The Trump administration has launched an investigation under Section 232 of the Trade Expansion Act into the impact of semiconductor imports on national security, a step toward imposing tariffs. But if it moves ahead with tariffs on all semiconductor imports, the United States would raise hardware costs for US AI firms, punish important partners such as Mexico and Taiwan, and lower prices for Chinese competitors. Tariffs targeted at China have their uses in the US-China tech competition, but they shouldn’t be applied haphazardly to US allies and partners.

Semiconductors and dual-use imports

Today, the United States and like-minded allies and partners are competing with China in AI, or what AI entrepreneur Dario Amodei and former US Deputy National Security Advisor Matt Pottinger have described as possibly “the most powerful and strategic technology in history.” AI-related imports enable US AI companies to access cost-effective inputs and continue to outpace Chinese competitors. Since AI is an emergent technology with such large potential utility and consequences, it would be a mistake to allow China to define the rules of engagement.

Components are a key cost driver for training AI models. Key AI-related component imports include processing units, such as graphics processing units (GPUs) and central processing units (CPUs), and printed circuit assemblies (PCAs), all of which could be targeted by Section 232 tariffs. GPUS are one of the most popular computing technologies to run AI models due to their ability to train massive models and speed up inference at scale; they’re also used on board autonomous vehicles. Similarly, PCAs are critical because they house and interconnect critical components like GPUs, CPUs, memory, and networking chips inside servers and data center infrastructure. AI is a critical source of demand, although chips and printed circuits are also used by a variety of non-AI applications, including cars, computers, washing machines, routers, etc. Imports of processing units and PCAs have surged in recent months due to both AI-driven demand and companies seeking to get out ahead of tariffs.

PCA unit imports have more than quintupled since 2021, with no productivity changes to explain the jump—pointing to greater hardware needs. Consequently, if PCA prices rise due to tariffs, the US AI buildout could slow.

Two economies are prominent partners of dual-use technology, with both military and civilian applications, for the US AI sector. The first, Taiwan, not only ships leading-edge GPUs to the United States, but the Taiwan Semiconductor Manufacturing Company has committed to investing a cumulative $165 billion in the US tech sector. The second, Mexico, is the largest single aggregate supplier to the United States of GPUs and CPUs, as well as PCAs, by value. Tariffs on semiconductor inputs would punish US partners while limiting the access of US firms to the global market.

Indeed, hardware is a significant cost driver for US AI. Researchers for Epoch AI and Stanford University have found that AI accelerator chips and other server component costs comprise about half of all costs for training and experiments of machine language models. Moreover, building AI models is highly capital intensive: hyperscalers committed $200 billion in twelve-month trailing capital expenditures in 2024; Morgan Stanley projects hyperscaler capital expenditures could reach as high as $300 billion in 2025. Significantly, since hardware acquisition costs are “one to two orders of magnitude higher than amortized costs,” higher prices via tariffs could deter new AI entrants, slow adoption, and stymie dynamism. 

Unintended tariff consequences on the Chinese tech sector

While heavy tariffs would harm the US tech sector, they are unlikely to impede China in the AI race. In fact, tariffs could indirectly encourage tech transfer to China by pushing other countries, especially in Southeast Asia, to work more closely with Beijing. In mid-April, after US President Donald Trump’s announcement of global “reciprocal” tariffs and the subsequent ninety-day pause, Chinese President Xi Jinping visited Vietnam, Malaysia, and Cambodia, saying he would “safeguard the multilateral trading system.” China left these meetings with several memorandums of understanding on investment and trade, including a call to increase AI cooperation with Malaysia.

The mention of AI cooperation was striking and potentially significant. Export controls of US-designed semiconductors to China have been leaky: There is some evidence of GPU transshipment to China through Southeast Asia, notably Malaysia. The Wall Street Journal also reports that Chinese engineers are using Malaysian data centers to train AI models. Meanwhile, the export of GPUs and other computer hardware containing semiconductors from Taiwan to Malaysia reached $307 million in April (more than half the value of the same exports for all of 2024). Remarkably, Taiwan’s GPU and CPU exports to countries in the Association of Southeast Asian Nations (ASEAN) hit a record high in April—surpassing exports to the United States by value for the first time on record.

The increase in Taiwan’s semiconductor exports to ASEAN does not, by itself, demonstrate transshipment to China: Malaysia is becoming an increasingly popular spot for international data centers because of the country’s cheap real estate and its proximity to Singapore. It’s possible that the GPUs and CPUs were consumed in the domestic market. Still, it’s worth noting that recent data center entrants in Malaysia include Chinese firms. If US tariffs make countries like Malaysia more willing to work with China, that could increase the risk of US export controls being violated.

 If not tariffs, then what?

Given that non-China tariffs appear likely to harm the US tech sector and could strengthen Chinese tech firms via technology leakage, US policymakers should consider alternative tools.

The United States has been able to slow the Chinese tech sector by imposing a series of bipartisan export controls that limit Beijing’s access to high-end semiconductors. Last month, the Bureau of Industry and Security rescinded the AI Diffusion Rule, which strengthened chip-related exports. Some criticize the framework for casting too wide of a net, while others hold that export controls are a crucial economic statecraft tool for protecting US national security interests and preventing technological acquisition by strategic rivals.

Export controls are vital and necessary, but they are not a silver bullet. To outcompete China, the United States must strengthen its own capabilities, including by incentivizing manufacturing and know-how in semiconductors and other strategic technologies. This is precisely the rationale for the bipartisan CHIPS and Science Act, which was signed into law in August 2022. Tariffs alone do not provide enough support to incentivize foreign investment and domestic capacity in chip technologies. While Congress and the White House should make adjustments to the CHIPS and Science Act where appropriate, the program’s overall aims should be maintained.

No one should be unclear on the stakes, amid the global race toward artificial general intelligence (AGI)—or artificial intelligence equal to or exceeding human capabilities. Whether the race is a sprint, a marathon, or something else entirely, the technology’s productivity gains will likely prove sizable. AGI also holds obvious potential risks, but it is in the United States’ best interest to be at the forefront of setting standards and developing the regulatory environment. Accordingly, it is important for the United States to maximize its chances of obtaining this technology and integrating it before China does by securing vital, high-end semiconductors ahead of its rival.

Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center and the Indo-Pacific Security Initiative. He also edits the independent China-Russia Report.

Jessie Yin is an assistant director at the Atlantic Council’s GeoEconomics Center. This article reflects their own personal opinions.

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Click to jump to an expert analysis:

China: There is no cooling off this trade war

European Union: New US tariffs unaffected by the courts could have the biggest bite

United Kingdom: The UK-US deal continues to provide certainty and some unique advantages

Mexico, Canada, and the Americas: While some countries may be in less of a rush, USMCA negotiations will ramp up

India: Its special position means New Delhi should press ahead on a deal

China

European Union

United Kingdom

Mexico, Canada, and the Americas

India

Trump Tariff Tracker

The second Trump administration has embarked on a novel and aggressive tariff policy to address a range of economic and national security concerns. This tracker monitors the evolution of these tariffs and provides expert context on the economic conditions driving their creation—along with their real-world impact.

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Such data gives a different perspective on the United States’ trade relationships. Countries in Latin America and the Caribbean (LAC), especially Mexico, import US goods at levels more typical of high-income countries, outperforming countries with similar income and development levels located in other regions.

This infographic highlights LAC’s unique role as a high-value market for US products. With strong trade ties and deep supply-chain integration, the region could help the United States advance its economic goals.

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This infographic reflects on trade balances in the broader context of supply chain interdependence. Research shows that Mexico is deeply reliant on US intermediate goods, which means that it imports US inputs that go into more finalized products that are then exported through the USMCA back to the United States. This places Mexico, in particular, in a separate category from all other major US trade partners.

The post Americas economies in-depth: The US-Mexico trade balance in context appeared first on Atlantic Council.

How previous presidents approached power

Mexico has long suffered from underinvestment in electricity generation, transmission, and distribution. Power outages are a persistent and growing challenge, electricity prices are higher than those of the neighboring United States, and much of the country is underserved in power access and reliability. CFE is undercapitalized and saddled with expensive and carbon-intensive infrastructure. Indeed, it reportedly lost close to six billion dollars in 2024.

This undercapitalization is a core political challenge for every Mexican government. If the most profitable customers are served by private competitors or supply themselves, then CFE has little hope of growing a credit-worthy market—especially when it is already saddled with providing guaranteed subsidized power to the residential market. Lacking capital, the country needs private-sector investment to grow generation capacity. 

This problem has been apparent for a while, and several ways of addressing it have been tried before. President Carlos Salinas de Gortari, who served from 1988 to 1994, introduced IPPs and self-supply schemes to allow CFE to lease modern gas-fired power plants and let industry generate its own electricity. More recently, President Enrique Peña Nieto passed a comprehensive constitutional and legal reform to Mexico’s energy policy in 2013 and 2014. These reforms made CFE a special productive enterprise that competed with the private sector on an equal footing, created multiple independent regulators for industry supervision, and held highly successful auctions for renewable power. 

Then López Obrador, who governed from 2018 to 2024, disrupted the reforms with executive and legislative attempts to overturn them. While these attempts were not successful during his term, in practice, the winners of renewable auctions saw the economics of their projects destroyed when they were denied the interconnection, green certificate, and priority-of-dispatch benefits they were entitled to under the reform. When the ruling Morena party won both the presidency and legislative supermajorities in the July 2024 elections, López Obrador ultimately passed constitutional changes that reversed many of the Peña Nieto reforms and restored CFE’s primacy in the power sector. 

How Sheinbaum’s plan could work

The new law, which is expected to be approved by the Chamber of Deputies before the end of April, creates a hybrid framework where CFE has “prevalence” in the power system, with a requirement that it retain 54 percent of the nation’s power generation. The private sector can provide the balance, and every year the national planning authorities will review whether the correct balance has been maintained. The law requires that new renewable energy also provide storage to maintain grid stability.

The Plan Mexico and CFE’s 2025-2030 Expansion Plan promise major government investments on transmission and distribution and adequate funds for the government to build up to 6 gigawatts in gas generation over the next six years to fulfill its share. The Plan Mexico also pledged, and the new law incorporates, “one stop shopping” for expedited permitting. This allows for some small-scale self-supply without a permit: less than 0.7 megawatts (MW) distributed generation and up to 20 MW self-supply with a permit but with very tight rules that require the consumer to apply for the permit.

Importantly, the law also introduces two new schemes for CFE projects financed by the private sector: the Long Term Producer, which is a new type of IPP that will sell electricity exclusively to CFE, and the so-called Mixed Investment. The Mixed Investment is an electricity company controlled by CFE in which private investors can participate as minority shareholders, and that could sell electricity to CFE or to private customers. This follows a precedent set by Energia Quantum, a government-controlled private company that owns thirteen plants bought from Iberdrola Mexico. CFE has already announced that it will tender the first new projects (to add 2,376 MW generation capacity) in the first four months this year. The framework is essentially buying time for CFE to grow enough to provide grid-based solutions to all major consumers and right-size its finances. 

There is much that is positive in this new plan and proposed law. Project developers would, in theory, be guaranteed that the power they generate would be dispatched on an economic basis once they have a permit and their project is incorporated in the national plan. Previously, CFE’s own generators took priority even though the law was supposed to create a level playing field. The plan’s commitment to increasing renewable energy’s share of the mix is welcome and important for Mexico’s energy security, given the country’s deep reliance on US natural gas. The self-supply and IPP projects, which were built under prior legal regimes, are preserved—a welcome sign of stability for investment. While the new framework is likely too restrictive to attract new investors to the power sector, the major private-sector players that have prospered over the past six years, who have worked with CFE, and who already operate at scale are well-positioned to participate in this new phase. It is also helpful that the law would allow for some smaller scale new self-supply, even if the rules are restrictive, so that some businesses can provide their own power without waiting for a new permit. There is also some welcome financial flexibility allowed for CFE itself. Under the plan, CFE would have the authority to develop its own generation capacity and access private financing and capital.

Eight ways the plan could fall short

There are also major risks and drawbacks to the new approach. 

First, with the Secretariat of Energy exercising complete discretion over which private sector projects are permitted, the lack of merit-based selection and transparency is a major integrity risk.  

Second, the regulations will need to make clear which projects are scored in the government’s 54 percent share and which are not. If CFE contracts with a private company to supply it with power, for example, which basket is that contract in? 

Third, the costs of private-sector generation may be uncompetitively high. The new rules restrict the right to build transmission to the government alone. If a generator needs a new substation or transmission line, it can build it with permission—but the infrastructure needs are discretionally determined by the National Center for Energy Control (CENACE) and must be donated to the government. And if, for example, CFE contracts with a Long Term Producer for a 500 MW facility and the power plant has the capacity for 700 MW, the company cannot sell the excess power. The owner must transfer property of the plant to CFE without compensation at the end of the contract (e.g., a typical IPP contract lasts twenty-five years, and a combined cycle plant has a life cycle of forty years). These ancillary expenses will raise the cost of every project. 

Fourth, the economic viability of private projects depends on regulated rates and charges (e.g., transmission) set by the new regulatory authority (the National Energy Commission) and by the system and market operator (CENACE). These two are formally independent but ultimately controlled by the minister of energy. Will they set reasonable charges and rates that allow private companies to recover costs and compensate for some ancillary costs that result from the new law (e.g., the cost of connecting self-supply to the grid, or the cost of storage for renewables)? 

Fifth, will CFE have the technical and financial capacity to procure its 54 percent share (including getting access to gas turbines, which seem to be backlogged for years)? CFE’s track record over the past several years has been less than stellar, with many projects that were to be completed in 2024 now scheduled to start in 2025-2027. If not, will the private sector be held back while it waits for CFE to deliver its share? Down the road, how can the total generation “pie” grow, if it will be dependent on new money for CFE? 

Sixth, will the new regulations assure that “prevalence” for CFE does not mean primacy in dispatch or allow for other types of unjustified discrimination? The government seems to be saying that dispatch will be on economic terms if a power provider has a permit, but if transmission is constrained, will this still be the case? The rules need to provide clarity and legal protection with recourse. 

Seventh, the government has not yet promulgated a national plan for natural gas supply. There is some excess capacity which can be utilized for the first wave of projects, but more gas will be needed for the government to meet its planning goals. The challenge to new infrastructure lies on the Mexican side of the border. The government will need to support the procurement and permitting of new infrastructure and help expedite the completion of projects already permitted to ensure that its new plants are well supplied. 

