Brookings: Topics - Mexico

What Is the Future of U.S.-Mexico Security Cooperation?

Andrés Rozental — Wed, 08 May 2013 00:00:00 -0400

The decision by the Peña Nieto administration to channel the U.S.-Mexico security agenda through the Interior Ministry is not designed to negatively affect the close ties established over the past years in intelligence sharing and cooperation. Rather, it is the result of the Mexican government's decision to bring all the official agencies involved with that agenda domestically under a single umbrella.

The previous Public Safety Ministry and Federal Police are now coordinated from the Interior Ministry, so it is logical to have counterpart U.S. agencies use that same channel. There is no reason to believe that this change will negatively affect the bilateral relationship on security or drug trafficking issues since President Obama clearly concurred with this new approach during his visit to Mexico and during conversations with Mexico's president and his cabinet.

Aside from the security agenda, which is still an important element in the relationship, the two presidents indicated that other priorities will characterize the agenda going forward, especially economic ties, business facilitation, border infrastructure and educational exchanges. This is a positive development in my view as it moves the U.S.-Mexico agenda back to the issues that have historically brought our two countries together and de-emphasizes the monothematic nature of the relationship over the past six years.

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Andrés Rozental

Publication: Inter-American Dialogue's Latin America Advisor

Image Source: © Kevin Lamarque / Reuters

President Obama's Trip to Mexico Emphasizes America's Future Economic Prosperity and Security

Diana Villiers Negroponte and Ted Piccone — Thu, 02 May 2013 00:00:00 -0400

Mexico and the U.S. are mutually dependent on one another for their collective and respective economic and national security interests. President Obama’s meetings with Mexico’s new president Enrique Pena Nieto will certainly cover border security issues, weapons, drug trafficking and immigration, but these two leaders will want to find ways to further cement the economic relationship between the two countries. Earlier this week, Senior Fellows Ted Piccone and Diana Negroponte sat down together to examine the importance of these talks.

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President Obama's Trip to Mexico Emphasizes America's Future Economic Prosperity and Security

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Image Source: © Kevin Lamarque / Reuters

Obama’s Mexico Trip: Putting Trade and Investment at the Top of the Agenda

Diana Villiers Negroponte — Thu, 02 May 2013 09:00:00 -0400

President Obama recognizes that security is a pervasive problem in the bilateral relationship between the U.S. and Mexico. But in his April 30 press conference prior to setting out for Mexico, Obama highlighted the U.S.-Mexico trade relationship:

“A lot of the focus is going to be on economics. We’ve spent so much time on security issues between the United States and Mexico that sometimes I think we forget this is a massive trading partner responsible for huge amounts of commerce and huge numbers of jobs on both sides of the border. We want to see how we can deepen that, how we can improve that and maintain that economic dialogue over a long period of time.”

Beyond the statistics of expanding trade, what more should the presidents discuss?

Total two-way trade reached $494 billion in 2012, which according to Mexican Ambassador Medina-Mora means more than $1.3 billion per day; almost $1 million dollars per minute. In absolute terms, Mexico is America’s third largest trading partner, and in 2012 U.S. exports to Mexico were $216.3 billion. According to Medina-Mora this is more than the combination of U.S. exports to all the countries with which the United States has a trade agreement in place – except for Canada. Surprisingly, it is more than U.S. exports to Japan and China combined, that is $180.6 billion.

We agree that exports to Mexico both maintain and create jobs in the United States. The U.S. government estimates that each additional billion dollars in new exports supports more than 6,000 new jobs. According to the U.S. Chamber of Commerce, almost 6 million U.S. jobs rely on trade with Mexico, the consequence of which is the potential creation of 107,000 new U.S. jobs.

Furthermore, individual states benefit from exports to Mexico such as Arizona, California and Texas which hold Mexico as their main export destination. Mexico is also the second destination for exports from 20 other states and is ranked among the top five export destinations for 34 states.

Investment flows are also mutually beneficial. According to the U.S. Trade Representative’s office, sales of services in Mexico by majority U.S. owned affiliates were $34.4 billion in 2010. Sales of services in the United States by majority Mexico-owned firms were $4.8 billion. According to the U.S. Embassy in Mexico, the United States currently provides 41 percent of all foreign direct investment in Mexico, benefiting more than 21,139 companies.

Beyond the numbers, the reality of trade and investment is that the United States and Mexico compete together in the global economy. Production and supply chains in North America are deeply integrated with the U.S. content of Mexico exports to the United States estimated at 40 cents on the dollar. This compares to 25 cents for Canadian exports to the United States and 4 cents for China and 2 cents for the European Union, according to a Wilson Center report. In short, there exists a growing integrated manufacturing platform that takes advantage of geography, time zones and cultural affinity.

The challenge ahead is how to build on that integration for the forthcoming Trans Atlantic Trade and Investment talks with the European Union. The development of common standards and regulations will impact both Mexican and Canadian industry. Therefore, they need to be either at the table, or close to the negotiations. How close will the consultations with the Mexican trade delegation be? Ideally, the Mexicans would like to be at the negotiating table, but that is improbable. More likely is a commitment from President Obama to consult closely with the Mexican delegation. This could include both pre-talks and post-talk briefings, reinforcing Obama’s call “to maintain the economic dialogue over a long period of time.” On the European side, Turkey wishes to have a close consultative arrangement with the EU negotiators. This creates a balanced need for consultations with immediate trading partners.

