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Mexico: nowhere to go but up?

Tuesday, November 15, 2016


With a Trump presidency threatening to renegotiate or even terminate a free trade deal and reduce payments from Mexican workers in the United States to families back home, and with chronic domestic problems of violence and corruption, times look tough for Mexico

As far as bilateral relations are concerned, the United States is unlikely to pull out of the North American Free Trade Agreement.

On the other hand, any renegotiation which affects exports to the United States would likely have an impact on Mexican jobs.

Even if Mexico resists re-writing Nafta, the United States could curtail imports of Mexican products, by claiming that the factories which make them are in violation of local labor or environmental rules.

Between 2009 and 2015, Mexican exports to the United States exceeded U.S. exports to Mexico by more than $400 billion.

Then there is the threat of taxing remittances – payments sent home by Mexicans working in the United States.

In 2015, the value of remittances was $25 billion, greater than the value of oil production, and equal to more than 2% of GDP.

When it comes to domestic issues, especially drug trafficking, the rhetoric has softened, but not the reality.

Mexican authorities no longer refer to the “war on narcos”, which President Felipe Calderón declared at the beginning of his presidency in 2006, but the level of violence is much the same.

Mexico has at least three layers of police force, all of which have problems of poor training and widespread corruption.

Meanwhile, the armed forces, which see themselves as responsible for defending the country against foreign enemies, have shown little interest in waging a war on their own people.

On the political front, the governor of Veracruz State, Javier Duarte, last month resigned his post and disappeared in the face of allegations of corruption, as well as involvement in the murder of 12 journalists during his administration.

Duarte, together with the former governors of Chihuahua and Sonora, left behind them shortfalls in state finances of almost 100 billion pesos ($5 billion), which is more than the armed forces budget to fight organized crime and alleviate natural disasters.

With two thirds of Mexicans not trusting other Mexicans, according to recent polls, the future may look grim.

On the other hand, Mexico at this point may have nowhere to go but up.