Enhanced Reciprocity for the U.S.-Mexico Relationship?

The economy in the United States is currently in turmoil, as evident by the “fiscal cliff” negotiations that may result in an overall tax adjustment.  As such, a stronger bi-lateral trade relationship with Mexico might turn out to be a vital factor in the restoration of the U.S. economy in the months to come.  President Obama’s relentless efforts to find a solution to the deficit problem may be more productively directed towards a collaborative relationship with newly elected Mexican President, Enrique Peña Nieto.  This revived North American relationship between the two leaders, tied together by increasing cross-border trade, has the potential to mutually stimulate both the United States and Mexican economies.  However, as the Mexican economy continues to rise, it is likely that powerful Mexican drug cartels, along with perpetuated violence and corrupt public officials associated with these criminal organizations, could witness a concurrent expansion as well.

On December 2, Enrique Peña Nieto assumed office as the President of Mexico and began the tedious process of reestablishing Mexico as a country of economic distinction and global importance, rather than continue to bear its current stigma as a narco-state that has seen nearly 60,000 drug related deaths since 2006.[1] In an attempt to redirect international focus away from the bloodshed, President Peña Nieto has been showcasing the brighter side of Mexico while on a recent White House visit in which President Obama praised him for his “ambitious reform agenda”.  Domestically, Peña Nieto has been promoting this own 13-point plan that emphasizes his party’s focus on optimistic economic growth in Mexico’s future, rather than one in the hands of corrupt agencies and drug cartels.

 Peña Nieto’s optimism about his country’s future is a product of increased trade and the volume of industrial exports to Mexico’s northern friend and ally.  In 2011, with nearly 80 percent of all Mexican goods being exported to the United States, Mexico became the second largest oil supplier to the North American superpower.  Numerous factors contribute to this relationship, specifically: a 2,000-mile border that facilitates 1 million daily travelers, an internationally recognized free trade agreement (NAFTA), numerous bi-national organizations and agreements, upwards of 18,000 U.S. invested companies with over $145 billion USD invested in Mexico and an overall average equal to $1.25 billion USD in reciprocal trade per day.[2] As Mexico experiences increases in international investment, there will be an increasing parallel in levels of Mexico’s reliability.  The rise of bi-lateral corporations forces an increasingly clear dependability that is needed in Mexico in order to maintain the millions of USD invested through these companies.  A continued rise in the Mexican-American commercial relationship is one of the defining factors that will be necessary to contribute to the projected mutual economic progress of both countries.

Although the current trade relationship between the United States and Mexico is unparalleled, the drug-induced side south of the border always seems to overshadow such a rapport. Since 2006, Mexico has experienced upwards of 60,000 deaths, including at least 3,000 police officers and soldiers who confiscated over 114 tons of cocaine, 11,000 tons of marijuana, 75 tons of methamphetamines and close to 100,000 large and small-scale firearms.  Given the structured control of 90 percent of the cocaine that enters the United States and an estimated annual income of 18 to 39 billion USD, it is the Mexican drug cartels that truly govern these political units and furthermore, utilize extortion, corruption and extreme violence in order to bring about current hostile stereotypes that the rest of the world associates with Mexico.[3]

 To combat this pending struggle, President Peña Nieto began his tenure by stating that he will “launch a series of political and economic reforms” ranging from social issues, such as education and social security, to reforms based on improving energy production and national security.  Mexico is already the United States’ third largest importer, and is forecasted to be the largest one by 2018.  In reality with these reforms, “experts from the financial industry, including Goldman Sachs and Nomura, predict that, by 2020, Mexico’s economy will be among the ten largest in the world.”[4]  With such an economic potential as a result of effective trade agreements, Mexico has the ability to not only advance the welfare of its citizens, but to also be a potential solution for the economic woes of the United States.  Furthermore, President Peña Nieto’s bold and optimistic reforms, combined with Mexico’s projected economic growth, could potentially act as the vessel that transforms Mexico out of the culture of violence that persists in the country today.

 On the other hand, a Mexican transformation might occur in the form of collusion and back-alley deals with the cartels that helped bring about Mexico’s current level of violence. President Peña Nieto’s Partido Revolucionario Institucional (PRI) has an unforgettable history of corruption within Mexico’s political system, involving illegal landholdings and the manipulation of public-sector enterprises.[5] Although the PRI is notorious for its backroom deals, their illegal customs were able to keep violence at a minimum and bring about economic growth for Mexico during the 71 consecutive years that the party was in power before the presidential election in 2000.  The important question of this Presidency is whether or not Peña Nieto will be able to revolutionize Mexico with his newly proposed reforms without the collaboration of the drug cartels.

 As Peña Nieto’s presidency proceeds into full swing, there will most likely be a revival of the constant political battles plaguing Mexico.  There is however, a brighter and more optimistic argument that points to a more tangibly improved modern economy on the back of free trade and possibly massive exports to the United States market. The other side of the situation could conversely illustrate a Mexico run by drug cartels that thrives on their self-generated violence, corruption and also illicit exports to the United States.  These two sides of Mexico have been in a constant regional struggle since the early 20^th century and once again will determine the success or failure of the Peña Nieto administration and more importantly, the success or failure of Mexico.

Ethan Roseman, Research Associate at the Council on Hemispheric Affairs

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