Related to the growth in two-way trade is the need to facilitate movement of trucks across the U.S.-Mexico border. Despite an increased use of pre-clearance procedures, Mexican trucks must line up several kilometers from the border while they wait their turn to reach the fast lane that leads up to and through the U.S. border. Public-private partnerships are needed to construct the access roads some 10 kilometers from the border so that pre-cleared vehicles can move rapidly through the border zone. Currently, GPS vehicle trackers are used to link the sending and receiving manufacturers with U.S. Customs and Border Patrol (CBP). Before the truck even reaches the border post, CBP will know the content and value of the merchandise, as well as specifications on the cab and its driver. Only if tampering is detected will CBP stop the truck for secondary inspection, otherwise the truck sails through the border and onto its final destination. The Mexican private sector has demonstrated interest in constructing those access roads, but it needs presidential mandates from both governments to support the projects, as well as Mexican government purchase of necessary land.

Increasingly, the economies of both the U.S. and Mexico depend upon each other. There is much for the presidents to discuss and many challenges lie ahead, including productivity and education in both our countries. As President Obama begins his second term, it is constructive for him to put energy and political will into deepening that economic relationship.

Authors

Diana Villiers Negroponte

Image Source: © Kevin Lamarque / Reuters

A Conversation on President Obama’s Trip to Mexico and Costa Rica

Joshua Meltzer, Diana Villiers Negroponte, Ted Piccone and Neil Ruiz — Wed, 01 May 2013 17:59:00 -0400

In advance of President Obama’s trip to Mexico and Costa Rica later this week, Brookings scholars Ted Piccone, Joshua Meltzer, Neil Ruiz and Diana Negroponte discuss the main priorities on the agenda between the United States, Mexico and Costa Rica. Topics covered include: expanding trade and economic cooperation between the U.S., Mexico and Central America, U.S. immigration reform, border security, drugs, crime and violence in Mexico and Central America, energy cooperation, and local politics in Mexico.

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“I think there has a been a view around for awhile now that the bilateral relationship at least with Mexico has been dominated by drugs and violence. And I think there is going to be a concerted effort here to refocus attention on to the depth and size of the economic relationship.” — Joshua Meltzer

“It’s a second term trip for the president, but its early in his second term and I think he’s got a lot of heavy lifting still to do on issues that are particularly important to Latin America and especially important to Mexico and Central America. These issues [jobs and the economy, immigration, security] are not the typical ones on the foreign policy agenda. These are issues that are bread and butter, hot-button domestic political issues but they are very important to the Latins, particularly in Mexico and Central America.” — Ted Piccone

“Immigration is a hot button issue of course. It’s something that is still alive here in the U.S. There’s no reform yet to report back to Mexican and Central American leaders. But these meetings actually set the stage for building the relationship for working together once immigration reform is implemented into law.” —Neil Ruiz

“This is a time when Enrique Pena Nieto, the newly elected Mexican president, has got a chance to really celebrate the strength of the Mexican economy: 3.5 percent GDP growth this year, 3.9 percent GDP growth last year… [and] a growing middle class, which means more people with a car and an ability to take a vacation, with iPods, with cellular telephones, and more mobile.” —Diana Negroponte

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A Conversation on President Obama’s Trip to Mexico and Costa Rica

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President Obama’s Visit to Mexico: Key Anti-Crime Issues

Vanda Felbab-Brown — Fri, 26 Apr 2013 11:57:00 -0400

Up to two weeks ago it looked like President Barack Obama would be going to Mexico with a very strong hand. Had the gun control measures, which the Obama administration pushed as one of its key domestic issues in the second term, passed in the U.S. Congress, the U.S. President could have arrived in Mexico next week having delivered on a sticky bilateral issue: For more than a decade, successive Mexican presidents have been demanding greater weapons checks and tighter gun control from the United States, with the hope that such measures would reduce the excruciatingly high criminal violence in Mexico.

Mexico’s other long-term demand has been immigration reform: increasing legal job opportunities for Mexican workers, reducing deportations, and allowing Mexican families to travel and connect without great personal security and legal risks. President Obama might yet be in a position to remove the immigration thorn from the U.S.-Mexico bilateral relationship. Clearly, any immigration reform will not pass before he goes to Mexico next week. But he can credibly indicate that his administration has made immigration reform a key domestic priority and that there is more congressional movement on immigration, including on offering a path to citizenship to the millions of undocumented migrants living in the United States, than there has been in years. And at least until the Boston terrorist attacks, it appeared that immigration reform would finally pass in the U.S. Congress. Those opposing immigration reform or demanding a tightening of borders and fail-proof screening that cannot realistically be achieved, are seizing on the Boston attacks as an excuse for derailing the immigration reform legislation. But the prospect of reform is still very much alive.

In addition to gun control and immigration, Mexican President Enrique Peña Nieto will want to talk economics. Upon assuming office last year, he announced that he would like to break out of the Mexico-U.S. relationship being captured in the prism of the drug trade violence and collapsed into anti-crime cooperation, and to have the relationship refocus on global and bilateral trade and energy issues.

But security issues will inevitably be on the agenda, and the discussions may not be easy. For a long time, Washington was suspicious that if the Institutional Revolutionary Party (PRI) which President Peña Nieto leads returned to power, it might be tempted by its old ways —again lessening Mexico’s determination to tackle organized crime and its penetration into Mexico’s law enforcement and administrative institutions and its grip on large segments of Mexico’s society. Since being elected, President Peña Nieto has repeatedly disavowed any negotiations with criminal groups, but he has also maintained that the priority for his government will be not to disrupt drug flows to the United States (as his predecessor President Felipe Calderón sought to do), but to minimize the terrible drug violence in Mexico. Both the reduced focus on disrupting drug flows and the new emphasis on reducing violence, especially should it lead to changed interdiction and targeting patterns in Mexico, might be difficult to sell to Washington and would require the United States to abandon some of its established, albeit often ineffective and counterproductive, international anti-crime and anti-drug policies.