Finally, the rules for distributed generation and the new self-supply (0.7 MW and up to 20 MW) could be unhelpfully tight. For many areas of Mexico, such as the southeast, grid connections may take some time to arrive. A permissive structure could deliver power and development on a faster timeline. Likewise, the demand for power for near-shoring and additional data centers, coming from industrial parks in the north of the country, is imminent in the next four years or so. Distributed generation and self-supply could provide competitively priced power faster there as well. Perhaps a time-limited program, with projects required to be under development within four years, could balance CFE’s long-term goals with industry’s short-term needs.  

Some of these questions will be answered when the final regulations are promulgated, which is expected to happen in the next few months. In the interim, the Sheinbaum government deserves praise for its active engagement with the private sector over how these rules are to be drafted. Time will tell how quickly permits will be granted and whether the new framework encourages or restricts growth. But given the government’s ideological commitment to the dominance of state enterprise, this new framework has the potential to grow generation and support the president’s commitment to her energy transition goals. 

Mexico’s economic competitiveness hangs in the balance. But this government has a practical, technocratic approach that may allow for adjustment down the road if needed. 

David L. Goldwyn is president of Goldwyn Global Strategies, LLC, chairman of the Atlantic Council’s Global Energy Center Advisory Group and a former special envoy for international energy affairs at the US Department of State. 

César Emiliano Hernández Ochoa is a managing partner at Publius, a Mexico City law firm, and served as deputy secretary of energy for electricity for SENER, Mexico’s energy Ministry, from 2014-2017.

The post Mexico’s new electricity law could boost the country’s energy sector. But big questions remain. appeared first on Atlantic Council.

Introduction

2024 has brought a time of renewed upheaval in Mexico, six years after the election that fundamentally changed the political and economic systems of the country. Claudia Sheinbaum, standard-bearer for the incumbent Morena party, won the presidency in June 2024, the first ever woman to do so. The presidential and legislative elections were among the most decisive in Mexican history. With her victory comes a spate of questions about the political and economic future of the country, as she moves to cement the momentous political reforms her predecessor, Andrés Manuel López Obrador (known as AMLO), set into motion. In such a time of transformation, the Atlantic Council’s Freedom and Prosperity Index remains deeply illuminating.

Starting in the late 1980s, Mexico underwent a series of structural transformations that have significantly modified the nature of the state, the market, and their relationship in the country. At the tail end of the Institutional Revolutionary Party’s seventy-year single-party rule, public and international pressure brought about a democratic transformation that included the emergence of wide-ranging independent and technical institutions, with remits of electoral integrity, monetary policy, competition, statistics, transparency, and the specific regulation of markets. The state’s interventionist role in the economy was reduced, with an overarching privatization process that, among other things, touched banking, telecommunications, and infrastructure. More structural economic change came with free trade agreements and their upward pressure on competition in the private sector. Most notable among them was the North American Free Trade Agreement (NAFTA), which along with its 2018 successor the United States–Mexico–Canada Agreement (USMCA) has shifted the economic matrix over three decades from significantly primary to mostly secondary and tertiary activity: Where oil-related products once represented almost 20 percent of exports in the early-mid 1990s, today they account for less than 5 percent; instead, manufacturing has climbed to approximately 90 percent of exports over the past decade. Several notable milestones have followed:

• Technocratic rule prevailed for years and favored a relatively unfettered private market.
• The ruling party lost in the 2000 presidential election—a first in seven decades—to a right-wing party.
• The 2018 landslide election of a left-leaning populist prompted changes to the nature of the state-market relationship by strongly favoring the role of the state. 
• The concentration of power has accelerated since 2024, when the incumbent ruling party achieved a legislative supermajority (via a friendly legal interpretation) and full judicial control (through a constitutional amendment). The promise, at least on paper, is not only to give extraordinary weight to the state but also to give force to the market as an engine for growth and prosperity. The result of this experiment is yet to be known.

Taking a step back to examine the Mexican index from its beginning in 1995, we can see a notable difference between the freedom and prosperity indices. On the one hand, the Prosperity Index has shown a steady, though slow, rise over the past twenty-eight years from 55.4 to 65.8 (the COVID-19 crisis notwithstanding). On the other hand, the Freedom Index shows Mexico rated only slightly higher than in 1995, despite a significant period of improvement in the 2000s. We can see two distinct inflection points that form a kind of “plateau” of higher freedom scores, around the years 2000 and 2018. The former coincides with the election of Vicente Fox, of the National Action Party (PAN), to the presidency, enabled through democratic reforms in the 1980s (including the establishment of the precursor to today’s National Electoral Institute). His rise marked a momentous moment in Mexican politics as the first president from outside the PRI, which had previously enjoyed essentially single-party rule since 1929.

The second inflection point, in 2018, is particularly notable as it includes the effects of two countervailing forces on the Freedom Index. The first is the signing of the USMCA, which according to the index’s methodology resulted in a significant increase in economic freedoms. The second is the election of AMLO, who rose to power on a wave of antielite sentiment. Once in power he began implementing his unique brand of populist governance, combining a redistributive fiscal policy with democratic backsliding and power consolidation. These features have blended to create a notable downward trend in freedoms over a half a decade, as we will explore in detail below, though they also have contributed to the continued improvement in some of the prosperity indices.

Focusing on the past five years, the index shows the continuation of a trend that is rare in the region and elsewhere—the decoupling of freedom and prosperity. Mexico is one of the few cases in the last five years, together with Nicaragua and Chile, where prosperity has continued to increase while freedom has declined. This is contrary to the wider trend in the Latin America and Caribbean (LAC) region, where both indices have declined.

In a marked shift from its categorization as “mostly free” in the 2023 index, Mexico is classified in the 2024 edition as a “low freedom” country, ranked 90 in the world—reflecting accumulated, significant antidemocratic shifts over the years of the AMLO presidency. Mexico continues to be “moderately prosperous,” though the changes underlying the reductions in freedom can be expected to damage prosperity as well, sooner rather than later. 

Atlantic Council research suggests that, in general, the level of freedom in a country plays a significant causal role in its prosperity. The effect of a significant shift in freedoms is usually delayed by several years, taking up to two decades to manifest fully. In the case of the recent reductions in freedom in Mexico, the economic effects are likely to be felt much sooner. For example, as I will discuss below, judicial reforms are likely to pose an enormous challenge for the private sector and the renegotiation of the USMCA in the coming year, which could have severe economic ramifications for the country, as uncertainty affects investment climate. In the context of the current authoritarian shift in Mexican politics, this highlights the importance of steadfast, long-term public policy. That said, whether we continue to see this divergence going forward through the Sheinbaum presidency is yet to be seen.

Evolution of freedom

Mexico’s Freedom Index score has continued its decline, falling almost six points to 63.3 over the five years leading up to 2023. The score is characterized, after a decade of stop-start improvement, by a sharp fall since 2018, driven by declining political and legal freedoms. While Latin American countries have seen declining freedoms in this timeframe, Mexico’s slide is an outlier. Despite starting the period with a higher freedom score than the rest of the region, it has now slipped well below the average of 66.4, ranking eighteenth among the twenty-four nations in LAC, and the trendline continues to be negative. While economic freedom has been steady at around 76 after a notable drop in 2019, legal and political freedom scores have plunged since 2018. Mexico’s legal freedom score is 48.6, down from 54 in 2018; in fact, while the score has steadied in the past year, recent judicial developments (discussed below) suggest that we will see a severe drop next year. Political freedom has recorded an even more severe decline, dropping over ten points to 65.4 in 2023.

We can see several notable declines within the political subindex. Political rights have fallen steeply in the past five years. Mexico has dropped over twelve points and twenty-five places in the international rankings, and well down among the LAC countries in the nineteenth position. This score reflects the adversarial stance of the former AMLO government regarding criticism, opposition, public protest, and most significantly, the freedom of the press. The president presided over a militarized response to anti-femicide protests in Mexico City, for example, and he continued to constantly attack specific press representatives during his mandate. On one occasion in February 2024, he revealed the private phone number of a New York Times journalist during a live press conference; on another, he exposed private income and tax information of a Mexican one.

In another sign of democratic backsliding, the elections score has declined almost three points to 89.1. As president, AMLO often used his platform to campaign for members of his party as well as continuously attack political opponents from his privileged tribune, contrary to legal principles. The decline also reflects the fact that while the National Electoral Institute (INE) remains de jure independent, it has been subject to relentless political pressure and intervention, as well as severe funding cuts. The former president accused the institute of fraud and sought to centralize it under the executive. Furthermore, the legislature—controlled by the ruling party, Movimiento de Regeneración Nacional, or Morena—has continued to leave the Elections Tribunal without its required seven magistrates. Those threats and the loss of funding have yet to translate into a further deterioration of election integrity; nonetheless, it remains part of a worrying trend.

On a similar note, the most severe decline was in the legislative constraints on the executive score, which fell almost thirty points to 36.3 in 2023. This period coincided with AMLO’s sweeping election and legislative majorities (including a supermajority in the Chamber of Deputies), giving the administration a period of total legislative control until the supermajority was lost in 2021 (coinciding with a brief uptick in the constraints score). However, AMLO continued to undermine legislative independence: for example, forcing through legislation in violation of procedure. With Sheinbaum’s election victory in 2024 came not only the presidency but a questionable supermajority in the Congress of the Union. In fact, the ruling coalition now controls 73 percent of the Chamber of Deputies with 54 percent of the popular vote for the chamber, against a constitutional limit of 8 percent for the difference between representation and vote share. Despite initially falling one vote short in the Senate, a subsequent—questionable in its form—defection from the opposition has handed the coalition a supermajority across both bodies for the first time since the 1990s. Morena has also sought to remove additional constraints on executive power, for instance by following through on the elimination of several key autonomous agencies. These include the National Institute of Transparency Access to Information and Data Protection (INAI), an essential resource for government accountability; the Federal Economic Competition Commission, known as COFECE, which has a broad antitrust and competition remit; the National Council for Evaluation of Social Development Policy (CONEVAL), which is in charge of the evaluation of social programs and for poverty reduction strategy; the Federal Telecommunications Institute, the telecom regulator; and the Energy Regulatory Commission. The proposal was passed in November 2024, ostensibly to reduce costs, though the savings will amount to less than 0.05 percent of the federal budget. This follows years of AMLO hamstringing the agencies via unfilled appointments and budget cuts. Additionally, while Sheinbaum’s government made some changes to AMLO’s initial proposal to remain compliant with USMCA provisions, potentially compromised regulatory functions may yet violate the treaty if they end up favoring state-owned entities.

A similar dismantling on presidential checks and balances characterizes the decline in the legal subindex score. Apart from informality, which has been steady, every other legal indicator has fallen sharply since 2018, driving a twenty-one-place drop in global rankings for Mexico. Judicial independence has nose-dived to 50.4 from 62.2, reflecting an extended offensive from the Morena government against the national judiciary. AMLO appointed four justices to the Supreme Court of the Justice of the Nation, including a party insider with no judicial experience. He has repeatedly accused the court of treachery and corruption, encouraged public anger at the court’s president, threatened the pensions of judiciary workers, and slashed the court’s budget. Among the most contentious political issues of the past two years is a radical judicial overhaul, first proposed by AMLO but supported by, and eventually passed under, President Sheinbaum in late 2024. In a world first, the reform aims to require every judge in the system (over 17,000) to be elected by popular vote along with a reduction by two seats in the size of the Supreme Court. A significant portion of the candidates will be prescreened by the ruling Morena party. This presents severe dangers to the rule of law and independence in the judiciary, with judges exposed to the influence of political pressure and public sentiment on what should be a fully indifferent, impartial process. Legal interpretations will become unreliable as politicization in the judiciary results in inconsistent ad-hoc rulings. The role of the judiciary as a check on the executive and legislative will be greatly diminished, primarily by means of its ability to intervene against political parties and other political actors which will now control its judges’ candidacies. Despite the imminent need for significant improvement and the administration’s continuous attacks on and heavy-handed influencing of the court, it had remained de jure independent; but the recent judicial reform throws even that into question.

The ramifications of this fundamental reform, which undermines the capacity and oversight of the judiciary, will be manifold. This includes effects on the Mexican economy, as discussed below, but to start with, top-to-bottom elections set for June 2025 will cost $650 million. These expensive elections come in the context of one of budgets aiming at reducing the historically high fiscal deficit of 2024through severe fiscal consolidation in 2025.

The fight against corruption, which has been a key justification for Morena’s authoritarian measures like the judicial reform, has shown little signs of improvement over the past five years. On the contrary, some notable loci of corruption have only emerged during recent years. In one case, the director of the recently established Institute to Return Stolen Property to the People (INDEP) resigned after explosive revelations of theft within the agency. The agency was established to redistribute the value of assets seized from criminals to the Mexican people (though critics argued it simply renamed an existing agency with the same purpose); instead, “multimillion dollar corruption” has plagued its operations. Additionally, while seized assets were previously used solely to compensate victims of crime, the new agency has opaque authority to distribute funds as it pleases, including to other political priorities, increasing risks of cronyism on top of corruption.

The judicial reform is likely to exacerbate the problem by politicizing judicial officials in lower courts and opening them to the influence of political interests and even crime. Additionally, the elimination of key autonomous oversight agencies, as discussed above, is likely to lead to less transparency and accountability for two reasons. One is that by destroying the agencies and absorbing their functions into the executive branch, regulatory and antitrust capacity are likely to suffer significantly, likely allowing more cases of bad practice to fall through the cracks. Additionally, they would be less likely to scrutinize entities associated with the executive. Similarly, while in office AMLO also directed a growing share of economic power to the sole purview of the military, including seaports, airports, customs processing, and major pet infrastructure projects like Tren Maya (Maya Train) and the Trans-Isthmic Corridor. Removing the requirement of competitive bidding and procurement, along with limited outside oversight of militarized economic activity, raise additional transparency and accountability concerns.

