Navigating Mexico: What to Expect in 2022
By JUAN DE JESÚS BREENE
Like everything else with an uncertain future, predictions for the year ahead are just that: prognoses that could or could not come to pass.
That said, and with no crystal ball in hand, here are four broad predictions that most likely could be agreed upon by most in the Western Hemisphere for 2022:
- emerging COVID-19 variants will jeopardize our return to normalcy;
- imminent interest rate hikes will wreak havoc in our debt-heavy world;
- the global supply chain will continue to strain due to unforeseen events and sky-high prices; and
- geopolitical tensions will continue to flare up, causing jitters in the global markets.
How might these four predictions play out in Mexico? Like many other countries, Mexico has a tendency to be highly insular and make predictions around what is known closest to home: my family, my social circle and my workplace community, assuming the level of control is local when the real factors, like the four above, tend to be more external in scope.
Mexico really will have no control over these four factors, but it will have to make decision on how to respond to each of them.
In fact, there is even a phrase in Spanish, “¿Cómo te fue en la feria?” which loosely translates to “How did things go for you at this year’s patron saint celebrations?”
My crystal ball is no better than anyone else’s, but based on my many years in Mexico and knowledge of its political and social culture, I think that these might be how the four predictions play out in Mexico.
Emerging covid-19 variants could jeopardize our return to normalcy. With relatively high vaccination rates, but with a terrible track record for covid deaths and even a poorer national communication strategy, I predict that Mexico will take longer than needed to stabilize.
Unlike in the United States, where there is a greater local control, decisions such as school closures and the like are left to state governors, whose political interests may outweigh public health science.
Federal leadership has stated that commerce will not be impacted, making it difficult to impose limitations that could be needed or prudent in the future.
There are still no requirements at all to enter to country. Like most issues in Mexico, coordination across the three branches and up the three levels of government appears nonexistent, and often take their lead from the whims of a capricious president.
Imminent interest rate hikes could wreak havoc in our debt-heavy world.
Interest rates for CETES, Mexico’s oldest debt instrument, issued as federal treasury certificates, have returned to the prepandemic levels of over a year ago, now back to 5.5 percent.
Two years ago, before the pandemic, they were at 7 percent, so if the trend continues, for a consumer to borrow, I predict the rates will be prohibitive.
And that is not the biggest issue since many Mexican families know far too well how to do without.
The issue is at the macro level, where President Andrés Manuel López Obrador (AMLO) has stated he is not contracting additional foreign debt, but public fact-finders have asserted that he is lying, with Mexico contracting more foreign debt during his first three years in office than any of the recent previous presidents he so consistantly condemns.
Since foreign debt is the bill on the dining room table which gets paid first, I predict Mexico will have less in the budget to grow the economy and subsidize basic services. And with less corporate growth (if any), there will be less revenues for the Finance Secretariat (Hacienda) to tax, also adding to a squeezed federal budget.
This will have more of an impact on national inflation than the global supply chain will, but I predict that the government soundbite will be that continuing inflation is due to the supply chain, which is somewhat silly since the typical Mexican family does not enter into the supply chain process beyond buying a used cell phone every few years.
The global supply chain continues to strain due to unforeseen events and sky-high costs.
The best example of this was a piece I penned last week, comparing prices for identical products on Amazon.Mexico to Amazon USA.
While supply chain issues will have some impact on daily purchases, the Mexican government measures inflation almost entirely on basic food items and other staples that are, for the most part, nationally produced and therefore are not affected by the supply chain b acklog.
However, those products are impacted by the cost of gasoline to get them from farm to market or to your corner tiendita.
Geopolitical tensions continue to flare up, causing jitters in the global markets.
In a country so rich in natural resources, you would think the impact of all this on Mexico would be somewhat mitigated.
But with such an erratic president, I predict the opposite.
The poor Secretary of Foreign Relations (SRE), Marcelo Ebrard, continues to try to keep the peace with Mexico’s most important trading partners, including the very specific details signed in trilateral agreements by López Obrador himself, but the president continues to go off on tangents with the likes of Cuba, Venezuela and whatever the-country-of-the month happens to be for a populist president.
I predict that at some point, the United States and Canada will begin to say publicly what they are saying privately: “You can’t change the rules of the game without renegotiating them, and you can’t continue to pretend you forgot the rules when it is convenient.”
The fifth item — not on the list above, but maybe it should be — is worldwide immigration, a topic for another day, as the number of global migrants is increasing slightly faster than the world’s population: Immigration movement represents 3.3 percent of all the planet’s inhabitants today, compared with 2.6 percent in 1960, according to United Nations statistics.
So far, Mexico’s (public) response has been to discontinue the standard 180-day visa for tourists and limit the days to a few weeks based on plane tickets.
Meanwhile, it continues to have porous southern borders and allow thousands of undocumented immigrants to enter the country each day, only to be later abused and exploited by coyotes and even local officials.
And to ponder: All of Mexico’s internal political circus in 2022 might just be a farce to distract us from watching the four predictions mentioned above come true, since the impact might last for a decade.
I predict we are in for a bumpy 2022. Keep your seat belt comfortably fastened and feliz año.