For its part, the new Mexican government has been surprised and made uncomfortable by the extent and tightness of U.S.-Mexico anti-crime cooperation that was established during the Calderón years. Not only has much of the strategic and tactical intelligence for interdiction and other anti-cartel operations come from the United States, but also, and in an unprecedented way, U.S. advisors have become intimately involved in helping to design and shape tactical interdiction operations of several Mexican entities used for anti-cartel law enforcement as well as in reforming law enforcement institutions in Mexico. Conscious of sovereignty, eager to establish tight control of these security institutions, and seeking to redirect Mexico’s security policy to reducing violence, the Peña Nieto administration has been mulling over whether or not and how to shape U.S.-Mexico security cooperation. It needs to take care not to throw the baby out with the bath water. U.S. cooperation, including intelligence provision and law enforcement reform assistance, continue to be greatly valuable for Mexico, and Mexico is hardly in the position to do without them.

For its part, Washington needs to recognize that seeking to reduce criminal violence, including killings, kidnappings, and extortion, is the right priority for Mexico, and indeed, should be a key goal for law enforcement in any country. The United States should wholeheartedly support that objective in Mexico. But achieving violence reduction in Mexico will not be easy, as President Peña Nieto and his security team have already learned in their first six months. Major questions remain about the details, operationalization, and actual implementation of the security strategy Peña Nieto has outlined. As I detail in my report Peña Nieto’s Piñata: The Promise and Pitfalls of Mexico’s New Security Policy against Organized Crime, many components of the new strategy, such as the organizational reshuffle of Mexico’s security institutions, the establishment of a new gendarmerie, or even the youth-crime prevention focus (important as the last element is for any sustainable long-term strategy to reduce criminality) do not easily, quickly, and directly translate into violence reduction in Mexico.

Paradoxically, the policy that is most directly available to Mexico to reduce criminal violence is the one for which it needs the most cooperation from the United States: changing targeting patterns. Instead of deploying the Mexican military or federal police or the gendarmerie (whenever it will actually become available) merely in response to wherever violence intensely breaks out and making cartel capo decapitation the core of its strategy, Mexico needs to prioritize targeting in a way that will reduce violence. That means abandoning both top-level decapitation and reactive deployment of forces. Instead, a wiser interdiction pattern would be more selective and based on an analysis of which law enforcement actions will stimulate what responses and actions from and among the criminal groups. The changed interdiction pattern can include focusing on the most violent group in a particular area and focusing on the middle layer, as opposed to the top capos, of a cartel. As I also explain in another report, Focused Deterrence, Selective Targeting, Drug Trafficking and Organized Crime: Concepts and Practicalities, strategically choosing the basis of prioritized targeting and moving away from interdiction based only ad hoc on how intelligence becomes available requires careful calibration and an uneasy balancing of the pros and cons of each possible option for prioritized interdiction. It often entails uneasy tradeoffs.

Nonetheless, Washington should not define the prioritized interdiction approach (which can mean not vigorously going after some groups for a while) as yet another manifestation of the corruption of Mexican law enforcement institutions by organized crime groups. In turn, explaining to the United States that prioritizing law enforcement actions is smart policy, not weakness and corruption, requires that Mexico maintains extensive discussions with Washington.

What in the long term will increase the rule of law in Mexico is ensuring that communities obey laws, by increasing the likelihood that illegal behavior and corruption will be punished via effective law enforcement, but also by creating a social, economic, and political environment in which the laws are consistent with the needs of the people and allow citizens to embrace their police forces and state presence. Reducing criminal violence is a key element. Adopting a smarter interdiction pattern is an important first step.

Authors

Vanda Felbab-Brown

Image Source: © Kevin Lamarque / Reuters

The Obama-Peña Nieto Meeting: Critical Issues in the Upcoming U.S.-Mexico Talks

Thu, 11 Apr 2013 16:00:00 -0400

Event Information

April 11, 2013
4:00 PM - 5:30 PM EDT

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

Next month, President Barack Obama will meet with Mexico’s newly elected President Enrique Peña Nieto. While the two leaders met briefly last November, this meeting—Obama’s first in Latin America since his own re-election—will address major issues of concern to both nations including trade and investment, energy, border security and infrastructure, illicit drug trafficking and public safety. With significant political and economic consequences at stake, the Obama-Peña Nieto meeting will take place as both leaders face complex and contentious domestic challenges that have a direct impact on the bilateral relationship.

On April 11, the Latin America Initiative at Brookings hosted a discussion on the critical issues that will dominate the Obama- Peña Nieto meeting. Arturo Sarukhan, Brookings distinguished affiliate and former ambassador of Mexico to the United States, provided opening remarks on the larger political context for the bilateral meeting. A panel discussion followed featuring contributors to the forthcoming book, The End of Nostalgia: Mexico Confronts the Challenges of Global Competition (Brookings, May 2013). Brookings Nonresident Senior Fellow Diana Villiers Negroponte moderated the discussion.

What Will the Proposed Telecom Overhaul Mean for Mexico?

Andrés Rozental — Mon, 25 Mar 2013 13:17:00 -0400

In his first 100 days in office, President Peña Nieto has successfully garnered widespread political support for various reform packages that had been pending from previous administrations. Education and labor reforms were the first to be approved by Congress and in the case of the former is now constitutionally law.

The telecommunications reform package has won approval in the lower house of Congress and now must pass the Senate and be ratified by the states before becoming part of the Constitution. Rather than being specifically targeted at any individual company, the reform is designed to open the sector to competition and to guarantee Mexicans access to services that up to now have been expensive and oligopolistic in nature. Measures such as opening up national television to additional channels, wider broadband coverage and a stricter regulatory regime are all designed to fundamentally change Mexico's telecoms structure. When finally approved, these changes will greatly benefit the Mexican economy by generating competition and additional players in the sector.