Militarization was also a key component of AMLO’s approach to security. In this case, a relatively flat trendline may belie a regression in Mexico’s internal security situation; the former president’s conciliatory approach to cartel violence has failed to reduce their impunity; despite misleading assurances to the contrary, a government agency confirmed that more homicides occurred during AMLO’s time in office than any other Mexican president in history. He also reversed course on his support for Mexico’s “desaparecidos,” over 100,000 unsolved cases of criminal kidnapping. However, President Sheinbaum’s approach to security may prove to be a case of significantly distancing herself from the previous government. Instead of continuing AMLO’s “hugs, not bullets” strategy, she seems willing to rely more on action than inaction, and on counterintelligence and coordination to combat and deter unsustainable levels of violence. This enormous change will be legitimized (vis-à-vis AMLO) by the need to opt for a completely different approach when put between a rock and a hard place by the United States, threatened with a 25 percent blanket tariff if inaction and lack of cooperation occur in terms of tackling drug-trafficking organizations and migration.

Finally, the clarity of law has also suffered, with Mexico dropping twenty-seven places in global rankings and losing eleven points to reach a score of 37.6. This metric assesses whether Mexican laws are general, public, consistent, and predictably enforced. Indeed, all four of those characteristics were tested repeatedly by the previous administration, perhaps most notably in an anticompetitive electricity reform bill that was struck down by the Supreme Court in early 2024. Now that Morena has pushed through its judicial overhaul, it is likely that such distortions of the clarity of the law will have fewer checks going forward, whether through anticompetitive measures from the government or unpredictable enforcement by a judicial system in disarray. Further reduction in the clarity of the law has taken place via government abridgments of private property rights.

The economic subindex shows only a moderate decline of three points since 2018. However, within the average lies an interesting dynamic, with subindices moving in different directions. On one hand, trade freedom and investment freedom show a marked increase in 2018, following the ratification of the USMCA. Trade freedom especially benefited from the agreement, showing further improvement in 2020 once the agreement was ratified.

On the other hand, the property rights score has decreased dramatically following the 2018 election. Despite being an enshrined principle in the constitution, the previous administration took several notable actions to weaken the right to private property and fair treatment of that property by the government. In 2019, the government passed a law equating tax evasion with organized crime and assigned the corresponding punishment; among its outcomes is the ability to enforce mandatory pretrial detention without bail as well as asset forfeiture prior to a guilty verdict. While this was later overturned by the Supreme Court in 2022, citing unconstitutionality, such court-ordered rollbacks are less likely given the recent erosion of judicial independence. We can see the effect of this law on the sharp drop in the score in 2019. This follows from one of the broader themes of the past AMLO administration, which was active interventionism and an anticompetitive role for the state in a variety of sectors. For example, AMLO’s energy nationalism has resulted in more and more of the government’s fiscal eggs going into the basket of Pemex, the state-owned oil company, at the expense of private investment in both fossil fuel energy production as well as, critically, renewables. This is likely to be another area where President Sheinbaum distances herself from her mentor and predecessor as she recently presented an Energy Plan which included private-sector participation through mixed investment and the reprioritization of energy transition through renewable generation. It is yet to be seen, however, what the practical implementation of such a plan will be and how a much more doubtful private sector will respond to these recent policy shifts.

It is important to also mention that the government showed a particular tendency to infringe on property rights when pushing AMLO’s pet projects; for example, in May 2023 the government illegally seized a privately administered rail track, despite a legal contract granting the company its concession, to advance the Trans-Isthmic Corridor rail initiative. Additionally, in 2023, the government sent armed military, in contravention of court order, to seize the port assets of an American company in Playa del Carmen. In the final days of his presidency, AMLO issued a decree expropriating the entirety of that private land for a nature reserve. He has previously suggested using the rare deepwater port as a cruise dock; it is also the only port in the region capable of transporting the required raw materials for the Tren Maya, which has been subject to considerable environmental and economic criticism from opponents. Neither of those two incidents are reflected in the property rights score for the past two years, but they will affect foreign investment, particularly from the United States, and resulted in a sharp rebuke from the US Senate Foreign Relations Committee. While President Sheinbaum has taken a conciliatory tone with foreign investors so far, it remains to be seen how she will align further concentration of power with an environment of enablement and certainty for business development in Mexico.

By contrast, despite some concerning years when women’s marches were met with the use of force, the women’s economic freedom score has stayed flat at 88.8 and now offers reason for cautious optimism. President Sheinbaum plans to introduce several policies aimed at advancing women’s empowerment, including supplemental pensions for women aged sixty to sixty-four and an extension of parental leave. She also has proposed a National Care System aimed at supporting unpaid work (like childcare) that traditionally falls to women, though funding for the system has yet to be established.

Evolution of prosperity

Despite the dramatic backsliding in political, economic, and legal freedoms, Mexico has mostly resisted a similar decline in the Prosperity Index during the same period, rising six places in the global rankings. Despite a foundation of macroeconomic stability, overall growth has remained frustratingly low relative to its potential. Its score has tracked fairly closely with the regional level since 1995.

While Mexico’s global prosperity score rose above pre-COVID-19 levels in 2022, in contrast to the regional average, the income subindex shows the opposite: Mexico remains below its pre-COVID levels, while the region on average has surpassed them. This can be attributed to the government’s low levels of fiscal support (0.7 percent of gross domestic product) during the pandemic, which stands in stark contrast to others in the region such as Brazil, which spent close to 9 percent of GDP on its response. Even before COVID-19, the economic growth of Mexico suffered a significant deceleration. During the first year of AMLO’s government, the economy contracted by 0.1 percent and the compounded average growth of his term (excluding 2024) is less than 1 percent. The economy notably underperformed compared to the just-under 2 percent compounded annual growth seen over the three preceding administrations from 2001 to 2018.

There are also lagging indicators that suggest constraints on growth going forward. For example, while overall foreign direct investment (FDI) has grown in recent years (mostly due to profit reinvestment), new FDI inflows show a different story. Fresh FDI inflows via equity capital have plunged steeply from $15.3 billion in the first three quarters of 2022 to only $2.0 billion for the same period in 2024, based on the latest Mexican government data.

Despite sluggish income growth, Mexico has made significant strides in reducing inequality since 2018, moving up eleven places in the global rankings and five points to 57.7. This has been driven by AMLO’s social policy; for example, the minimum wage has nearly tripled since 2018 (by decree, rather than as a result of higher productivity and competition), and poverty has declined by 20 percent since 2020, in large part due to a costly and enormous rise in cash transfers. This creates further fiscal pressures at a time when the country is running its highest deficit in almost four decades, at 5.9 percent of GDP. Remittances have also virtually doubled from about $8 billion in the first quarter of 2019 to $14 billion in the first quarter of 2024. (International Monetary Fund research has shown that remittances have a downward effect on inequality in Mexico). It should be noted, however, that the rate of improvement in the inequality score has remained reasonably consistent since 2012.

On the environment, the index shows Mexico suffered only a slight decrease from 67.2 in 2018 to 67 in 2023. This reflects a flat trend, on average, for emissions, air pollution deaths, and access to clean cooking technology. In the case of Mexico, however, this obscures significant setbacks in environmental progress from a policy perspective. Mexico dropped seven places to 39 in the 2024 Climate Change Performance Index, which rated its climate policy as “low performance.” AMLO’s oil nationalism prioritized public investments in the floundering state-owned oil supermajor, pushing out competition and heavily disincentivizing investment in renewable energy and the wider green transition. Additionally, some of the administration’s pet projects, particularly the Tren Maya, have been criticized for environmental damage to sensitive ecosystems of the Yucatán peninsula. According to Global Forest Watch, primary forest loss saw a large increase in 2019 and 2020. This was likely due to the misguided Sembrando Vida (Sowing Life) policy, which aimed to address rural poverty and environmental degradation but resulted in large tracts of forest destroyed for timber or agriculture—despite many of the landowners having been compensated for protecting existing forest under the prior government’s policy regime. The data shows a marked improvement in 2021, suggesting the government acted to stymie Sembrando Vida’s negative externalities.

The path forward

Thus far, democratic backsliding has seemingly been either aligned with the will of the voters; a cost they are willing to pay for cash transfers, a renewed hope derived from populist rhetoric, or as punishment to previous governments. Or perhaps Mexicans simply don’t care or do not acknowledge – due to a lack of effective engagement and communication from previous governments – material benefit from a rather ethereal concept: democracy. AMLO’s presidency came with noticeable material improvements in many lives, as we can see with significant progress on poverty, inequality, remittances (though unrelated to his policies), and the minimum wage. Additionally, the political opposition is in total disarray, tainted with accusations of elitism and corruption—and without capacity to self-assess, regroup, and present a compelling alternative. AMLO, with his singular star power, and now Claudia Sheinbaum with more than 75 percent popularity (in January 2025), have effectively capitalized on their absence with an inclusive narrative of economic nationalism and executive strength.

On top of backsliding, the targeted problems of corruption, lack of security, and a culture of privilege remain largely unsolved. Additionally, the risks of continuing down the path of democratic retrenchment are immense and wide-ranging. The politicization of the judicial system risks an even deeper loss of public trust in the law as well as deeper entrenchment of a single hegemonic party, further reducing the viability of a basic democratic requirement: a strong opposition, which has also inflicted significant self-damage to be seen as an appealing and trustworthy political option.  

In addition to driving a cycle of continuously shrinking freedoms, the existing approach may also struggle to generate an adequate growth engine required for improvements in economic vibrancy. The country is facing several headwinds in achieving its growth potential in the medium term. For one thing, returning the budget deficit to manageable levels—Sheinbaum has pledged to meet a 3.9 percent deficit target in 2025—will require fiscal trade-offs. It will require the president to confront her government’s relationship with Pemex, the roughly $100 billion elephant in the room. While her predecessor injected almost $100 billion into Pemex via direct financing and tax breaks, production declined and losses doubled to $8.1 billion in October 2024 compared to a year earlier. The company’s debt now stands at almost 6 percent of the entire country’s GDP and the government has pledged almost $7 billion more this year amid a rapidly tightening budgetary environment. The Pemex albatross will hang heavily on the sovereign balance sheet, as we are seeing already. Along with concerns about the constitutional reform, Pemex’s fiscal burden helped drive Moody’s latest downgrading of Mexico’s debt outlook from “stable” to “negative” in November 2024.

Additionally, Mexico’s macroeconomic scenario is highly dependent on foreign trade, particularly its integration with the United States and Canada via the USMCA. Exports accounted for over 40 percent of Mexico’s GDP in 2022, and over 80 percent of those exports went to the United States. Those who invest and trade with Mexico crave certainty, particularly in a context of transformative changes to international supply chains. However, current uncertainty is driven by two key factors, one domestic and one international. Domestically, dramatic policy change toward concentration of power, fewer checks and balances, and less competitive markets are likely to alarm international investors as well as curtail domestic economic activity. The latter factor concerns Mexico’s trade relationships within North America, especially the outcome of USMCA negotiations and their effect on nearshoring growth. Donald Trump, following his decisive electoral victory in the United States, has advocated for extreme trade protectionism, including against Mexican imports. While rhetoric must soon give way to actual policy implementation for the Trump administration, it remains to be seen if his most severe threats will be realized, such as the imposition of a 25 percent tariff on Mexican imports that would have likely been implemented the first day of February, had the Mexican president not engaged in a forty-five-minute call with Trump in which, among other things, she committed to the immediate deployment of 10,000 military forces in the northern border area of the country. The coming four years, but particularly this year, are expected to be quite uncertain as, according to mostly vague thresholds of cooperation on organized crime and migration, the main anchor of the Mexican economy (trade with the US) will become extremely volatile.

One thing is for sure: There will be uncertain and tense times ahead, beginning with the first months of the second Trump administration and continuing until an agreement for a revamped trade agreement is in place, most probably, one which considers a form of sectoral customs union. Mexico is the main US trading partner and source of imports. Mexico also is among the top trading partners of the majority of the fifty US states, so having a free trade agreement that anchors certainty and promotes competitiveness and productivity in North America is a matter of priority for the United States as well. That said, one should expect a great deal of rhetoric and threats to stand in the way before a consensus emerges. Mexico will have to stay focused and display a sophisticated and effective multilevel strategy to reduce uncertainty and enhance its position in the negotiating process. The most important aspect will be managing the effects of rhetoric on business sentiment and avoiding the implementation of drastic and costly measures for Mexicans and the country’s economy.

The drop in FDI noted above is a foreboding sign. Investors had been awaiting the outcomes of the Mexican judicial reform and the US election, among other factors, and now they watchfully wait to see the Trump administration’s actual policies. Meanwhile, so far, Mexico has seized less of the unique nearshoring opportunity than it should have from Asian competitors like India and Vietnam. To do so, it must still meet important nearshoring requirements such as improvements in infrastructure, energy reliability, and security.

In conclusion, the past several years of deepening democratic retrenchment have culminated in a seismic shift in Mexican politics. Despite continued improvements in poverty and inequality and steady, if low, income growth, these reductions in freedoms may soon threaten Mexico’s prosperity in the medium term. Most of the population has fluctuated between eagerness and indifference vis-à-vis these changes so far. If President Sheinbaum and Morena continue to consolidate power and reduce checks and balances, it may be too late to reverse course once the full effects are felt.

President Sheinbaum has made her choice on the political transformation of the country, moving toward more concentration of power in the executive and the cancellation of several checks and balances which, however imperfect and thus improvable, were there as both limit and anchor. Her second conundrum will be around the economic system, where a series of contradictions derived from the chosen course of action in the political sphere will play out. We have yet to see what can become of a new model and a new trend in the world: regimes with autocratic features or even full-blown autocracies that create the avenues, spaces, and conditions for the private sector to accommodate and flourish in an era of deglobalization and strategic ally shoring; post-truth politics and social media; and a more polarized and volatile ecosystem.

Note: The text of this report was finalized in February of 2025.

Vanessa Rubio-Márquez is professor in practice and associate dean for extended education at the London School of Economics’ (LSE) School of Public Policy. She is also a member of the Freedom and Prosperity Advisory Council at the Atlantic Council, an associate fellow at Chatham House, and a member of organizations such as the Mexican Council of International Affairs, the International Women’s Forum, Hispanas Organized for Political Equality, and LSE’s Latin America and the Caribbean Center. Previously, Rubio-Marquez had a twenty-five-year career in Mexico’s public sector, including serving as three-times deputy minister (Finance, Social Development, and Foreign Affairs) and senator.

The Atlantic Council and its staff, fellows, and directors generate their own ideas and programming, consistent with the Council’s mission, their related body of work, and the independent records of the participating team members. The Council as an organization does not adopt or advocate positions on particular matters. The Council’s publications always represent the views of the author(s) rather than those of the institution.

