BIDEN’S ELECTION SIGNALS GREATER PREDICTABILITY IN U.S.-MEXICO RELATIONS
BY MONARCH GLOBAL STRATEGIES
The election of Joe Biden as the 46th president of the United States will bring greater predictability to U.S.-Mexico relations. It will also open the door to new opportunities for collaboration on trade and the always prickly issues of immigration and security, even as it creates the likelihood of increased conflict over the implementation of the environmental and labor provisions of the United States-Mexico-Canada Agreement (USMCA) and in energy policy. This is particularly true given Mexico’s efforts to favor state enterprises over private producers, including U.S.-based energy companies, often at the expense of clean energy projects.
U.S.-Mexico Relations
Under a Biden presidency, the U.S.-Mexico bilateral relationship will again operate through institutions rather than being driven by the force of individual personalities. It will no longer be poisoned by the anti-Mexico and anti-Mexican rhetoric that dominated much of the Trump administration. And the trade relationship will return to normalcy, no longer hostage to tariff threats intended to coerce Mexico into meeting U.S. policy demands on immigration and security matters.
That being said, there are apt to be new points of contention in the relationship. But this will be driven by policy differences, not personal disputes. Although Democrats strongly believe that AMLO’s visit to the White House in the middle of the presidential campaign was designed to offer Trump a campaign boost, and although they deeply resent AMLO’s decision to withhold a congratulatory call to President-elect Biden until the results are “official,” Biden will not punish AMLO or Mexico for this. Not only is this not in Biden’s nature, he also understands the importance to the United States of its bilateral relationship with Mexico and likely recognizes that AMLO would not want to anger Trump during the 2.5 months remaining in his presidency. He will not risk that relationship to settle a personal or partisan score.
But there will be policy disagreements. AMLO’s reticence to recognize Biden as the President-elect will reinforce efforts by congressional Democrats to pressure Mexico to meet its labor rights and environmental protection commitments under the USMCA. Biden is apt to respond favorably to these concerns, and to bipartisan congressional efforts to protect the rights of U.S.-based energy companies operating in Mexico. These firms insist that recent regulatory changes unfairly discriminate against their investments, breaking Mexican commitments under both NAFTA and the new USMCA. More broadly, the clean energy component of Biden’s proposed Latin American policy runs directly contrary to AMLO’s emphasis on promoting oil production at Pemex and the burning of dirty fuels in power production by CFE.
A Biden administration might pressure Mexico on questions of press freedom and democracy, which would be likely to elicit a strongly nationalist reaction from AMLO in defense of Mexican sovereignty. An additional point of bilateral tension is likely to develop this spring when immigration to the United States is expected to increase due to drier weather conditions and continued suffering in Central America, including dislocations caused by the series of hurricanes to hit the region this month, and to Mexico’s increasingly weak job market.
Under a Biden presidency, the U.S.-Mexico bilateral relationship will again operate through institutions rather than being driven by the force of individual personalities.
Still there are important areas where the two countries can collaborate. The trade relationship would benefit from a bilateral effort to reconcile national regulations and smooth bureaucratic procedures, including aligning national definitions of essential industries, a disjuncture exposed by COVID-19 shutdowns. The 1944 water treaty could be updated to adapt it to the challenge of climate change. And both countries have expressed interest in a development plan for the Northern Tier of Central America that would reduce migration by increasing regional growth, security, and stability.
Finally, a collaborative security relationship is still possible, despite the fallout from the October 16 arrest of former Mexican defense minister, General Salvador Cienfuegos, on drug trafficking and money laundering charges. Never before in Mexican history has a defense minister been arrested, despite a history of government-sanctioned corruption in the military. Equally important, the arrest took place in the United States on a warrant issued in April 2019, but AMLO was informed of the pending arrest only two weeks before it took place. There was no collaboration between the two countries in a case that has been an embarrassment for the Mexican military, a close ally of the AMLO government.
AMLO’s initial reaction was muted, merely insisting that the armed forces not be held responsible for the actions of one individual. Apparently facing pressure from within the army to protect the honor of the institution and broader Mexican sovereignty, AMLO ordered Foreign Minister Marcelo Ebrard to make clear to the United States (1) Mexico’s discontent at not having been informed sooner and (2) Mexico’s willingness to stop collaborating with the DEA on anti-drug efforts should the prosecution go forward. In response, U.S. Attorney General William Barr abandoned efforts by the U.S. government to prosecute Cienfuegos. For its part, Mexico has promised to investigate the former general and, if appropriate, bring charges against him. But at present, since U.S. charges against him have been dropped and Mexico has yet to charge him with a crime, Cienfuegos went free on his November 19 arrival to Mexico. And given the historical position of the military in Mexico, there are serious doubts that he will actually be prosecuted.
At the same time, the homicide rate in Mexico has reached new heights under AMLO, who has cut federal budget transfers for municipal police forces and focused a significant segment of the National Guard on curbing migration rather than fighting organized crime. Collaboration between the United States and Mexico in the battle against organized crime and drug trafficking has always been challenging. We expect this will be reinforced by a Biden administration focus on the entire bilateral relationship instead of his predecessor’s nearly exclusive focus on trade and immigration, albeit with a constant effort to cooperate with Mexico.
The Energy Sector
On October 22, a bi-partisan group of 43 members of the U.S. Congress sent a letter to President Trump complaining about unfair treatment for U.S. energy companies operating in Mexico. They argued that their experiences ran contrary to “the spirit, if not the letter, of the USMCA.” In reply, AMLO stated that he would continue to implement an energy policy that openly favors Pemex and the CFE over private firms. Indeed, he insisted that the only investments that matter to his government are public ones. He also vowed that his government would not break any law or treaty responsibility in its energy policy since the USMCA gives Mexico full sovereignty over its energy resources. Just the week prior, AMLO noted that, if it became necessary, he would consider a constitutional reform to ensure that Pemex and the CFE recovered their leadership roles in the Mexican energy sector.
Our reading of both NAFTA and the USMCA suggests that AMLO is mistaken about its provisions. The agreements effectively lock in the terms of the 2013 energy reform, prohibiting any backtracking on the part of the Mexican government. Firms may also turn to the agreement’s investor-state dispute resolution mechanism to protect their investments. AMLO is thus in a difficult position. His policy of prioritizing the distribution of CFE-generated electricity over private generators has been placed on hold by the courts, and now he may have to deal with the limitations imposed by the USMCA in both electricity and petroleum.
At the same time, AMLO lashed out against private energy producers. The largest private electricity producer in the nation, the Spanish firm Iberdrola, announced that it would not make any further investments in Mexico until the AMLO government clarifies its policy toward private energy companies. AMLO replied by accusing Iberdrola of breaking its contractual obligations with Mexico and asserted that his government is simply not interested in private investment in the energy sector. In a separate October 24 statement, he even mocked clean energy as being “wrong-headed.”
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Monarch News© is a publication of Monarch Global Strategies LLC (all rights reserved) that is provided to their clients and friends of the firm as a courtesy. The Editorial Team includes Dr. Pamela Starr, Geoffrey Jones, and Michael Camuñez, with support from the entire Monarch team.
The views and opinions expressed here are those of the authors and do not necessarily reflect the official policy or position of the Pacific Council.