All indications are that this reform package will be approved, perhaps with congressional modifications. Although there has been opposition by some in the PAN to parts of the proposal, the other parties are agreed on the majority of the changes. This augurs well for further proposals that Peña Nieto plans to send to Congress in the coming months, especially the energy and fiscal reforms that are so necessary for Mexico to guarantee future growth and prosperity.

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Authors

Andrés Rozental

Publication: Inter-American Dialogue's Latin America Advisor

Image Source: © Edgard Garrido / Reuters

Finding the ‘New’ Mexico in Querétaro

Joseph Parilla and Alan Berube — Fri, 15 Mar 2013 00:00:00 -0400

Nearly five centuries after the arrival of Hernán Cortés on its shores, Mexico is being rediscovered again. After years in which drugs and thugs led the Mexico headlines in Western media, no less than the Economist, Foreign Affairs, and the Financial Times now highlight the country’s rapid federal reforms, booming middle class, and strong current and projected economic growth. Mexico City, which was largely spared from the recent wave of violence, is booming with new residential and commercial construction, including what will be the tallest building in Latin America. And upon visiting Monterrey, Mexico’s third largest region, New York Times columnist Tom Friedman described “How Mexico Got Back in the Game.”

But the “new” Mexico—site of this year’s Global Cities Initiative international forum—is exemplified best by neither Mexico City nor Monterrey. To see it, we drove two and a half hours northwest of the capital to the city and state of Querétaro. For decades, the 2 million-person state was perhaps best known as the site where Mexico’s current Constitution was ratified in 1917. Now, Querétaro is ground zero for the country’s economic revolution, achieving average annual GDP growth of 5.5 percent over the last decade, highest among Mexico’s 31 states. It is home to major multinational corporations like GE and Samsung, a burgeoning middle class, new golf courses, and what will soon be Latin America’s second-largest shopping mall, all within a stone’s throw of an immaculately preserved colonial center (a UNESCO World Heritage site).

What accounts for Querétaro’s economic energy? Both state leaders and local residents credit the 2005 arrival of Bombardier, the Canadian aerospace and transportation manufacturer, as the catalytic investment that put Querétaro on the global map. The firm was attracted to the region’s well-educated population and the promise from federal and state governments to locate a new aerospace university, UNAQ (Universidad Aeronáutica en Querétaro), to supply the budding cluster with skilled workers. Of the 1,800 workers at Bombardier, nearly two-thirds were trained at UNAQ, and the firm works closely with the university to tailor the curriculum for all rungs of the aerospace career ladder—from production workers to engineers.

Beyond its local assets, Querétaro lies at key intersection of North American advanced manufacturing. It sits at the convergence of Mexico’s road, rail, and telecommunications network, right along the “NAFTA Highway” that allows parts to be shipped to Wichita and Toronto for assembly much more quickly than from China. Bombardier’s plant abuts the brand new Querétaro International Airport, whose runways the state hopes will test the first entirely Mexican-made aircraft within a decade. And with Querétaro producing fuselages, wings, and electrical harnesses; Wichita offering design and assembly; and Montreal providing research and development, Bombardier’s supply chain for the Learjet 85 benefits from the distinct specializations of three metropolitan economies all within two time zones and one free trade area.

Queretaro’s story exemplifies the increasingly important role Mexican metropolitan areas play in advanced industry supply chains—such as aerospace, automotive, and appliances—that unite North America as one de facto economic market that not only trades goods, but co-produces them for the rest of the world. Nearly 20 years after NAFTA’s passage, 40 percent of what the United States imports from Mexico is actually American-made content. With global economic winds like the shale gas revolution, eroding cost advantages for Chinese labor, and the “just-in-time” production imperative at North America’s back, the continent has clear incentives to integrate further to compete with Asia, Europe and the rest of Latin America.

Yet the administration of newly elected Mexican President Enrique Peña Nieto recognizes that the country can no longer simply integrate into global value chains. Its economic strategy seeks to move Mexican firms up those value chains by boosting productivity, innovative capacity, and entrepreneurial dynamism in key sectors. To do so, it must build from the sort of strengths evident in regions like Querétaro, which are building expertise and infrastructure to accommodate higher-value activities like research, design, and finance.

Mexico’s rise could usher in an even more prosperous next 20 years for North America, but not without stronger cooperation between the three nations. With the Obama administration still focused on the Middle East and the “pivot to Asia,” regional and state leaders in the United States have a unique opportunity to change the conversation. U.S. cities and states should get to know Querétaro, as its progress pinpoints the challenges and opportunities of the maturing economy to our south, and holds some lessons for its northern neighbors, too. And they might learn, as we did, why signs greeting visitors say, Suertudo, vives en Querétaro (Lucky you live in Querétaro).

Authors

Joseph Parilla
Alan Berube

How Well Has Peña Nieto Performed in His First 100 Days?

Andrés Rozental — Fri, 01 Mar 2013 00:00:00 -0500

President Peña Nieto's first 100 days have been marked by a great deal of activity and a feeling of high expectation among most Mexicans. The president's closest team of officials has been working hard on various aspects of his electoral promises and the 95 commitments contained in the 'Pact for Mexico.' The same is true for the PRI leadership in Congress and the 19 state governors that represent the ruling political party.