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Two weeks earlier, on February 20, the Trump administration officially designated eight Latin American cartels, including six from Mexico, as Foreign Terrorist Organizations (FTOs) for their major roles in drug smuggling and human trafficking into the United States. The move marks a major escalation in the administration’s efforts to cripple the cartels, as an FTO designation grants the administration access to enhanced counterterrorism authorities, such as the ability to launch covert operations authorized by the president. The FTO designation came only days after the Mexican Senate approved the presence of the US Army’s 7th Special Forces Group to conduct joint training with Mexico’s elite Naval Marine Corps.

The Trump administration’s FTO designation and US Special Forces presence in Mexico comes as the administration is taking other notable steps. The United States has imposed new tariffs on Canada and Mexico to pressure them into greater cooperation against cartels and trafficking. On orders from the president, US Northern Command launched new deployments at the US southern border. And Central Intelligence Agency (CIA) surveillance drone flights, approved by Mexico, have reportedly gathered intelligence on cartel operations within the country. The rapid speed and scale of these apparent foreign counteroffensive preparations, arguably not seen since the early stages of the War on Terror, may indicate that the United States is on the verge of direct military action, either unilaterally or with the Mexican military, against cartels on Mexican soil.

While it remains unclear what the US administration will decide next, a scenario outlining what such an engagement might entail can be constructed by examining recent developments in the US-Mexico relationship and US counterterrorism efforts.

The following outlines a potential four-part sequence of events that could unfold if the United States conducts a direct military action against the cartels.

Step 1: Build relationships and training

US-Mexico cooperation is the best method of addressing the cartel problem. Therefore, at the start of this scenario, the new administration will likely work to establish operational partnerships with its Mexican counterparts. However, fostering reliable relationships may be challenging due to the country’s alleged entanglement with cartels. 

Two recent criminal cases brought by the US Department of Justice against two of Mexico’s highest-ranking former law enforcement and military officials highlight the problem. In 2020, former Defense Minister Gen. Salvador Cienfuegos Zepeda was accused of using his position to aid the H-2 Cartel in drug smuggling. In 2024, former Mexican Secretary of Public Security Genaro García Luna was sentenced to thirty-eight years in prison for taking bribes from the Sinaloa Cartel in exchange for assisting the cartel. Moreover, a US Drug Enforcement Administration (DEA) report found evidence that cartels had funneled millions into the 2006 presidential campaign of Andrés Manuel López Obrador, known as AMLO. 

In a move that perhaps anticipates the difficulty of engaging a government compromised by cartel influence, Trump appointed Ron Johnson as US ambassador to Mexico. Johnson is a former US ambassador to El Salvador, retired Green Beret, and veteran CIA officer with more than twenty years of experience leading sensitive paramilitary operations. He is uniquely equipped to secure cooperation from civilian officials while mitigating counterintelligence risks from cartel-affiliated public officials.

The US-Mexico military relationship presents a different set of challenges. During his term as president of Mexico (2018-2024), ALMO increased the funding and authority of the Secretariat of National Defense (SEDENA) in order to expand the main military branch’s role beyond military operations into civilian functions, such as law enforcement and infrastructure projects. However, this expansion occurred during a three-year absence (2019-2021) of a formal US-Mexico counternarcotics agreement, after AMLO pulled out of the Merida Initiative agreement in his first months in office. During this time, cartels extended their territorial control and fueled the rise of fentanyl-related overdose deaths in United States. The Mexican military’s expanding role in civil society and private business in recent years, coupled with allegations of corruption and cartel collusion, particularly around intelligence leaks, may complicate the US relationship with Mexico’s primary military branch. However, given its dominant role in Mexico’s national security, the US will continue to engage with SEDENA on conventional military cooperation, particularly in curbing migration and drug smuggling on the US-Mexico border. 

By contrast, the smaller Secretariat of the Navy (SEMAR), a separate federal executive cabinet member, has built a strong record in conducting successful specialized counter-narcotics operations and has maintained a long-standing partnership with US forces and the DEA. Given its specialized capabilities and established US relationships, SEMAR is well-positioned to be a key partner in any potential US-led joint operations with Mexico against cartel leadership. The fact that the first joint training under the Trump administration was conducted by Green Berets and SEMAR further suggests this likelihood. 

Step 2: Identifying first targets

What cartels might the United States target first? Among the candidates, the Sinaloa Cartel, one of two cartels reportedly responsible for the majority of drug trafficking into the United States, is likely high on the list. As the most powerful drug-trafficking organization in the Western Hemisphere, its influence extends beyond narcotics and human smuggling. The cartel has been involved in business extortion, illegal mining, and oil theft, as well as infiltrating formal businesses to launder money.

But what sets the Sinaloa Cartel apart is its deep ties to China in the fentanyl trade. The cartel has reportedly relied on Chinese suppliers for precursor chemicals, and it uses Chinese money-laundering networks to clean its illegal profits. The Sinaloa Cartel’s danger to US interests is so significant that it has been the primary target of congressional investigations and aggressive US law enforcement actions in recent years, with the most notable recent step against the group being the arrest of Ismael “El Mayo” Zambada, the co-founder and leader of the group, in 2024 by the Biden administration.

The Sinaloa Cartel’s willingness to partner with a major state adversary to flood the United States with deadly drugs underscores its growing brazenness in violating US sovereignty and undermining national security. Targeting the Sinaloa Cartel first would not only disrupt one of the largest fentanyl producers in the Western Hemisphere but also send a clear message to other cartels to refrain from engaging with China and other states hostile to the United States.

Step 3: Covert action and “shock and awe” strategy

Once training operations conclude and intelligence assets finalize target selection, the United States will need to consider its next steps. In the past, countercartel efforts have been managed primarily by US law enforcement agencies, such as the DEA and Federal Bureau of Investigation. These agencies conduct criminal investigations and collaborate with their Mexican counterparts to arrest cartel operatives for prosecution in Mexico or extradition to the United States for trial.

However, the new US administration’s decision to allocate significant resources from the Department of Defense and the CIA to dismantle the cartels suggests that more aggressive measures are also being considered, potentially including the launch of a military campaign. Such a step would require the administration to initiate a formal procedure for authorization.

The first option the Trump administration can pursue is a formal Authorization for Use of Military Force (AUMF) approved by Congress. This would allow the administration to deploy military assets in an open and continuous manner under Title 10 of the US Code. However, given the political sensitivity of US troops operating on Mexican soil, the administration may instead opt for a second option: a CIA-directed covert action conducted in secrecy and under Title 50. In this scenario, Trump would issue a presidential finding that authorizes the CIA to conduct covert actions against the cartels. From there, CIA paramilitary officers or special forces units, typically under Joint Special Operations Command (JSOC), would be used to carry out the secret operations. Trump has historically favored covert operations in counterterrorism efforts against al-Qaeda and the Islamic State of Iraq and al-Sham (ISIS), making this a more likely scenario. 

Regardless of which option the administration chooses, it is likely to launch robust kinetic operations during the initial phase of the conflict. The Trump administration’s designation of the eight cartels as FTOs strongly supports this expectation. This is because the first Trump administration may have set a precedent when it placed Iran’s Islamic Revolutionary Guard Corps (IRGC) Quds Force on the FTO list just eight months prior to the assassination of its leader Qasem Soleimani. Importantly, the Department of Defense announcement of his killing references his leadership in the FTO-designated group in the opening sentence. 

Specifically, in the cartel context, the United States may employ a “shock and awe” strategy that is similar to the first Trump administration’s rapid-strike military campaigns against ISIS. The goal of this approach would be to overwhelm the cartels’ forces through raids and to eliminate high-value cartel targets, particularly sicarios and mid-level commanders coordinating logistics and enforcement operations. In such a scenario, the United States would likely provide heavy air support in order to prevent cartel counteroffensives and ensure that targeted cells cannot regroup or retaliate. This may include US forces embedding with the Mexican navy’s special forces. Drone warfare may also be used to eliminate high-value cartel command centers, fentanyl production labs, and weapons depots. 

Finally, it’s important to note that such direct actions against cartel factions will likely complement, not replace, ongoing bilateral operations between the United States and Mexico to extradite senior cartel leaders for prosecution. Instead, lethal actions can be expected to focus on cartel security forces and professional sicarios responsible for enforcing the cartel’s rule through violence in Mexico, including the assassination of elected officials, journalists, and innocent civilians.

Step 4: Concession and enforcement

Military force will be central in the early phases of the conflict, but the Trump administration has historically followed extreme pressure with engagement. Accordingly, after an initial shock-and-awe campaign, the administration is likely to push for the Mexican government to lead discussions with the cartels to compel them to end their drug smuggling, particularly synthetic drugs, and human trafficking operations in the United States, while also demanding that they sever business ties with state adversaries such as China.

Early signs of this strategy may already be emerging. In February, open-source intelligence indicated a ceasefire was brokered between the Grupo Escorpion and Metros cartels in the northern state of Tamaulipas that called for the end of fighting between the groups and an end to fentanyl trafficking into south Texas. This event, credited to pressure from the Mexican government, could serve as the recipe for future US efforts. This model of applying overwhelming force to compel cartels into submission, followed by behind-the-scenes discussions, will likely define the long-term course of the conflict. Continuous monitoring and enforcement will be essential to ensure compliance with the concessions.

After “shock and awe”

How would cartels respond to a “shock and awe” military campaign similar to that which destroyed the ISIS caliphate? While cartels control territory, command militia-style forces, and possess military-grade weaponry, they lack a standing army, which makes it more difficult for them to survive a sustained military campaign. Additionally, their tactics are limited to lightweight ambushes and terroristic actions, primarily targeting civilians and rival groups. 

Unlike ideological terrorist organizations, cartels operate as businesses. When their funding streams and resources are severely threatened, they are more likely to adapt, negotiate, and shift operations rather than engage in prolonged conventional warfare. Therefore, targeted military attacks on cartels could potentially lead to successful cartel concessions. Furthermore, while direct narco-terrorist attacks on US soil from Mexican cartels are unlikely, US military actions against them could create an opportunity for other state-sponsored groups to conduct counteroffensive attacks, such as targeting US law enforcement officials and terrorizing civilians. 

While it remains to be seen whether the United States will conduct direct military action, one thing is clear: the Trump administration’s efforts to combat drug smuggling and human trafficking into the United States is not likely to be a short-term political goal. Instead, these efforts represent a significant step in redefining US grand strategy away from maintaining the country’s post–World War II global primacy toward securing concrete national interests closer to home. Secretary of Defense Pete Hegseth articulated this shifting policy during a recent Pentagon town hall, stating, “Chaos happens when the perception of American strength is not complete. And so, we aim to reestablish that deterrence, and it starts with our own southern border. It starts with the defense of our homeland.”

James Fowler is a counterterrorism expert who specializes in leveraging technology to support democratic governance and institutional resilience. A retired Special Operations Command (SOCOM) operator, he brings extensive experience in counterterrorism operations and security strategy. Fowler is a member of the Atlantic Council’s Counterterrorism Project, where he contributes to policy discussions and strategic initiatives aimed at enhancing global security.

Alicia Nieves is a legal expert in immigration and refugee law, specializing in humanitarian assistance and conflict rescue. She is a member of the Atlantic Council’s Counterterrorism Project and co-founder of the Gaza Family Project, an initiative of the Arab-American Civil Rights League (ACRL) dedicated to helping American families impacted by the Israel-Hamas war.

The post How US military action against drug cartels in Mexico could unfold appeared first on Atlantic Council.

Click to jump to an expert analysis:

Josh Lipsky: Attention world—Trump is serious about tariffs

Matthew Kroenig: Trump’s promising shipbuilding proposal deserves more attention

John Herbst: Trump signals an end to his sparring with Zelenskyy

Leslie Shedd: Zelenskyy’s overtures to Trump should extend to congressional Republicans

Torrey Taussig: Trump needles Europe and portrays himself as neutral on Ukraine

Graham Brookie: Trump shouldn’t reject bipartisan wins such as the CHIPS Act

Landon Derentz: Trump’s praise for Japan and South Korea reveals an energy playbook for US allies

Thomas S. Warrick: Trump is right that border crossings are low today—but they are going to go up

Alex Plitsas: With his counterterrorism surprise, Trump shows that US-Pakistan cooperation continues

Daniel Fried: The highs and the lows of Trump’s power plays

Attention world—Trump is serious about tariffs

The most significant line on trade in the president’s address wasn’t about steel, aluminum, or farming. It was when Trump said tariffs are “about protecting the soul of our country.” These seven words should put the whole world on notice that Trump is serious about tariffs. To him, they are not just a negotiating tool. It is possible that, within the next several months, we could be facing a global trade war.

On Tuesday night, we heard more details—and more commitments—than ever before regarding the administration’s plans to shock the global trading system. It starts with the administration’s implementation earlier in the day of across-the-board tariffs on Mexico and Canada. It will continue next week (seemingly) with steel and aluminum tariffs on a range of “friends and foes” alike, as the president said—including the European Union. 

But the biggest move—the one that will rip up the rules that have governed trade since the signing of the General Agreement on Tariffs and Trade in 1947—is the promise to levy reciprocal tariffs on every country in the world. Will Trump follow through? Will the markets react so strongly that he has to back off? That will be the question every country will be asking between now and April 2, the date when Trump said these reciprocal tariffs will go into effect. After tonight’s speech, the honest assessment is that you can’t afford to bet that what he previewed is just a negotiating position. Trump made clear: This is about more than economics.

—Josh Lipsky is the senior director of the Atlantic Council’s GeoEconomics Center and a former adviser to the International Monetary Fund.

Trump’s promising shipbuilding proposal deserves more attention

In the realm of defense and security, Trump reviewed several long-term priorities and early successes, including building a “Golden Dome” missile-defense shield for the United States, taking back the Panama Canal, and attempting to negotiate an end to the war in Ukraine. 

What was less noticed, but highly important, was the announcement of a new office of shipbuilding at the White House. The United States has long had the world’s most dominant navy, but the United States’ ability to produce naval vessels has atrophied greatly since the end of the Cold War and now pales in comparison to that of China—the United States’ foremost military rival. Indeed, the United States can only produce 1.3 submarines per year—far short of the Navy’s target of three. As a member of Congress, Mike Waltz introduced legislation to revitalize the United States’ shipbuilding capability. Now that he is national security advisor, it is reassuring to know that he will carry this important priority with him to the White House.

