s hydrocarbons industry to private and foreign investment, when companies submit bids on the first batch of contracts under Round One. The outcome of that test is far from certain, and there endure substantial concerns in the oil industry over the contract terms that have been issued by the government to date. In fact, there is a growing sense that, unless the government makes major changes to the contract terms, few foreign companies will choose to participate on this occasion. Read more
A Pemex oil rig ©Getty
International oil companies are “polygamous” by nature, says Iván Sandrea, chief executive of Sierra Oil & Gas, the first Mexican exploration company to be formed since the country’s sweeping reform of the sector to open it to private investment.
So one thing the former Statoil executive is not happy about is the government’s insistence that bidders in the two tenders so far launched can belong to only one consortium. “I’ve never seen this in other countries,” he says. Read more
By Paul Shortell
Mexico’s electricity industry appears poised to outperform oil and gas in 2015. Ambitious plans to boost investment and increase production in the hydrocarbons sector, widely consider the poster child for President Enrique Peña Nieto’s wide-ranging economic reforms, have been complicated by the collapse of crude oil prices. State oil company Pemex recently reduced its estimate of investment this year by the oil and gas sector from $35bn to $25bn and may be forced to delay licensing of certain unconventional and offshore blocks. In January, more than 10,000 workers contracted by Pemex lost their jobs as the indebted company undertook new austerity measures.
Though not without its own challenges, the power sector shines by comparison. Read more
What’s the one good thing about Mexico’s consumer confidence being poor? It should help prevent the country’s weakening peso from fuelling inflation.
All eyes are on the peso at the moment, after monetary authorities launched a new intervention programme on Wednesday to try to calm volatility and ensure liquidity as the dollar goes from strength to strength. Read more
By Eduardo Bolio and Jaana Remes, McKinsey
Since the 1980s, both national and international observers have predicted time and again that economic growth in Mexico is just about to take off. But it hasn’t, and others have quickly gained ground and overtaken Mexico. In 1980, for instance, Mexico’s GDP per capita was almost double South Korea’s and 30 per cent higher than Taiwan’s. Today, South Korean per capita GDP is twice Mexico’s and Taiwan’s is almost three times as much. China, which had one-twelfth of Mexico’s GDP per capita in 1980 could surpass Mexico by 2018.
The important factors that stoke rapid growth in emerging economies exist in Mexico: a young and growing labor force, abundant natural resources, and access to export markets (in Mexico’s case a strategic location next to the United States and membership in NAFTA provide uniquely privileged access). In addition, Mexico has opened up its economy to trade and foreign investment, installed extensive reforms. Since 2000, it has also been able to boast sustained macroeconomic and fiscal stability. Read more
Mexico’s oil liberalisation is now well under way, with the tender of a second lot of oil assets – nine fields grouped into five blocks – now set to join the 14 that have already been announced. But do the country’s projections for future oil recovery add up?
The government is hoping that private investment in a sector closed for nearly 80 years under the monopoly of state oil company Pemex will succeed in turning around a decade of inexorable decline in Mexico’s oil output. Indeed, it has talked of adding 500,000 barrels per day (bpd) by 2018, when the government’s term is up. Read more
Good news: After weeks of political gridlock, Mexico’s three main parties have agreed a framework for a new anti-corruption system. It should be put to a vote in the lower house of Congress this week.
But the devil is in the details. Does it go far enough? Will it get watered down before it comes to a vote? And, the biggest question of all, will it stop corruption?
The jury is out. But before taking a look about what’s good and what should be better, it is worth remembering why Mexico so urgently needs a serious anti-corruption strategy. Corruption has long been an accepted part of life in Mexico. If you start digging, you will find it, says one political analyst – much like how the missing bodies of 43 students in the state of Guerrero has turned up other undiscovered mass graves. Read more
Director Alejandro González Iñárritu
Electricity market regulations may sound dry and complex. But for César Hernández, Mexico’s electricity undersecretary, these regulations will “move us to the type of institutions our country deserves to have”.
The unspoken message: Take that, Alejandro González Iñárritu!
The Mexican director created a domestic storm with his Oscar acceptance speech on Sunday night, in which he said: “I pray that we can build the government we deserve.”
The comment generated a much lampooned response from the ruling PRI party (the tone was “but we already ARE, haven’t you noticed?”) and sparked much Twitter discussion about what Mexico needed and deserved from an unpopular government under fire from conflict-of-interest scandals. Read more
Oil is popularly known as black gold. Now the world’s biggest miner of another shiny precious metal is jumping on Mexico’s ambitious energy reforms to get in on the dirty black stuff.
Alberto Baillères, head of Grupo Bal, which counts silver producer Peñoles y Fresnillo among its companies (as well as upscale department store the Palacio de Hierro), has launched a new oil company, called Petrobal. Read more
Just over a month to go, and Mexican car exports to Argentina and Brazil (which Mexico has overtaken as No. 1 Latin American car maker) should be back on track after a three year system of quotas. That’s the plan, at least.
Or rather, that’s the deal the three countries signed: March 15, 2015 would spell a return to free auto trade. Read more
By Joy K Gallup of Paul Hastings
The transformation of Mexico’s telecoms sector has begun. Reforms enacted in 2013 promise to transform the investment opportunities and market dynamics of the sector and have already had a major influence, managing the current market dominance of América Móvil through the regulatory actions of IFETEL and opening the sector to foreign investment. In the past few months we have seen fines and other regulatory decisions taken against the dominant players, including América Móvil’s subsidiaries Telmex (which controls 80 per cent of Mexico’s fixed-line telephone market) and Telcel (which controls 70 per cent of its mobile phone market). In recent days, AT&T completed the purchase of Mexico’s third-largest wireless company Iusacell for $2.5bn from Grupo Salinas, and announced an agreement to buy Nextel Mexico from NII Holdings for $1.8 bn (expected to close mid-year). So, what do these reforms mean for the future of the smaller telco companies in Mexico, such as Axtel, Alestra and Maxcom? Read more
Mayors fronting drug cartels, a union leader splurging thousands on cosmetic surgery, and a multi-million-dollar mansion reportedly gifted to the president by a federal contractor. Enrique Peña Nieto’s first two years in charge have not been short of scandals.
Peña Nieto was pitched by many as Mexico’s great reformer. Since taking office in December 2012, the Institutional Revolutionary Party (PRI) politician has achieved the seemingly impossible, ushering through a string of key economic reforms with a view to boosting investment, competitiveness, and growth. Read more