While there appears to be a decision to delay presenting urgent energy and fiscal reform packages to Congress, there is nonetheless a flurry of activity on many other fronts. Education and telecommunications reform are among the highest priorities, but there has also been progress on judicial reform with important changes to the 'amparo' regulations already approved by an overwhelming majority of the lower house of Congress, a renewed push for those jurisdictions to implement oral trials to do so well before the 2015 deadline, a national campaign to fight hunger, a gubernatorial commitment to implement unified state police forces and several high-profile administrative changes that do not need congressional approval. Peña Nieto apparently believes that addressing low-hanging fruit first will make it easier for the more difficult energy and fiscal reforms to be successfully approved in the second half of the year.

While the 'Pact for Mexico' has so far been a cohesionary force among the three main political parties, the true test of its strength will come when the administration presents its energy and fiscal reform proposals. Internal divisions in the PAN and PRD might well interfere with the government's ability to hold the various factions together for the two thirds majority it needs to pass constitutional changes.

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Authors

Andrés Rozental

Publication: Inter-American Dialogue's Latin America Advisor

Image Source: © STRINGER Mexico / Reuters

Peña Nieto’s Piñata: The Promise and Pitfalls of Mexico’s New Security Policy against Organized Crime

Vanda Felbab-Brown — Tue, 19 Feb 2013 16:30:00 -0500

Mexico’s new president, Enrique Peña Nieto, has a tough year ahead of him. After six years of extraordinarily high homicide levels and gruesome brutality in Mexico, he has promised to prioritize social and economic issues and to refocus Mexico’s security policy on reducing violence. During its first months in office, his administration has eschewed talking about drug-related deaths or arrests. The Mexican public is exhausted by the bewildering intensity and violence of crime as well as by the state’s blunt assault on the drug trafficking groups. It expects the new president to deliver greater public safety, including from abuses committed by the Mexican military, which Mexico’s previous president, Felipe Calderón, deployed to the streets to tackle the drug cartels.

Seeking to bring violent crime down is the right priority for Mexico, and indeed, should be a key goal for law enforcement in any country. The United States should wholeheartedly support that objective in Mexico. But achieving violence reduction will not be easy, major questions remain about the outlines of the security strategy Peña Nieto has sketched, and some approaches to reducing violence would come with highly negative side-effects.

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Authors

Vanda Felbab-Brown

Image Source: © Tomas Bravo / Reuters

Have Prospects for U.S.-Mexican Relations Improved?

Andrés Rozental — Fri, 01 Feb 2013 00:00:00 -0500

The Mexico-U.S. relationship won't substantially change; there are too many ongoing issues to expect any major shift in what has become a very close and cooperative bilateral partnership in economic, security and social aspects. There will be a change of emphasis from the Mexican side as far as the security relationship goes, with Peña Nieto's declared intention to focus much more on the economy and public safety. He has already moved away from the constant statements made by his predecessor extolling the number of criminals apprehended and 'successes' in the fight against organized crime. The change of message comes as a relief to many Mexicans tired of hearing about violence and crime on a daily basis.

There are two issues on the bilateral agenda, however, that portend significant changes if President Obama is able to fulfill his latest commitments: gun control and immigration reform. The latter seems to be headed toward a bipartisan agreement that might fundamentally change the situation for the thousands of Mexicans who are in the United States without proper documents. If Congress passes a comprehensive reform that allows them to normalize their situation and have a path to legal residency and eventual citizenship, it would have a huge positive impact on the relationship. As for gun control, Mexico would obviously favor a total ban on the sale and possession of assault weapons as the best way to prevent them from crossing the border, but even universal background checks and limits on the number and type of weapons an individual can purchase would be a welcome development. On trade ties, Mexico reached a quarter trillion dollars of total exports and imports in 2012 — a hefty portion of that unprecedented amount was with the United States. As Mexico becomes an increasingly important part of the global supply chain and U.S. companies continue to invest heavily south of the border, the economic relationship has nowhere to go but up. And if Peña Nieto is able to fundamentally reform the country's energy sector, there promises to be even more investment.

Authors

Andrés Rozental

Publication: Inter-American Dialogue's Latin America Advisor

Image Source: © Handout . / Reuters

Forging a New Strategic Partnership Between Canada and Mexico

Andrés Rozental and Perrin Beatty — Fri, 30 Nov 2012 10:37:00 -0500

Editor's Note: This report was originally published by the Canadian Chamber of Commerce.

The visit to Ottawa by Mexico’s President-elect Enrique Peña Nieto the week of November 26, provides Canada with the opportunity to elevate its bilateral relationship with Mexico to the level of a strategic partnership. Bilateral trade and investment have increased steadily since Canada signed the North American Free Trade Agreement, but there remains enormous, untapped potential, particularly in Mexico. In this report, Andrés Rozental and Perrin Beatty offer substantive recommendations that point to the benefit of efforts that will intensify bilateral partnerships, not only in their own right, but also in strengthening both countries’ ability to deal more effectively with the United States in pursuing matters of mutual concern.

Recommendations:

Work on deepening the direct, bilateral relationship between Canada and Mexico where there are real gains to be made by strengthening trade, investment and people-to-people linkages.
Work together to maximize benefits from participation in the TransPacific Partnership (TPP).
Pursue further economic cooperation with the United States on a pragmatic basis.
Institutionalize the North American Leaders’ Summit (NALS) and establish a complementary North American Business Council.
Launch a public awareness campaign about the mutual economic opportunities for Canada and Mexico.
Remove the visa requirement for Mexican visitors to Canada and encourage student exchanges between Canada and Mexico.
Increase funding to the Anti-Crime Capacity Building Program (ACCBP).