—Matthew Kroenig is vice president and senior director of the Atlantic Council’s Scowcroft Center for Strategy and Security. He previously served in the Department of Defense and the intelligence community during the Bush, Obama, and Trump administrations.

Trump signals an end to his sparring with Zelenskyy

Trump’s speech was preceded by expectations that he would use the moment to discuss his approach toward Ukraine and policy to end Moscow’s war of aggression against the country, given Ukrainian President Volodymyr Zelenskyy’s sharp public exchange with Trump and Vice President JD Vance in the Oval Office on February 28, the White House’s strategically problematic decision to pause military aid to Ukraine, and Zelenskyy’s social media post on Tuesday expressing regret for the miscommunication in the Oval Office. On Tuesday night, Trump did not disappoint. 

Trump started by noting that the Biden administration’s disastrous withdrawal from Afghanistan may have persuaded Russian President Vladimir Putin that his moment to strike against Ukraine had come. This was an indirect way of saying that Putin was responsible for starting the war on Ukraine and for Russia’s huge escalation in February 2022—a welcome improvement from his peculiar accusation earlier this month that Zelenskyy was somehow responsible for this war.    

Trump noted that he had received a letter on Tuesday from Zelenskyy expressing Ukraine’s readiness to join negotiations with Russia under Trump’s leadership—and to sign the mutually beneficial critical minerals agreement. Trump expressed gratitude for the letter and noted that he is convinced from his contact with Putin that Russia too is eager for peace, even though there is no public evidence that Moscow is ready to make the compromises necessary for a stable peace. Trump did mention his successful effort to bring home Marc Fogel, an American prisoner in Russia, who was in the gallery. Putin made a clever decision to release Fogel at the start of the new administration in an effort to encourage Trump to approach Russia with kid gloves in peace negotiations. But Trump’s warm description of the Zelenskyy letter suggests that the sparring with the Ukrainian leader is behind us. The pause on US military aid to Ukraine likely will not be with us long. If the pause lingers, then Trump’s stated intent to broker a stable peace will look questionable.

—John E. Herbst is the senior director of the Atlantic Council’s Eurasia Center and a former US ambassador to Ukraine.

Zelenskyy’s overtures to Trump should extend to congressional Republicans

There is still strong bipartisan, bicameral support for Ukraine in the US Congress. But that support has taken a hit over the last week in the wake of the disastrous Oval Office meeting between Trump and Zelenskyy. There is growing frustration even among Ukraine’s most ardent Republican supporters over Zelenskyy’s inability to keep his temper in check during the meeting and his failure to quickly and explicitly apologize for how the meeting devolved. His latest overtures to Trump, including a social media post on Tuesday afternoon expressing his regret and a letter he sent to the president ahead of his joint address to Congress, thankfully seem to have helped mend the relationship. 

The general consensus is that even though the minerals deal was not announced Tuesday night during the speech, it will be announced in the coming days. This deal creates an economic incentive—on top of the already existing moral incentive and national security incentive—for the United States to remain fully committed to a Ukraine free from long-term Russian aggression.  

But more needs to be done to mend Zelenskyy’s relationship with Republicans on Capitol Hill. Republicans have risked their own political capital with the Republican base and with some people inside the White House to support Ukraine over the last three years. Many now feel spurned by Zelenskyy. These are his biggest champions who helped to get the supplemental spending package across the finish line last year. The Oval Office meeting had repercussions for their credibility. Now is the time for Zelenskyy to reach out to those members and make sure they know he is committed to finding a solution that ensures continued US support for the sake of his people and the security of the world.

I don’t judge the level of support for an issue based on who was clapping at which lines in the president’s speech on Tuesday night. What matters is who is with Ukraine when it really counts. Like almost every issue in Washington over time, Ukraine has become politicized. But at the end of the day, I agree with the assessment of Rep. Brian Fitzpatrick (R-PA), who said last month that there remains an “outcome-determinative number of Members of the United States Congress, from both parties and in both Chambers, who are ready, willing, and able to do whatever it takes” to ensure Putin does not benefit from his brutal war of aggression. If Democrats truly care about helping Ukraine and not politicizing this issue for their own personal gain, they will encourage Ukraine to sign the minerals deal and get on board with Trump’s plan for peace. That is the only game in town right now. Furthering the notion that Ukraine is a Republican-versus-Democrat issue only hurts Ukraine.

—Leslie Shedd is a nonresident fellow at the Eurasia Center and former senior advisor to members of the US Congress, and US senatorial and presidential candidates.

Trump needles Europe and portrays himself as neutral on Ukraine

Trump didn’t raise Europe or the war in Ukraine until over ninety minutes into his speech. When he did get to the region, his comments were short but sharp. He first signaled his support for Greenland’s self-determination before threatening to seize it, stating “one way or the other, we’re going to get it.” These comments are sure to raise alarm bells in Greenland and Denmark. 

The president then repeated his known criticisms of Europe, including not taking its own defense seriously and passing the burden of the Ukraine crisis onto the United States. In this critique, he restated inaccurate figures of US and European support for Ukraine. Otherwise, Europe—as the United States’ largest trading partner, largest investor, and largest network of allies—was largely ignored (likely to the relief of many European officials). 

In addressing the war in Ukraine, the president looked to portray himself as a peacemaker and a neutral arbiter. Trump read verbatim a letter he received earlier that day from Zelenskyy indicating Ukraine’s readiness to commence negotiations with Russia and to sign the critical minerals agreement with the United States. While Trump appeared to be lowering the temperature of his public feud with Zelenskyy, he missed an opportunity to announce a restart of US military assistance to Ukraine.

—Torrey Taussig is a director and senior fellow at the Atlantic Council’s Transatlantic Security Initiative in the Scowcroft Center for Strategy and Security. Previously, she  was a director for European affairs on the National Security Council.

Trump shouldn’t reject bipartisan wins such as the CHIPS Act

To compete effectively in an era of increasing geopolitical competition and rapid technological change, long-term planning and building on bipartisan accomplishments is essential. 

For example, the Trump administration announced this week that Taiwan Semiconductor Manufacturing Company (TSMC)—the world’s largest maker of advanced semiconductors—will invest one hundred billion dollars in further fabrication capability in the United States. This effort began in the first Trump administration, which lobbied TSMC to build more in the United States to ensure supply-chain resilience that has enabled the booming artificial-intelligence economy. The Biden administration built on that work by passing the bipartisan CHIPS Act, which—among many other things—paved the way for an initial $65 billion investment by TSMC to begin building manufacturing capability in the United States, including plants that are already producing 4 nanometer chips reportedly for companies such as Apple, NVIDIA, and Qualcomm. 

The facts of US policy on semiconductors show a story of continuity and building momentum. Trump could tell that real success story. But he instead used his address to Congress to disparage his predecessor’s policy, which built on his own, by calling the CHIPS Act a “horrible, horrible thing.” The United States has a generational opportunity to continue building on a popular agenda to maintain the United States’ technical edge, but it will require working together across party lines and industry segments.

—Graham Brookie is the Atlantic Council’s vice president for technology programs and strategy. He previously served in various positions at the White House and National Security Council.

Trump’s praise for Japan and South Korea reveals an energy playbook for US allies

Trump’s brief reflections on energy policy in his remarks to Congress on Tuesday night reinforced his administration’s domestic ambition for leveraging US energy resources to drive economic growth, while also outlining a framework for constructive engagement with foreign partners. Though cloaked in antipathy for the policies of the prior administration, Trump’s emphasis on new oil and gas leases, pipeline construction, and the economic viability of power plants underscore that mobilizing private sector investment in energy infrastructure is a mainstay of the administration’s broader economic strategy, including efforts to lower inflation. 

In highlighting his executive order declaring a national energy emergency from January, Trump is signaling his intent to supercharge the traditional Republican focus on deregulation in pursuit of an energy landscape that reinforces US autonomy and strengthens US geopolitical influence through energy exports. 

That Trump conveyed this perspective in the context of Japan and South Korea’s interest in a liquefied natural gas (LNG) project in Alaska demonstrates that there is room for partners and allies to join in the president’s plans for expanding domestic oil, gas, and mineral production across an ambitious list of projects. Even though the US trade deficit with Japan and South Korea collectively exceeds $120 billion, the two countries have nonetheless found themselves on the right side of an assertive Trump administration tariff regime. It’s a testament to other allies and partners that US economic pressure can be allayed through investment in the United States that lowers trade deficits and bolsters alliances against China.

—Landon Derentz is senior director and Morningstar Chair for Global Energy Security at the Atlantic Council Global Energy Center. He previously served as director for energy at the White House.

Trump is right that border crossings are low today—but they are going to go up

There is a danger in believing too much in your own press clippings. Trump took pride in the low number of “illegal border crossings” in February, which he attributed to declaring a national emergency on the southern border and deploying the US military to help the Border Patrol. The Border Patrol apprehended 8,326 people on the US side of the southwest border in February. That is a record low monthly total since these statistics were first recorded in 2000, but the number is all but certain to go up. Here is a prediction: After a few months of relatively low numbers at the southwest border, apprehensions will increase later this year.

The cartels that control human smuggling across the Mexico-US border can throttle the numbers up and down. When the United States changes its policy, as happened in May 2023 when the US government formally ended the COVID-19 pandemic, numbers went down in June only to go back up the next month. Moreover, February is often, but not always, a relatively slow month for unauthorized border crossings—and numbers vary wildly from month to month, as shown in this graph from Axios using official Customs and Border Protection data.

Mexico’s policy decisions also make a big difference. Mexican cooperation can drive down unauthorized border crossings, as was the case in June 2024 during the Biden administration. Trump’s tariffs on Mexico could incentivize Mexico to keep numbers down—but it could have the opposite effect. Trump’s implicit threat to use the US military against the cartels is another potential flashpoint that could affect Mexico’s cooperation.

With a government shutdown possible in two weeks, Trump asked Congress Tuesday night for billions of dollars to carry out his mass deportation program and further discourage migrants from making the journey north. Border Patrol would keep working during a shutdown, but the expansion of the capacity to deport millions of people would be delayed. Trump’s divisive language Tuesday night may discourage Democratic cooperation unless Trump agrees to fund other programs to attract Democratic votes.

In the Democratic response on Tuesday night, Sen. Elissa Slotkin (D-MI) struck a bipartisan tone. It was Slotkin, not Trump, who invoked former President Ronald Reagan’s vision that “required America to combine our military and economic might with moral clarity.” Slotkin speaks for national security Democrats in arguing that while border security is important, so is fixing the United States’ broken immigration and asylum system. This contrast between the parties is likely to become clearer in the next few months.

—Thomas S. Warrick is the director of the Future of DHS project at the Atlantic Council Scowcroft Center for Strategy and Security. He previously served as deputy assistant secretary for counterterrorism policy at the US Department of Homeland Security.

With his counterterrorism surprise, Trump shows that US-Pakistan cooperation continues

Trump and his administration have been very vocal and public about efforts to designate drug cartels as terrorist organizations and to disrupt their human and narcotics smuggling operations into the United States, which have had deadly consequences. By comparison, the president has been very circumspect about other areas of counterterrorism, particularly when it comes to Central Asia, where there have been reports of a resurgence of terrorist training camps in Afghanistan and transnational terrorist groups operating in the region. 

However, Trump revealed Tuesday night that the United States had apprehended Mohammad Sharifullah, the “top terrorist responsible” for the Abbey Gate suicide bombing at the Kabul airport during the US withdrawal from Afghanistan in August 2021. That attack killed thirteen American service members and injured many more along with nearly two hundred Afghan civilians. This was important for a few reasons. 

First, it sends a message to terrorist groups who may have thought they would have more freedom of movement, due to Trump’s desire to withdraw from Afghanistan and his “America first” foreign policy, that they will be targeted or apprehended. Second, it speaks to the importance of liaising with foreign intelligence services and continued cooperation with Pakistan, which the president thanked publicly during his speech and with which the Central Intelligence Agency is said to have conducted a joint raid. Third, it underscores Pakistan’s willingness to work with the Trump administration despite a recent announcement that the United States would increase military sales to India by “many billions” and a pathway to India acquiring F-35 fighter jets.

 —Alex Plitsas is a nonresident senior fellow with the Scowcroft Middle East Security Initiative, the head of the Atlantic Council’s Counterterrorism Project, and a former chief of sensitive activities for special operations and combating terrorism in the Office of the Secretary of Defense.

The highs and the lows of Trump’s power plays

First, good news but with a hitch: Trump’s March 4 address to a joint session of Congress included words of reconciliation with Zelenskyy, who hours before had offered a statement of support for Trump’s efforts to end Russia’s war in Ukraine and of regret for the blowup in the Oval Office the previous Friday. The Trump administration should have followed by resuming military assistance and intelligence cooperation, both of which the United States suspended to put pressure on Zelenskyy. That would clear the way for the United States to work with Ukraine and Europe to deal with the real obstacle to ending the war: Putin, who appears to have been enjoying the spectacle of the United States quarreling with its friends and allies. Instead, however, the administration has reportedly said it will continue to withhold this support until a date is set for talks with the Russians, a move that gives the Kremlin every incentive to slow walk the process. Hopefully, the manifest weakness of this position will generate a rethink and reversal.

In another sort-of positive gesture, Trump boasted that US efforts to “reclaim” the Panama Canal were advancing by means of a US company (BlackRock, though Trump did not name it) purchasing key ports at either end of the canal from a Hong Kong company. That’s hopeful because it suggests that rather than invade Panama to seize the canal, Trump might call it a win if key canal-related infrastructure were in US hands rather than Chinese hands. That may be a rough way to achieve a good deal.

Other Trump foreign policy moves in the speech are more questionable or downright bad. His threat to impose worldwide retaliatory tariffs could in practice mean tough bargaining, leading to some set of deals. But it also could easily lead to a trade war, with retaliation disrupting supply chains, fueling inflation, and slowing investment into the United States. Trump’s April 2 deadline may be a negotiating ploy, but the threat of economic nationalism may be a brake on growth when the US economy is already showing signs of slowing. Trump is often more apt to threaten than follow through and deal with the consequences. But bad consequences may follow, given the tariffs imposed already on Canada and Mexico.

