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Column 021317 Wall

Monday, February 13, 2017

Where will U.S.-Mexican Relations Go in the Age of Trump?

By Allan Wall

Where will U.S.-Mexican relations go in the age of Donald Trump, the newly-inaugurated President of the United States? 

Judging from his campaign statements and early actions as president, Trump’s policies on trade and immigration may differ greatly from his predecessor, and there may be much friction between the U.S. and Mexico.

On the other hand, changes in these policies open new opportunities and ways of doing things that may actually be beneficial to Mexico.

The dizzying series of occurrences that has occurred since Trump became president continues and makes it hard to keep up.  

There was the planned visit of Mexican President Enrique Peña Nieto to the White House on January 31st.  This trip was cancelled. 

On the other hand, Mexican Foreign Minister Luis Videgaray and Economics Minister Ildefonso Guajardo did visit Washington, and were reportedly in the White House in discussions when Trump announced his wall project.

Trump is probably less popular than ever before in Mexico, which is really saying something.   

Mexican President Peña Nieto is currently not too popular himself, but the conflict with Trump has probably given him a temporary lift. 

It may not count for much in the long run however.  Mexico has presidential elections next year, so Peña Nieto may soon be a sort of lame duck.

Mexican presidents serve six-year terms, without reelection. 

Although Peña Nieto is not running for reelection himself, his party wants to do well in 2018. So the president is likely to try to keep a lid on things in the interests of his political party, the PRI (Partido Revolucionario Institucional).

Nevertheless, the winner of next year’s election, though it’s too early to tell, may be perennial leftist-populist candidate Andres Manuel Lopez Obrador (known by his initial AMLO, nowadays coinage of a nickname).   

As to the border wall, Trump’s insistence that Mexico should pay for it is a little strange and unprecedented.  It was an effective campaign chant, but really, why would Mexico be required to pay for a wall put up by the United States?

Of course, there are ways to get Mexico to pay, in a sense.  One suggestion has been to garnish remittances sent by Mexican undocumented aliens in the United States back to Mexico. 

The remittance flow is a big one.  CNN reports that, “Between January and November of 2016, US$24.6 billion flowed back to the pockets of Mexicans from friends and relatives living overseas, according to Mexico's central bank.  That's even higher than what Mexico earns from its oil exports -- US$23.2 billion in 2015. And almost all of that cash comes from the U.S.” 

The latest estimate for Trump’s border wall was about US$21 billion, which would mean that about a 10% deduction from the remittances for about twelve years would pay for the wall.

However, if that occurred Mexicans might figure out other ways to get their money back, like sending it with a person*.

Plus, if you think about it, the remittance money is not Mexican-origin money anyway, it’s money paid by American employers which has been paid to Mexicans.

So, in a way that would mean that American employers are paying for the wall.  On the other hand, it is money that now belongs to Mexicans, but it’s not Mexican government money either.

The bottom line is that it’s not a good economic policy for Mexico to depend so much on remittances.

Another proposal would be to charge more money (whether you call it a tax or fee or tariff or whatever) on Mexican imports.  That would affect American consumers of those products.

Obviously, no Mexican president, of any party or persuasion, could publicly commit to paying for a wall on the U.S. side of the border.  That’s called political survival. 

What about U.S.-Mexican trade and investment? 

Trade is conducted under the rubric of the North American Free Trade Agreement.  It’s a treaty signed and approved by the governments of the U.S., Mexico and Canada.

So if Trump wants to renegotiate NAFTA, that opens a potential trilateral negotiation in which all three countries may push for changes.  Where will that end?

This is bigger, in other words, than a campaign slogan.

So stay tuned, it should be interesting.

Note:  On February 9th, I was a guest on Silvio Canto, Jr.’s Canto Talk show and we discussed some of these issues.  You can listen to the interview here.

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* MexiData.info note: Virtually all remittance amounts to Mexico cited in the media do not include money taken by individuals.

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Allan Wall, an educator, resided in Mexico for many years.  His website is located at http://www.allanwall.info.

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