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Andrés Rozental
Perrin Beatty

Publication: Canadian Chamber of Commerce

Mexico's Enrique Peña Nieto Confronts the Challenges of Federalism, Fiscal Reform and Education

Diana Villiers Negroponte — Fri, 30 Nov 2012 13:48:00 -0500

The PRI leader, Enrique Peña Nieto, assumes the Mexican presidency on Dec. 1. Manufacturing output is up, official unemployment is low and drug related homicides are down. This is an auspicious time to inherit the presidency. What are the principal challenges facing a historic party in a modern era?

Corruption is endemic with the Mexican federal government lacking the tools with which to hold the state governments accountable for significant federal transfers. Under a national reform reached in 1998, federal funds are dispersed to the 31 states and Mexico City in proportion to their population, local revenue and poverty rate. Federal transfers replaced local tax revenues. However, use of the federal funds was supervised by state legislatures, not federal legislatures. This has resulted in inflated state budgets to justify continued federal transfers. Ample opportunity for corruption by state and municipal officials exists. The incoming president will seek to devise and implement a new form of federalism which establishes reporting requirements and accountability for use of federal funds. A president from the PRI should have an easier task introducing this reform because 21 governors from the 31 states and Mexico City are members of the PRI. With less need to use federal transfers, for local political purposes, they are more likely to accept presidential instruction and conform to party discipline.

The use of educational funds presents a clear need for overhauling the federal transfer system. Non-conditional federal transfers are distributed based on the number of teachers in the state. The number of students is not considered. With the powerful teachers’ union, SNTE holding the capacity to influence the outcome of political elections, state politicians accept whatever number of teachers the union has established. Whether or not the teachers show up in class, federal funds are determined on those comisionados, i.e. licensed teachers. Presently, there are 160,000 comisionados in Mexico who do not show up to teach. If more comisionados = more Federal funds = more political support, the opportunity for corruption is obvious.

Reform of the federal structure is also related to fiscal reform. Currently, approximately one-third of federal revenues derive from the national petroleum company, PEMEX, but oil production has fallen from 3.4 million bpd to 2.55 million bpd. Falling production results in decreased royalties and taxes for the state. Therefore, the government must consider alternative forms of revenue raising measures. The easiest way is to raise the IVA (sales tax). However, the IVA is a regressive tax, impacting lower incomes more than those with medium to high income. A rise in the IVA conflicts with the president’s commitment to reduce the number of Mexicans living below the poverty line, currently estimated at 46% of the population. Therefore, other forms of raising revenue are being discussed. Raising or broadening the income tax is a possible solution, but Mexican citizens are skilled at avoiding this tax. (A pervasive cultural attitude suggests that only fools pay income tax.) Returning to the old system of higher state taxation may have to be considered. The downside of this proposal is that greater opportunity for corruption exists, but the advantage of decentralizing taxation is the potential for increased local responsibility and accountability for state and municipal programs, including education.

Education reform is essential. The OECD places Mexico at 51^st in math, 48^th in reading and 50^th in science out of the 65 countries participating in the PISA 2009 scores. The World Economic Forum business leaders ranked Mexico’s education quality among the lowest in the world: 120^thout of 139 countries surveyed. In large part, the problem lies with the SNTE (teachers union) to which all teachers are obliged to pay fees and which Elba Esther Gordillo rules with populist authority. Early in his administration and before the mid-term elections for governors, Enrique Peña Nieto needs to establish education goals and be ready to use political capital to implement them. Education reforms may require confrontation with the SNTE, a conflict that most politicians are unwilling to consider, given the power of the union. Needed is a comprehensive focus to mobilize parents, co-opt teachers and prosecute corrupt union officials. The task is herculean. If President Peña succeeds, he will enable the school students of today to participate in the modern economy and reduce the poverty rate. Otherwise, another generation of Mexican students will be condemned to half-time schooling, subpar skill sets and the inability to participate productively in the modern economy.

These challenges address underlying societal problems. They are more complex and maybe harder than reforming the energy sector. Nevertheless, now is the time to channel the soaring public expectation for positive change into these three directions: a new federalism, a fiscal reform that is fair, and a radically improved education system.

Authors

Diana Villiers Negroponte

What’s Good for Mexico Is Good for Canada

Andrés Rozental and Perrin Beatty — Tue, 27 Nov 2012 00:00:00 -0500

President-elect Enrique Peña Nieto’s visit to Ottawa this week offers a major opportunity to upgrade bilateral relations between Canada and Mexico to the level of a strategic partnership.

Although Canada joined the North American free-trade agreement talks to preserve the gains from the earlier Canadian-U.S. free-trade agreement, this “reluctant” decision has proved to be remarkably rewarding. Canada not only succeeded in protecting its primary market with its most important trading partner – the United States – but it also found a new partner in Mexico. Since NAFTA, Canadian trade with Mexico has grown nearly sixfold. Mexico is now Canada’s third-largest trading partner, with two-way trade reaching $34.4-billion in 2011.

The growth in the bilateral economic relationship has not been limited to trade. Canadian investments in Mexico have more than doubled since the late 1980s, as Canada has become one of Mexico’s largest sources of foreign direct investment. More than 2,500 Canadian companies have offices and operations in Mexico. Many have used their Mexican operations as launch pads to reach other markets in Central and South America. Mexican firms are now also showing greater interest in Canada.

After the United States, Mexico is now the most popular foreign destination for Canadians. The majority of these are short-term visitors, but there are also a growing number of business people, students and other long-term residents living in Mexico. In the other direction, Mexico is the second-largest source of temporary foreign workers for Canada, boosting the productivity of Canada’s agricultural sector through the Seasonal Agricultural Workers Program. As Canada’s labour force continues to age, Mexico offers a rich source of younger workers upon which to draw.

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Authors

Andrés Rozental
Perrin Beatty

Publication: The Globe and Mail

What Legacy Does Felipe Calderón Leave in Mexico?