Shamefully and tellingly, Trump repeated his threat to seize Greenland. He tried to show regard for the views of Greenlanders themselves. (“If you [Greenlanders] choose, we welcome you into the United States of America.”) But he quickly followed with “We need it [Greenland] … and one way or the other, we’re going to get it.” The threat, with its nineteenth-century imperial style, advances no US interest. Denmark, responsible for Greenland’s foreign policy, has made clear that it would be glad to accommodate the United States’ military or commercial interests in Greenland. In fact, the United States has made no concrete requests about Greenland.

Therein lies the tell: Trump has exhibited scant regard for the US-led system of alliances and partnerships rooted in common values that smooth the advance of US interests in ways that benefit both sides. The United States could obtain what it says it wants in Greenland by, well, asking. But that is not Trump’s way: at his worst, he prefers to speak of and threaten raw power. If implemented, that is the nineteenth-century great power way, and it is Putin’s way. The way the United States rose to global leadership in the “American century” was different—exceptional, actually—and it served the United States and the free world well. Trump seems to have little patience for that approach.

Trump’s address to Congress did not mark a final US commitment to act as a typical great power bully. It is possible that Trump will use bullying tactics to achieve specific goals but not push a destructive agenda or in the end make a bad deal with Putin over Ukraine. But the absence of an overarching international vision based on values, and the apparent default to simple power and zero-sum thinking, warns of strife with friends and bad deals with adversaries. The address to Congress was not all bad. But it was a warning of a problematic strategy that would ill serve the country and the free world.

—Daniel Fried is the Weiser Family distinguished fellow at the Atlantic Council and former US assistant secretary of state for Europe.

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It’s the opening alarm bell. Markets are sagging in response to US President Donald Trump’s decision—after a one-month delay—to impose 25 percent tariffs on Canada and Mexico, and increase tariffs on Chinese goods from 10 percent to 20 percent. As of today, the United States now has its highest effective tariff rate since 1943. To make sense of the market moves and Trump’s thinking on tariffs, we turned to the head of our GeoEconomics Center for insight.

• Josh Lipsky (@joshualipsky): Senior director of the Atlantic Council’s GeoEconomics Center and former adviser to the International Monetary Fund

Seeing red

• Monday was “the day Wall Street finally realized that Trump was serious about tariffs,” Josh tells us. The S&P 500 fell nearly 2 percent on Monday as Trump declared that the tariffs would indeed go into effect at midnight, and declined another 1 percent on Tuesday as Mexico, Canada, and China promised retaliatory measures.
• The markets are “quickly trying to make up for lost time since the election,” Josh adds, pricing in the impacts on consumers from a multifront trade war that is only now becoming real.
• And “this is only the beginning,” Josh notes. “Markets could remain shaky if deteriorating consumer sentiment translates into less spending and price hikes on everything from gas to cell phones come into effect in the coming weeks.”

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Three ways to tariff

• Josh has noticed three distinct ways that Trump is wielding tariffs in his second term. The first is “tariff as a negotiating tactic.” That’s what many on Wall Street thought the tariffs that came into effect today were, extrapolating from how tariff threats typically played out during Trump’s first term (for example, with the China Phase One deal). Josh expects this use of tariffs to continue, noting that China remains “a leading candidate for a renewed trade deal, despite Monday’s announcement” and the new tariffs against Canada and Mexico may prove “temporary and become part of deal-making to renew the US-Mexico-Canada Agreement in 2026.”
• The second form is “tariff as tariff,” meaning a way to either raise revenue or protect and promote US manufacturing. But it will take a much higher tariff than even 25 percent to make many products (such as laptops) cheaper to produce in the United States, Josh tells us, and years for companies to relocate production from overseas. “In the meantime, it is US consumers and companies that will end up paying higher prices—at a moment when inflation is proving a little stickier than Trump, or the Federal Reserve, anticipated.”
• The third and most novel is “tariff as punishment.” Trump, Josh says, sees tariffs as a “tool of coercive economic statecraft” and an alternative to financial sanctions, which Trump worries are causing countries to move away from the US dollar. During a press conference on Monday, Trump specifically stated that countries will be “punished by tariffs” for the damage he believes they’ve inflicted on the US economy. “The benefit, from the Trump team’s view, is that unlike the on-and-off switch of sanctions, tariffs can be ratcheted up (5, 10, 15 percent) or down,” explains Josh.

Street smarts

• Josh says we should expect much more “tariff as tariff” and “tariff as punishment” during Trump’s second term, and “therefore more retaliation from other countries” and greater “risk of a global trade war.”
• Next up are deadlines for a new tranche of steel and aluminum tariffs, and a report from cabinet departments to the White House about Trump’s plan for “reciprocal tariffs,” which Josh notes “will provide the framework for possible actions against nearly every country in the world.”
• With Wall Street waking up to these realities, Josh adds, “expect a bumpy ride ahead—in trade, in markets, and for the global economy.”

New Atlanticist

Mar 4, 2025

Wall Street is finally waking up to Trump’s tariff policy

By Josh Lipsky

Financial markets are beginning to react after the United States implemented tariffs on its three largest trading partners on Monday.

China Economy & Business

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Now the United States begins a trade war with its three largest trading partners, and the costs could start piling up. 

Monday’s reaction—the worst trading day since Trump was elected—was Wall Street quickly trying to make up for lost time since the election. This is only the beginning. Markets could remain shaky if deteriorating consumer sentiment translates into less spending and price hikes on everything from gas to cell phones come into effect in the coming weeks.

Why did many on Wall Street seemingly miss the signs that Trump was going to pull the trigger on tariffs? Because they were stuck in a mindset based on the previous Trump administration. In his first term, Trump often used the threat of tariffs to negotiate—see the China Phase One deal, for example—and implemented tariffs on a wide range of products. But in Trump’s second term, the president and his senior trade adviser Peter Navarro are approaching changes to trade on an even more sweeping scale and accelerated timeline. 

Trump is now wielding tariffs in three distinct ways. Here’s how to think about them.

First, there’s “tariff as a negotiating tactic.” This is the kind of deal Wall Street thought Trump was trying to get with his threats against Mexico and Canada, mirroring what happened frequently in his first term. Those deals will still happen. China, for example, is a leading candidate for a renewed trade deal, despite Monday’s announcement. 

The second form is “tariff as tariff.” Trump and his team are approaching tariffs with the traditional view that a tariff can generate domestic manufacturing by raising costs on importers and therefore incentivizing production in the United States. The challenge with this plan is that for many products (such as laptops), it would take a much higher tariff than even 25 percent to make it cheaper to produce them in the United States. While some companies are announcing efforts to move production back to the United States, it will take years to reorient associated supply chains. In the meantime, it is US consumers and companies that will end up paying higher prices—at a moment when inflation is proving a little more sticky than Trump, or the Federal Reserve, anticipated. 

The other challenge is that Trump wants to use tariffs as a source of revenue. The Committee for a Responsible Federal Budget estimated in February that the Trump administration’s new tariffs could raise over one hundred billion dollars per year (and therefore possibly offset some of the cost of the coming extension of the Tax Cuts and Jobs Act). That still would only represent approximately 2 percent of total US revenue. And there’s a contradiction here. If the United States is collecting revenue on tariffs, that means the companies paying the tariffs aren’t actually reshoring. Instead, those companies are paying the higher cost for tariffed goods because doing so still makes the most sense for their businesses. The traditional use of tariffs can boost revenue or reshoring, but it’s very difficult to do both.

The third form of tariff is a new development in Trump’s second term. It is “tariff as punishment.” In Trump’s press conference on Monday, he specifically said several times that Canada and Mexico were going to be “punished.” What does tariff as punishment mean? It’s a form of sanction. Instead of financial sanctions, which Trump argued during the presidential campaign were causing countries to move away from the US dollar, expect the administration to use tariffs more as a tool of coercive economic statecraft. The benefit, from the Trump team’s view, is that unlike the on-and-off switch of sanctions, tariffs can be ratcheted up (5, 10, 15 percent) or ratcheted down. A recent example of this approach to tariffs came when Trump threatened a 150 percent tariff on any country from the BRICS grouping of emerging economies that was moving away from the dollar.

Trump’s second term is going to feature much more use of the latter two kinds of tariffs than his first term did. Trump told the public as much when he decided to leverage the International Emergency Economic Powers Act to give himself the authority to issue tariffs without any notice—an unprecedented use of the law. There will be negotiations, of course. It’s possible the new Canada and Mexico tariffs will only be temporary and become part of deal-making to renew the US-Mexico-Canada Agreement in 2026. But there will also be more tariffs for tariffs’ sake, more tariffs as punishment, and therefore more retaliation from other countries. It all adds up to the risk of a global trade war. In the coming weeks, deadlines are approaching for the next wave of steel and aluminum tariffs and a key report on reciprocal tariffs from the Office of the US Trade Representative and Commerce Department, which will provide the framework for possible actions against nearly every country in the world.

As of today, the United States has the highest effective tariff rate it has had at any time since 1943. Wall Street missed the early signs that Trump was serious about imposing tariffs. Now that investors have woken up, expect a bumpy ride ahead—in trade, in markets, and for the global economy.

Josh Lipsky is the senior director of the Atlantic Council’s GeoEconomics Center and a former adviser to the International Monetary Fund.

Sophia Busch and Charles Wheelock contributed to the data visualization in this article.

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Congressional approval should resemble the Authorization for Use of Military Force (AUMF) enacted after the September 11 attacks, enabling the deployment of military assets against cartel infrastructure both within and beyond US borders. Congressman Dan Crenshaw, who co-sponsored the previous AUMF legislation targeting the cartels, has called for the formation of a “Select Committee to Defeat the Mexican Drug Cartels” that could eventually recommend such an AUMF. An AUMF against the Mexican drug cartels would unite various government agencies in a coordinated effort to combat what administration officials correctly regard as an existential threat to US security. An AUMF would also ensure that the United States could continue combating these terrorist groups when they inevitably fracture, change their names, or otherwise morph into groups that are different from those eight cartels originally designated.

These cartels have extended their networks into the United States, infiltrating major US cities and establishing themselves in furtherance of their criminal empires. The time has come for a whole-of-government response.

Mexican cooperation and challenges

Mexican President Claudia Sheinbaum’s administration has demonstrated unprecedented willingness to collaborate with US counternarcotics efforts. In the past month, he Mexican government has taken significant steps, including announcing that it would deploy ten thousand troops to the US-Mexico border specifically tasked with combating fentanyl trafficking. The Mexican Senate has also approved measures allowing US Special Forces to resume training with Mexican Marines, while enhanced bilateral cooperation on counternarcotics operations continues to develop. However, the path forward is complicated by years of cartel influence through their “plata o plomo” (silver or lead) intimidation tactics, which have entrenched corruption within Mexican institutions. This presents significant challenges for intelligence sharing and operational coordination between Mexico City and Washington, requiring careful consideration on how sensitive information and joint operations are managed.

The China connection

Perhaps most alarming is the emerging evidence of Chinese involvement in the narcotics trade. Intelligence reports indicate that Chinese companies, often operating with apparent impunity, supply Mexican cartels with fentanyl and precursor chemicals, while providing critical financial infrastructure for money laundering operations.

The Chinese doctrinal concept of “unrestricted warfare” proposes multiple indirect approaches for undermining strategic competitors, particularly the United States. Within this broader construct, the US House Oversight Committee identified “drug warfare” as one means by which China deviously attacks the very fabric of US society. This strategic dimension transforms what might otherwise be viewed as a law enforcement issue into a matter of national security. According to a September 2024 report by the Heritage Foundation, China’s facilitation of the fentanyl trade into the United States causes approximately two hundred deaths per day and cost the US economy upward of $1.5 trillion in 2020 alone.

A new strategic approach

Drawing lessons from successful counterterrorism campaigns, the administration should pursue a multi-faceted strategy that would fundamentally reshape the approach to combating cartels. As with the first Trump administration’s successful campaign to dismantle the caliphate of the Islamic State of Iraq and al-Sham (ISIS), the strategy should include both taking military action against criminal organizations’ infrastructure and strengthening diplomatic partnerships with regional allies. Equal emphasis must also be applied to targeting the financial networks that facilitate drug trafficking, as well as addressing the corruption and institutional weaknesses that enable cartel operations to flourish.

This threat must be understood within the broader context of strategic competition with China, as these cartels are effectively serving as proxy forces in a nefarious indirect attack on the United States.

Looking forward

Success will require sustained commitment from both the Mexican and US governments, along with unprecedented levels of international cooperation. Any proposed AUMF would provide a legal framework for military operations, but that force must be combined with other elements of national power to achieve lasting success.

Such an initiative is ultimately about creating alternatives for the Mexican people while eliminating the cartels’ ability to serve as proxies in China’s unrestricted warfare against the United States. This approach addresses both the United States’ and Mexico’s shared security interests and creates opportunities for mutual economic benefit.

As the administration moves forward with these proposals, influential members of Congress are already signaling support for expanded authorities to combat cartel influence. With bipartisan concern over fentanyl deaths and growing awareness of Chinese strategic involvement, the stage appears set for a significant shift in how the United States confronts this evolving threat to national security.

Doug Livermore is a member of the Atlantic Council’s Counterterrorism Program, the director of engagements for the Irregular Warfare Initiative, the national vice president for the Special Operations Association of America, national director for external communications at the Special Forces Association, and the deputy commander for Special Operations Detachment–Joint Special Operations Command in the North Carolina Army National Guard. He also previously served in the Department of Defense as a senior government civilian, intelligence officer, and contractor.

The views expressed are the author’s and do not represent official US government, US Department of Defense, or US Department of the Army positions.

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He’s hitting the pause button—for now. On Monday, US President Donald Trump announced that he was pausing the proposed 25 percent US tariffs on goods from Mexico and Canada after those two countries’ respective leaders agreed to strengthen border security and invest more in counternarcotics initiatives. However, the 10 percent tariffs on all Chinese goods went into effect at midnight on Tuesday, with Beijing quickly retaliating. What’s next for the United States’ tariff policy on its North American neighbors and China? And what other countries might Trump threaten tariffs against next? Our experts offer their insights below. 

• Josh Lipsky (@joshualipsky): Senior director of the Atlantic Council’s GeoEconomics Center and former adviser to the International Monetary Fund
• Reed Blakemore (@reed_blakemore): Director of research and programs at the Atlantic Council’s Global Energy Center
• Jason Marczak (@jmarczak): Vice President and senior director of the Atlantic Council’s Adrienne Arsht Latin America Center
• Barbara C. Matthews: Nonresident senior fellow at the GeoEconomics Center, former US Treasury attaché to the European Union, and founder/CEO of BCMstrategy, Inc.

