By ANTONIO GARZA, former U.S. ambassador to Mexico
As we head into fall, higher-than-expected inflation continues here at home despite declining gas prices, and, on Friday, Sept. 16, Wall Street closed out one of its worst weeks of 2022. Across the Atlantic, Russia’s retreat in northeast Ukraine has produced wary optimism among allies.
In our own hemisphere, the focus in the U.S.-Mexico relationship has revolved around energy and the economy. On Friday, SEpt. 16, Mexico celebrated its Independence Day. It had been anticipated that President Andrés Manuel López Obrador (AMLO) would defend his nationalistic energy position at the celebration’s traditional military parade, although he toned down his message in the wake of recent bilateral talks.
Seven days ago, U.S. Secretary of State Antony Blinken traveled with a delegation to Mexico City for the second annual U.S.-Mexico High-Level Economic Dialogue, which was relaunched by the Joe Biden administration in September 2021. During the visit, the two governments projected an unexpectedly optimistic tone in relation to the United States-Mexico-Canada Agreement (USMCA) energy dispute.
The USMCA complaint — filed in July by the United States and Canada — alleges that Mexico’s energy policy has favored the state-run Federal Electricity Commission (CFE) and Petróleos Mexicanos (Pemex). All parties have expressed a desire to reach a resolution during the consultation period, which lasts 75 days. This period can be modified by mutual agreement, which appears likely.
If the countries fail to come to an agreement during the consultation, the United States and Canada could request a dispute settlement panel, which must issue recommendations within 150 days. If this occurs, experts expect a panel to favor the United States and Canada.
Last week in Mexico City, the Biden administration focused the High-Level Economic Dialogue on leveraging U.S. legislation passed in the last month. The CHIPS (Creating Helpful Incentives to Produce Semiconductor) sand Science Act will invest $50 billion in semiconductor and chip manufacturing. Additionally, the Inflation Reduction Act will bolster nearly $400 billion in green technology.
Billions in new investment provide an enormous opportunity for North America to reconfigure supply chains and chip away at Asia’s advantage in semiconductors and electric car batteries. A renewed push for nearshoring would also give Mexico a chance to court investors who have wavered over López Obrador’s nationalistic policies. The Inter-American Development Bank previously estimated nearshoring with Mexico could add $35 billion a year in exports.
On security, Mexico continues to experience high levels of cartel violence, including recent attacks on convenience stores. While López Obrador campaigned on “hugs, not bullets”, his policies have taken a more militarized approach. Additionally, his administration has controversially expanded the budget of the armed forces.
Recently, Mexico’s lower Chamber of Deputies voted to expand the Mexican Army’s street presence to address violence through 2028. And earlier this month, the Chamber of Deputies passed a bill that put the National Guard under army control. Security analysts have expressed concern that moves to militarize public security fail to address structural issues within the justice system.
On immigration, the number of migrants arriving at the U.S. southern border, particularly from Venezuela, has remained high, amid political and economic hardship in Latin America. The Biden administration has reportedly asked Mexico and Panama to take back Venezuelan migrants under the Title 42 expulsion policy, which remains in place due to litigation.
As the U.S. midterms approach, it is no surprise that immigration is making national headlines. Texas Governor Greg Abbott and Florida Governor Ron DeSantis have transported arriving migrants to cities such as Washington DC, New York City, and Martha’s Vineyard. The two governors’ actions have placed the issue front and center, fueling commentary about their own national aspirations.
Through the end of 2022, the United States and Mexico will continue to engage on security, trade and immigration. Officials will meet next month in Washington, D.C. for the U.S.-Mexico High-Level Security Dialogue. And the next North American Leaders’ Summit is scheduled to take place this December in Mexico City.
Across Latin America, countries are also facing political strains amid persistent high inflation and exacerbated inequality. Over the past year and a half, Chile, Peru and Colombia have elected leftist heads of state. On Oct. 2, the first round of Brazil’s elections will pit President Jair Bolsonaro against former President Luiz Inácio Lula da Silva.