Andrés Rozental — Wed, 31 Oct 2012 00:00:00 -0400

Felipe Calderón's achievements, such as they are, will be quickly overshadowed by his legacy of a failed strategy in the fight against organized crime and the drug cartels, an unfulfilled pledge to create sufficient jobs to absorb new entrants into the market and a lackluster economic growth record.

Although the country's economy has performed reasonably well when compared to other middle-income nations and most industrialized ones, much of this has been due to a tenuous recovery in the United States, a competitive currency and a resumption of consumer spending on durable goods that Mexico produces for the U.S. market. There is little evidence that the underlying structure of Mexico's economy has improved sufficiently to weather another downturn in the United States or indeed a continuing global recession. Almost nothing was accomplished in getting needed structural reforms passed, nor was there any attempt to define an industrial policy for Mexico beyond promoting the automotive and aerospace sectors.

On the security front, there is little to praise vis-à-vis the current administration's accomplishments. Not only is the high level of deaths attributed to the war on cartels and other criminals ample proof that violence is still very much the order of the day, but the flow of drugs into the United States as well as the wave of assault rifles and other arms coming into Mexico continue relatively unabated.

Incoming President Peña Nieto will hopefully concentrate his government's efforts on achieving the reforms needed to accelerate economic growth, provide many more jobs, reform outdated state institutions and give Mexico the rule of law that is required to build confidence among Mexicans and foreigners alike. Success on these fronts will give longterm sustenance to Mexico's current economic performance.

Authors

Andrés Rozental

Publication: Inter-American Dialogue's Latin America Advisor

Are Mexican Factories Gaining an Upper Hand Against China's?

Andrés Rozental — Tue, 18 Sep 2012 00:00:00 -0400

Editor's Note: This commentary was originally published in the Inter-American Dialogue's Latin America Advisor on September 18, 2012.

With the rising cost of wages in China, manufacturers are increasingly considering Mexico an attractive location to 'reshore' production, McClatchy reported Sept. 10. Is Mexico gaining a competitive edge over China in terms of manufacturing? Or will other low-wage countries come to replace both China and Mexico as manufacturing destinations? What are the challenges and benefits of moving production facilities to Mexico? Can Mexico leverage the low cost of wages into more sustainable growth?

Andrés Rozental: Low wages have never been the sole determining factor for companies to decide in which country to site manufacturing facilities; otherwise countries such as Haiti or Bangladesh would be the manufacturing capitals of the world. Many other factors, such as availability of skilled labor, infrastructure, certainty of rules and regulations and fairness of the justice system, all play a significant role. True, China's wages are rising and no longer represent an overwhelming advantage for labor-intensive industries, but salaries in Mexico and other middle-income countries are also climbing. Studies show that the all-in cost for an average factory worker in a Chinese industrial zone is more or less equal to a Mexican working in a maquiladora near the U.S. border. Where Mexico does have a clear advantage over China—and this is what is driving companies to relocate facilities to our country—is in our geographic proximity to one of the largest consumer markets in the world, economic and political stability, ability to provide just-in-time sourcing and a relatively transparent regulatory framework in which to do business. One shouldn't forget that Mexico is fundamentally a sophisticated manufacturing economy that is growing at a very acceptable rate when compared to other emerging market economies. While it is true that we depend enormously on the strength of the U.S. economy because of NAFTA and our huge bilateral trade and investment relationship, it is equally true that Mexico, together with Canada, will always be the first to benefit from an economic recovery in our neighbor. Tens of thousands of companies have taken advantage of Mexico's benefits and foreign direct investment flows continue to show robustness even in the face of the insecurity and violence that affect parts of the country as a result of the fight against organized crime and drug trafficking.

Authors

Andrés Rozental

Publication: Inter-American Dialogue's Latin America Advisor

Mexican Coalition Politics in the Post-Election Period

Diana Villiers Negroponte — Wed, 12 Sep 2012 12:30:00 -0400

The Federal Electoral Tribunal confirmed Enrique Peña Nieto as winner of the Mexican presidential elections on August 31. This followed accusations that Peña’s party, the Partido Revolucionario Institucional (PRI) had bought votes and illegally used campaign funds. While the decision failed to address the question of whether the July 1 election was legitimate and free, the seven justices on the Electoral Tribunal concluded unanimously that there was insufficient evidence to prove fraud. President Felipe Calderon’s Partido Acción Nacional (PAN) party accepted the tribunal’s decision despite its finish in third place. Andrés Manuel Lopez Obrador of the leftist Partido de la Revolución Democrática (PRD) rejected the tribunal’s decision and called upon his followers to protest with a national rally on September 9. An estimated 38,000 people turned out for a peaceful rally in Mexico City, and the following day Lopez Obrador gracefully left the PRD party to reunite with his personal followers in the Movimiento Nacional de Renovacion (MORENA).

With the Electoral Tribunal’s confirmation that Enrique Peña had won with 38.2 percent of the national vote, compared to 31.6 percent for the second place PRD, we may conclude that Mexico has accepted the PRI victory. With the official declaration of a presidential winner behind us and a December 1 date for the oath of office, what does a prospective PRI administration offer Mexican citizens?

The PRI party platform laid out an ambitious plan for energy and fiscal reform – two key issues that have bedeviled the last three Mexican administrations. Opening up PEMEX to private investment requires two-thirds support in the National Assembly for a constitutional amendment. Rather than risk legislative defeat, PAN Presidents Fox and Calderón resorted to incremental reforms that opened the energy sector to private sector contracts downstream, i.e. oil distribution and petrochemicals. However, with diminishing barrels from the Cantarell oil field, it is critical to obtain both foreign technical skills and private funding for the exploration and production of new and deeper fields. In the electoral campaign, both the PAN and PRI presidential candidates agreed that a significant opening of PEMEX to private investment is needed. The PRD remained adamantly opposed.