China’s muted response

• China’s overnight retaliatory actions against the tariffs were “a muted response” that was meant to prevent further escalation, Josh tells us. For example, China excluded primary imports from the United States, such as soybeans, from its countermeasures. “What they’re hoping is that Trump stops here,” he says.
• China is “keeping its powder dry,” Josh notes, as it hopes for negotiations along the lines of the phase one trade agreement Beijing struck with the Trump administration in 2020. Meanwhile, he adds, China’s launching of an antitrust investigation against Google was a surprise move showing that Beijing could further target US tech companies if trade tensions persist.
• “The trend to watch” will be actions on critical minerals, says Reed, noting that China placed restrictions on exporting tungsten and indium to the United States on Tuesday. China is “very aware of where it can poke at the United States on these mineral supply chains,” Reed notes.

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Canada and Mexico’s continued concern

• Even with the thirty-day pause, Jason points out that the dispute will still affect North American trade, as there is now “significant fear and concern” in both Canada and Mexico.
• Jason says that wait times for cross-border traffic “will likely increase over the next thirty days” as Mexico cracks down on illicit shipments to the United States and that this slowdown will “have an impact on the US economy.” Over the longer term, he expects Mexico to continue diversifying its supply chains away from the United States; Mexico notably just struck a trade deal with the European Union (EU).
• The same goes for north of the border, where Reed says there are growing “conversations around de-risking from the US economic relationship,” and this question will feature heavily in this year’s Canadian elections.

Europe’s caution

• European leaders “have played this entire situation very well, very cautiously,” says Barbara, who notes that there hasn’t been much of a public response from the continent to Trump’s tariff threats. She adds that in the last month alone, European policymakers expanded their global footprint with economic and strategic partnerships in Japan, Mexico, and Malaysia. 
• However, Barbara points out a number of “very significant pressure points” that are “guaranteed to generate friction and headlines over the next couple of years.” These include the United States’ and EU’s vastly different views on climate issues, energy policy, and digital currencies. “I believe we will work our way through with our strategic partners, but they will be bumpy years,” says Barbara.

Who could be next?

• Europe could be a prime target. Barbara points to a United Nations Conference on Trade and Development report indicating that the countries most at risk for tariff tussles with the United States will be those that have both trade imbalances and high tariffs. For example, she says, “European tariffs on US imports are already higher than US tariffs on European imports, even before Europe’s Carbon Border Adjustment Mechanism goes fully into effect.”
• But it’s not just Europe. Given Trump’s threatened tariffs on the cars and auto parts from Canada and Mexico, “it doesn’t make sense strategically” to tariff those countries and not major auto exporters South Korea and Japan, Josh says. Otherwise, he notes, the North American auto tariffs would create “a very strange sort of dynamic” that would benefit South Korea and Japan “at the expense of American manufacturers.”
• Jason, meanwhile, thinks Nicaragua could become a target of Trump’s tariff measures because of the Nicaraguan government’s role in facilitating illegal migration to the United States. Tariff measures against Nicaragua, says Jason, “would be fairly in line with what he has been doing on the migration front.”

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Trade war shots fired. US President Donald Trump today announced tariffs on Canada, Mexico, and China—the United States’ three largest trading partners. The tariffs, 25 percent on Canada and Mexico and 10 percent on China, were issued based on Trump’s declaration of a national emergency over drug trafficking and illegal migration. How will the tariffs impact the four countries’ economies? And how might Canada, Mexico, and China respond? Our experts explain below.

• Josh Lipsky (@joshualipsky): Senior director of the Atlantic Council’s GeoEconomics Center and former adviser to the International Monetary Fund
• María Fernanda Bozmoski (@MariaBozmoski): Director of impact and operations and lead for Central America at the Council’s Adrienne Arsht Latin America Center
• Joseph Webster (@Joe_Webster_CRR): Senior fellow at the Council’s Global Energy Center

For China, relief

• Given Trump’s earlier threats to impose 60 percent tariffs on Chinese goods, “China is likely breathing a sigh of relief,” Josh tells us. Policymakers in Beijing must be wondering why the United States “tariffed its allies at 25 percent and its greatest economic challenger at 10 percent.”
• One likely reason for this, Josh argues, is Trump’s desire to keep inflation down in the wake of the higher tariffs on Mexico and Canada since “there’s only so much price pressure US consumers are going to put up with.” Another factor, he notes, is that China is far less dependent on US trade than are Mexico and Canada.
• Faced with the tariffs, China “has a trick up its sleeve: currency devaluation,” Josh says. “Watch to see how the yuan moves this week. It’s likely that most of this increase can be absorbed through exchange rates.” If this works, Josh expects that China’s “rhetoric will be sharp” but that its “economic retaliation will potentially be more muted.”

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For Mexico, an economic blow

• The 25 percent tariffs on Mexico are “counterproductive to Trump’s goals of curbing immigration to the United States,” argues María, in part because the policy will “weaken the Mexican peso and the country’s economy.”
• The tariffs will also have a significant impact on the United States-Mexico-Canada Agreement (USMCA), María notes. She says that their implementation will “quickly erode the economic growth and interdependence” that directly resulted from the USMCA, along with gains in securing supply chains.
• Instead, María tells us, the relationship between the two countries is shifting, with the White House tariff announcement even accusing Mexico’s government of having an “intolerable alliance” with drug gangs. “This marks the first time in decades that US-Mexico economic collaboration has been so explicitly dependent on security concerns.”

For Canada, defining “energy” will be crucial

• Trump’s executive orders place a 10 percent tariff on Canadian “energy resources,” as compared to the 25 percent levy against all other Canadian goods. Joe says that “the impact on energy markets will depend on the tariffs’ duration and the definition of ‘energy resource.’”
• For example, “if the lower rate excludes imports of electricity, batteries, and minerals,” Joe explains, this could have a negative impact on a range of US markets, including electricity, batteries, defense technology, artificial intelligence, and drones.
• What is clear, says Joe, is that “US refineries will now pay higher prices for Mexican and Canadian crude in the wake of tariffs.” Refineries in Midwestern states will be hard-hit by the tariffs, Joe points out, since “they have few if any alternatives to Canadian crude oil and will pass along many costs to consumers.”

The post What to know about Trump’s new tariffs appeared first on Atlantic Council.

Click to jump to an expert analysis:

Josh Lipsky: Beijing is breathing a sigh of relief

Jason Marczak: Can there be a short-term end game for Mexico?

María Fernanda Bozmoski: The tariffs on Mexico are counterproductive to Trump’s goal of curbing immigration

Joseph Webster: These tariffs could upend energy sector business models

Barbara C. Matthews: This historic move means US trade treaties now come with a caveat

Maite Gonzalez Latorre: Canada’s next prime minister must articulate how the country will navigate the Trump presidency

L. Daniel Mullaney: The tariffs genie is out of the bottle

Beijing is breathing a sigh of relief

Two things are true at the same time. These tariffs are more sweeping than any trade action we saw in the first Trump term and will impact over one trillion dollars in goods. The president has invoked the International Emergency Economic Powers Act (IEEPA) in an unprecedented way, levying major trade barriers all at once against the United States’ three largest trading partners. But it’s also true that China is likely breathing a sigh of relief.

Policymakers in Beijing have to be wondering how it happened that the United States tariffed its allies at 25 percent and its greatest economic challenger at 10 percent. Of course, the 10 percent comes on top of the already existing tariffs in several sectors, but it still means that most goods from Mexico and Canada will face a steeper fine than those from China. It’s much tamer than Trump’s campaign threat of 60 percent. (In fact, despite that threat, we predicted a China scale-down right after the election.) 

Why the softening toward China? Inflation is one reason. Trump knows his moves on Canada and Mexico will have an impact, and there’s only so much price pressure US consumers are going to put up with. But leverage is another. Mexico and Canada depend far more on the United States than the United States depends on them. (Though there’s no doubt every economy in North America is going to bear some cost in these new trade wars.) China is a different story. China’s economy is less dependent on trade than Canada and Mexico—and only 15 percent of its exports go to the United States, compared to nearly 80 percent for Washington’s neighbors.

Now faced with 10 percent tariffs, Beijing has a trick up its sleeve: currency devaluation. Watch to see how the yuan moves this week. It’s likely that most of this increase can be absorbed through exchange rates—and that’s one reason why Beijing’s rhetoric will be sharp but its economic retaliation will potentially be more muted.

—Josh Lipsky is the senior director of the Atlantic Council’s GeoEconomics Center and a former adviser to the International Monetary Fund.

Can there be a short-term end game for Mexico?

Mexican President Claudia Sheinbaum quickly responded to Trump’s announcement of 25 percent tariffs with an instruction for Economy Secretary Marcelo Ebrard to implement what she termed “Plan B” to include retaliatory tariff and non-tariff measures. If Mexico uses a similar playbook as to when Trump threatened tariffs in 2019, retaliatory tariffs will follow a red-state strategy. This could include pork from Iowa, dairy from Wisconsin, and industrial goods, including vehicles and electronics, particularly from Michigan and Ohio—all states that voted for Trump in 2024. 

Sheinbaum has until Tuesday to see how to de-escalate and what carve-outs may be possible. Back in 2019, Trump threatened escalating tariffs that didn’t end up going into effect since Mexico committed to specific measures to curb immigration. What can Mexico agree to do this time around that would satisfy Trump? The fact sheet announcing the tariffs stated that the purpose is to “hold Mexico, Canada, and China accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country.” The Mexican authorities will be seeking to find some type of common understanding on new measures—like in 2019—that could be undertaken so the US president can claim a quick win.

Trump may be looking at the success of last Sunday’s tariff threats against Colombia—25 percent immediately with an escalation to 50 percent after one week—as proof that tariffs can deliver quick wins. Last week, Colombia acquiesced by the end of the day to Trump’s demands around acceptance of deportees. The Colombia tariff threats were the first test of this new administration as to whether governments would quickly capitulate. But Colombia is not Mexico or Canada.  

—Jason Marczak is vice president and senior director at the Atlantic Council’s Adrienne Arsht Latin America Center.

The tariffs on Mexico are counterproductive to Trump’s goal of curbing immigration

This evening’s announcement of 25 percent tariffs on Mexican imports—it is still unclear when they will take effect—is counterproductive to Trump’s goals of curbing immigration to the United States. The Trump administration has, oddly, made it cheaper for US manufacturers to source supplies from China than from Mexico. The tariffs will quickly erode the economic growth and improvements in supply-chain security that were direct results of the United States-Mexico-Canada Agreement (USMCA). China is stronger, and Mexico and the United States are weaker, because of this move. 

The implementation of these tariffs will weaken the Mexican peso and the country’s economy. Depending on how long the tariffs remain in place, Mexican exports could fall by over 10 percent, and its gross domestic product (GDP) contraction could reach up to 4 percent. However, it is clear from the White House statement that the logic behind these tariffs on Mexico is not economic; they are being used as a tool to force flashy results on the security front. The Trump administration has gone as far as accusing Mexico of colluding with drug trafficking organizations. This marks the first time in decades that US-Mexico economic collaboration has been so explicitly dependent on security concerns. Most importantly, the signals it sends to the United States’ top trading partner ahead of the revision of Trump’s signature trade agreement—the USMCA—are far from positive. Finally, the timing of this announcement could not be worse, as Secretary of State Marco Rubio embarks on a trip to Central America to build goodwill among allies in the same neighborhood. 

—María Fernanda Bozmoski is the director of impact and operations and lead for Central America at the Adrienne Arsht Latin America Center.

These tariffs could upend energy sector business models

Trump has issued an order imposing 25 percent additional tariffs on imports from Canada and Mexico and a 10 percent additional tariff on imports from China. According to the White House, “energy resources from Canada” will face a lower 10 percent tariff. If these tariffs are indeed implemented, the impact on energy markets will depend on the tariffs’ duration and the definition of “energy resource.”

Many US energy producers will never have imagined that supply chains in Mexico and especially Canada would ever face 25 percent tariffs. Consequently, some energy sector business models will break down if these tariffs are sustained.

It’s unclear which Canadian energy resources will qualify for the 10 percent tariff, though crude oil likely will. If the lower rate excludes imports of electricity, batteries, and minerals, this could significantly impact US electricity, battery, and defense technology markets. US capabilities in artificial intelligence and drones will be impacted, as well.

As David Goldwyn and I noted in our examination of USMCA energy trade, US refineries will now pay higher prices for Mexican and Canadian crude in the wake of tariffs. Texas refineries have historically taken in Mexican crude oil but will now be forced to pay higher input costs, harming their export competitiveness to other markets, especially Latin America. Midwestern refineries will also face higher prices, as they have few if any alternatives to Canadian crude oil and will pass along many costs to consumers. Finally, the US automotive sector could be severely impacted by these tariffs, due to deep supply chain interconnectedness with its North American neighbors. US development of autonomous vehicles will likely slow, perhaps considerably. The Midwest—especially Michigan—may be particularly squeezed by auto-related tariffs, as the mobility industry accounts for an estimated 27 percent of the Wolverine State’s gross state product.

—Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center and Indo-Pacific Security Initiative; he also edits the independent China-Russia Report.

This historic move means US trade treaties now come with a caveat

Trump’s decision to impose tariffs on US trade treaty partners accelerates centrifugal forces that have been pulling at the global economy for over a decade.

The White House announced that the tariffs are being imposed under the president’s authority from IEEPA rather than through established trade treaties. This move is historic.

IEEPA provides the president with broad powers to address any “unusual or extraordinary threat, which has its source in whole or substantial part outside the United States.” Centering the tariff action on national security should make the move World Trade Organization-legal under the General Agreement on Tariffs and Trade’s Article XXI national security exception. If the Trump administration invokes the Article XXI national security exception, the United States and Ukraine will be the only nations ever to do so.

Trump has now asserted that the United States faces a dire national emergency as China exploits the free trade area created by the USMCA. The tariff policy implies that the United States’ closest trading partners are turning a blind eye to the fentanyl trade.

This is not, however, the first time that the United States has imposed tariffs to address non-trade vulnerabilities. President Richard Nixon invoked the Trading with the Enemy Act to impose across-the-board 10 percent tariffs after the United States left the gold standard in the early 1970s. His goal at the time was to avoid a balance of payments crisis. Nor would the United States be the only nation to use tariff policy to promote domestic policy priorities. The European Union is creating import levies based on their estimated embedded carbon emissions under the Carbon Border Adjustment Mechanism.