At the same time, if the state loses the resources from PEMEX to fund 40 percent of federal government expenditures, as well as meet the obligations on PEMEX’s $52.2 billion debt, future governments will have to raise significant revenues from a wider base of Mexican taxpayers. Thus fiscal reform is closely tied to energy reform: you cannot privatize part or all of PEMEX without increasing alternative fiscal revenues.

After the July 1 election, President Calderón chose to demonstrate his reformist inclination by talking about the need to reform energy and fiscal policy, but acting on labor reform and transparency in municipal government. All four subjects are important for the modernization of the Mexican state and were addressed during Calderón’s six-year term. Regretfully, both legislative initiatives were defeated by inadequate support from opposition – principally PRI – legislators. Why did Calderón now introduce legislation to end restrictive labor practices and require municipalities to account for their income and expenditures? Why did Calderón not introduce energy and fiscal reform?

Strong constituencies support Mexico’s existing labor law and municipal governance. However, national sentiment supports the exclusive ownership of Mexico’s petroleum resource. Nostalgic attachment to a nationalized resource will take time and extraordinary effort to dissolve. Therefore, the emergence of a new coalition between the outgoing PAN presidency and incoming PRI leadership is best tested on the less arduous task. Calderón’s tactic is to test the coalition’s legislative strength over the passage of labor and municipal reforms. Neither reform will be easy. First, 30 percent of the registered work force is employed by state entities, including PEMEX. Until now, they have exercised a stranglehold over labor protections under Article 123 of the Constitution. Second, municipal governments were granted autonomy under the concept of a “municipio libre” which harks back to Emiliano Zapata and the Mexican Revolution. Without coalition politics, neither of these reforms is possible.

Following the July elections, a window of opportunity exists for this coalition. Calderón retains the presidency until November 30 with the power to initiate legislative reforms. However, the composition of the National Assembly changed on September 1 to reflect the electoral results. PRI now has 207 deputies and 52 senators. The PAN lost legislators, but still has 114 deputies and 38 senators. With the help of a small party, PRI and PAN together now have the necessary two-thirds majority to pass constitutional amendments. A PAN president with sway over his congressional delegation can ally with an incoming PRI president to introduce and pass significant reforms. Furthermore, Calderón requested that the legislation be discussed on a fast-track, 30-day schedule. If he succeeds, the achievement of modernizing labor practices and transparency in municipal governance will be his, despite sharing the crown with the future PRI president.

The PRI has a reputation for being highly disciplined with its leadership exercising strict control over its legislators, including approximately 15 deputies from the PEMEX union and over 20 deputies from the SNTE, the teacher’s union. During the 70 years of PRI reign, rejection of the party line risked losing access to presidential favors. This may change in the 21st century, but memory of the party’s historic power to sanction is expected to keep all PRI legislators in line with presidential pleasure.

Why did the outgoing PAN president and the incoming PRI president not use this coalition to make the harder changes in energy and taxation? Legislative leaders in both parties will wait to see how the votes align on the issues of labor and municipal governance. Will the traditional PRI discipline continue to function, or will a more democratic Mexican society produce renegades? If both parties succeed in holding their members in line to support their leaders, then we should expect the proposed energy and fiscal reform to follow shortly behind.

If passage can be achieved by November 30, Calderón can step down with significant reforms to his and to the PAN’s credit. Afterwards, it will be up to the Peña Nieto to keep the coalition and his own party together to engage energy and fiscal reform. It may be harder to keep internal PRI factions in line than to retain the alliance with the PAN, but the early days of a new administration traditionally give a Mexican president greater influence over his own party. We should therefore expect that legislation will be drafted and tactics prepared for the battle over PEMEX and taxation.

The consequence of passing bold reforms is to demonstrate that Mexican voters have elected a new PRI. This will deflect the criticism that PRI remains the old party with younger faces. Success based on these early tests of leadership will establish Enrique Peña’s reputation as a reformer. Presently, he has the advantage of skilful political aides and continued support from the national press which identified him as a winner back in 2010. Together, there is a good chance that Mexico can break from the nostalgia for a century old revolution and confront the challenges of a highly competitive global economy.

Authors

Diana Villiers Negroponte

Brookings: Topics - Mexico

What Is the Future of U.S.-Mexico Security Cooperation?

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President Obama's Trip to Mexico Emphasizes America's Future Economic Prosperity and Security

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Obama’s Mexico Trip: Putting Trade and Investment at the Top of the Agenda

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A Conversation on President Obama’s Trip to Mexico and Costa Rica

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President Obama’s Visit to Mexico: Key Anti-Crime Issues

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The Obama-Peña Nieto Meeting: Critical Issues in the Upcoming U.S.-Mexico Talks

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What Will the Proposed Telecom Overhaul Mean for Mexico?

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Finding the ‘New’ Mexico in Querétaro

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How Well Has Peña Nieto Performed in His First 100 Days?

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Peña Nieto’s Piñata: The Promise and Pitfalls of Mexico’s New Security Policy against Organized Crime

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Have Prospects for U.S.-Mexican Relations Improved?

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Forging a New Strategic Partnership Between Canada and Mexico

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Mexico's Enrique Peña Nieto Confronts the Challenges of Federalism, Fiscal Reform and Education

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What’s Good for Mexico Is Good for Canada

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What Legacy Does Felipe Calderón Leave in Mexico?

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Are Mexican Factories Gaining an Upper Hand Against China's?

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Mexican Coalition Politics in the Post-Election Period

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