The harsh truth is that international economic interdependencies also create real vulnerabilities. The world has been adjusting to those vulnerabilities since the COVID-19 pandemic. Today’s tariff decision being premised on a national emergency shifts US trade policy past the trade paradigm. It signals that Washington no longer considers international trade to be either benign or always beneficial.

The United States’ trading partners have had time to prepare for this action. Geoeconomic alliances are already shifting. Canada’s prime minister has turned inward, encouraging domestic provinces and territories to decrease their own internal trading barriers to offset the disruption in trade flows with the United States. The European Union this month concluded a new trade agreement with Mexico. 

Today’s tariff decision tells the world that the United States’ trade treaty commitments come with a caveat: trading partners must support US policy priorities. The United States already exerts considerable economic influence through economic statecraft associated with US dollar sanctions policy. Tariff policy has now been enlisted into action as well.

—Barbara C. Matthews is a nonresident senior fellow with the Atlantic Council. She is also CEO and founder of BCMstrategy, Inc.

Canada’s next prime minister must articulate how the country will navigate the Trump presidency

As Canada navigates a race to determine who will lead the Liberal Party and become the next prime minister, the 25 percent Trump tariffs could potentially devastate Canada’s economy, shrinking its GDP by 2.6 percent (approximately 78 billion Canadian dollars), according to the Canadian Chamber of Commerce. While these tariffs would also harm the US economy, reducing its GDP by 1.6 percent (roughly $467 billion), Canada is more vulnerable due to its greater reliance on trade with the United States.

As the Liberal Party chooses its next leader, it is crucial for the party to present a strong, unified front to the public, despite internal challenges. More importantly, the candidates must articulate how Canada will navigate a Trump presidency, and fighting against these tariffs could provide an opportunity to achieve unity on this issue. Prime Minister Justin Trudeau said the country is readying a “forceful and immediate response,” which signals a strong, unified Canadian front.

Canada and the United States have long maintained a strong and vital economic and diplomatic relationship. The next Canadian government has the opportunity to assert itself and push back against unfavorable policies like the 25 percent tariff. This week, Rubio met with Canadian Foreign Affairs Minister Mélanie Joly in Washington to discuss collaboration on shared global challenges, including securing borders and ensuring energy security. With the United States emphasizing energy policy, Canada’s role as a key ally in this sector will become increasingly significant and could be a way to fight back against the tariffs.

—Maite Gonzalez Latorre is a program assistant at the Atlantic Council’s Adrienne Arsht Latin America Center.

The tariffs genie is out of the bottle

With this action, the United States has crossed a Rubicon. Previous tariffs have generally been in response to the injurious impact of some set of unfair trade practices, import surges, or balance of payments issues. Using the emergency power to impose tariffs in response to unrelated issues like drugs and immigration sets the stage for further tariffs in response to any number of other non-trade priorities. The genie is out of the bottle.  

—L. Daniel Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center. He previously served as assistant US trade representative for Europe and the Middle East.

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Welcome to the inaugural edition of “Beyond the border: Your briefing on US-Mexico commerce.”

The US-Mexico bilateral relationship has profound direct—and indirect—implications for most of the over 460 million people living in the two countries. So, where is the relationship headed and how can the United States and Mexico make its commercial ties work better?

This newsletter will offer new ways of thinking about US-Mexico ties with concise, sharp analysis and data-driven insight on some of the most pressing issues shaping our two countries’ futures.

Our vision is simple: to bring together some of the best minds in business, policy, and academia to offer fresh perspectives on what lies ahead for the United States and Mexico and how the United States can best position its ties to achieve national objectives. Dive into these perspectives and much more below.

Staff

Jason Marczak

Vice President and Senior Director

Adrienne Arsht Latin America Center

Americas Caribbean

Here’s the deal: The pandemic ushered in a new era of trade, and states across the United States are now more interconnected than ever with Mexico.

The takeaways

First: Mexico and the United States have become increasingly interdependent—supply chains transcend borders to optimize production. Supply chains cross the border multiple times. For example, for every dollar in manufactured goods that Mexico exports to the United States, about 30 cents of every dollar’s value comes from US-produced content or materials. Two years ago, Mexico became the United States’ top trading partner (see our graph on US imports by country), a position it solidified in 2024, surpassing China, Canada, and other advanced economies. This reflects the revitalization of Mexico’s export sector—a result of many factors including nearshoring trends and intensifying US-China competition that has favored Mexico. With the likely implementation of 25-percent US tariffs on Mexico as soon as February 1, these growth trends may evolve: For example, Mexico’s commercial growth related to the United States may substantially slow down.

Second: US states heavily rely on imports from Mexico—in some cases, for close to half of all their imports (see our map on key states that rely on imports from Mexico). These imports would, presumably, be subject to the 25-percent tariffs. And while US state-level exports to Mexico (when taken as a percentage of global exports) are not as significant, they could be subject to retaliatory tariffs from Mexico and thus could further shrink in size (see our map on key states that rely on exports to Mexico).

“So, you know, just as an example, with Mexico—we’re dealing with Mexico, I think, very well.” —US President Donald Trump, in remarks at the World Economic Forum in Davos, Switzerland

On January 20, Trump was inaugurated as president for the second time. During his first administration, Trump delivered on his promise to end the North American Free Trade Agreement—which he called “the worst trade deal ever.” He replaced it with the United States-Mexico-Canada Agreement (USMCA), an agreement the president called the “most modern, up-to-date, and balanced trade agreement in the history of our country.” At Davos this year, the US president said, “we’re dealing with Mexico, I think, very well.” Days earlier, US Secretary of State Marco Rubio stated during his nomination hearing: “Mexico’s economy in many ways is a very vibrant one and has made tremendous advances and continues to be a very strong regional power . . . Our economic interests are so deeply intertwined.”

In this new term, Trump is likely to focus more on improving security, stopping migration, and reducing Chinese influence and fentanyl flows, by utilizing tariffs—such as the ones expected to be placed on Mexico as soon as February 1—to help accomplish these goals. Mexican President Claudia Sheinbaum has presented the ambitious “Mexico Plan,” which will concentrate efforts on boosting nearshoring, strengthening coordination with the private sector, and increasing the independence of North American production chains from Asia. Countering China’s growing footprint in North America will require both countries to align strategically, seeing as the US and Mexican economies are intertwined at the local, state, and federal levels. This is especially the case for areas such as manufacturing, the automotive sector, the aerospace industry, and high value-added technological production. Long-term policy to diminish Chinese influence will invariably require bipartisan leadership and support in the US Congress. 

Mexico has an outsized role in US jobs and economic security. The United States and Mexico trade over $800 billion annually in goods (nearly $300 billion just from the top six exporting states, as shown in the graph above). More than one million US jobs are tied to cross-border commerce and over five million US jobs depend on commerce with Mexico, all intertwined in a highly diversified supply chain that keeps everything from cars to avocados flowing.

What they’re saying

US Representative Juan Ciscomani (R-AZ-6): “I always say, there are three buckets related to the southern border—security, immigration, and commerce. We can, and must, work to address and improve these three areas. Mexico is Arizona’s largest trading partner by four, encompassing nearly twenty billion dollars in trade every year. The goods, services, and tourism that flows between Mexico and my district is vitally important to the economic well-being of my constituents.

As vice-chair of the Arizona-Mexico Commission, I worked extensively to facilitate trade, tourism, and investment opportunities. That’s why, in Congress, I am committed to advancing policies that promote trade and tourism, which are essential to the success of both our economies.

In particular, I am concerned over China’s efforts to increase their influence in Mexico, and across Latin America. The Americas are our hemisphere. We must do more to promote commerce between us while limiting China’s malign attempts to undermine US interests. We must work collaboratively with our partners in the region to ensure they know the value of our collaboration not only on trade, but for security cooperation and supply chain resiliency as well. In his first term, President Trump negotiated the United States-Mexico-Canada Agreement (USMCA), which greatly benefited Arizona’s trade relationship with Mexico and Canada. I look forward to working with the president to strengthen our important bilateral relationship.”

US Representative Veronica Escobar (D-TX-16): “The United States-Mexico-Canada Agreement (USMCA) has been instrumental in enhancing economic integration across North America. In 2019, I supported the USMCA, recognizing its potential to benefit all of the El Pasoans dependent on a prosperous border economy.

As we approach the 2026 review, it’s imperative to focus on:

• Ensuring that labor provisions are effectively implemented to protect workers’ rights across all member countries.
• Strengthening commitments to environmental protections to promote sustainable development. There are communities on both sides of the US-Mexico border that have endured decades of environmental harm and we need to do everything possible to address these issues. In El Paso, we have already started this work by pushing towards removing commercial traffic from the Bridge of the Americas.
• Enhancing infrastructure at ports of entry to streamline trade and address bottlenecks. Additionally, we need to ensure both the US and Mexico are investing in the roads travelers use to get to these ports of entry.”

Senator Waldo Fernandez, chair of the USMCA Oversight Committee, sent us his thoughts on the future of cross-border commerce.

1. What is your view on the USMCA, its importance, and its impact?
   The USMCA is a strategic agreement that has successfully consolidated North America as an integrated and highly competitive region. The economies of the United States, Canada, and Mexico have significantly benefited from the agreement in terms of employment, trade, and investment. The agreement contains clear and expeditious mechanisms to resolve disputes between partners. That is why the USMCA provides certainty for trade, business and investment. But it goes further: Besides being economic partners, the three nations are today strategic allies, who face common challenges such as security and migration. Therefore, we must continue working together, promoting dialogue and collaboration to boost competitiveness, trade, and investment, as well as strengthening supply chains and coordination to face challenges.
   
2. What are the lessons learned in the first five years of the USMCA? What needs to be done?
   The economic and commercial relationship between Mexico, Canada, and the United States is broad, solid, and constantly evolving. It has been a constructive, deeply positive relationship not only for Mexico but also for our neighbors in the north. Thanks to the treaty, we have consolidated important markets at the international level, such as the automotive and agricultural markets. Thus, the first five years of the USMCA confirm that more things unite us than divide us. Throughout these years, the will and willingness to build agreements prevails. It seems to me that in the revision of the treaty, this goodwill will continue to be important, as well as the recognition that today the three nations are of equal importance and relevance in the agreement.
   
3. What are the main challenges that North America is facing?
   There are challenges in terms of commercial triangulation, customs fraud, and unfair trade practices by some countries in Asia that export to North America. In that sense, the USMCA has been a very effective instrument to counteract or at least mitigate these challenges. The rules and mechanisms of the USMCA have worked successfully to resolve differences, provide certainty to businesses, and combat unfair trade.
   
4. What are the main opportunities for the countries of the region?
   The 2026 review of the USMCA represents the main opportunity to build in North America the most competitive and most dynamic region in the world in terms of trade, investment, growth, technology, and innovation. In addition, the review of the USMCA in the context of the relocation of companies could be used to establish conditions for the benefit of the population, such as job generation, regional content promotion, development of technology, and clean energy projects, among others.
   
5. Finally, how do you see the relationship between the United States, Canada, and Mexico after the 2026 review?
   I am sure there will be a recognition of the need to maintain and strengthen a stronger, more united, and more competitive region. Only this way will we be able to successfully face global challenges as a bloc.

Glenn Hamer, president and CEO of the Texas Association of Business: “Trade with our largest trading partner, Mexico, is responsible for over five hundred thousand jobs in Texas and $270 billion in economic activity. Tariff-free trade with Mexico allows Texas companies to maintain efficient supply chains, which increases the competitiveness and resiliency of our economy. Simply put, we build products together. As the nation’s top export state, the USMCA has benefited Texas more than any other state. More trade with Mexico would mean more prosperity for Texans. The Texas Association of Business is committed to building on the USMCA, which is probably the most important trade deal in US history.

Gerry Schwebel, executive vice president, Corporate International IBC Bank–Texas and Oklahoma: “Communities along the US-Mexico border are so integrated economically and culturally that we often say we are ‘one city in two countries.’ We border communities experience the benefits of a robust bilateral trade relationship between the United States and Mexico every day and are an integral part of the success of an equally robust supply chain network.”

Mexican Senator Cynthia López Castro: Why an integrated US-Mexico relationship is vital

North America’s success as an economic region is indisputable. According to the International Monetary Fund, North America contributes 17.9 percent of the world’s gross domestic product (GDP). That means that just three countries contribute almost one-fifth of the world’s GDP. The integration of North America as a region is an indisputable foreign policy success of the three countries.

NAFTA succeeded in integrating value chains, connecting Mexico’s economy with the world (and specifically, the United States and Canada). It created a collaborative industrial ecosystem in the region characterized by the transfer of knowledge, with the capacity to produce complex goods such as automobiles. While there are many critics and doubts about the domestic benefits of NAFTA and then the USMCA, the benefits of the free trade agreement are tangible: Twenty-five years after the agreement came into force, trade with Canada and Mexico had nearly quadrupled, reaching $1.3 trillion; and Canada and Mexico bought more than one-third of US merchandise exports. In addition, 68 percent of inputs for US-produced goods come from Canada and Mexico, and trade with Mexico and Canada supported fourteen million US jobs.

Needless to say, the trade relationship with the United States is indispensable for Mexico. However, this relationship is asymmetrical: The United States is the destination for more than 80 percent of Mexico’s exports and the source for 40 percent of Mexico’s imports. Most analysis focuses on the enormous concentration of Mexico’s exports and the vulnerability that this entails, but rarely does it highlight the global importance of Mexico’s trade relationship with the United States. Mexico’s importance to the United States is so significant that, in 2023, Mexico was the top US goods trading partner in 2023, with total two-way goods trade of $807 billion, surpassing China.

To put this into context: The United States remains the undisputed economic superpower of the world, and Mexico is its leading trading partner, not only surpassing but displacing the rising superpower that is China. It should be clear to both sides that the narrowness of the US-Mexico relationship protects the United States from becoming too dependent on its main commercial and political rival and guarantees Mexico privileged access to the world’s most important market for its agricultural and manufactured products. Taking care of it is not optional for any of the parts involved.

Mexico’s relationship with the United States is unavoidable, and strategically vital for both countries, in terms of not only trade but also security, migration, and the environment. For example, whether the United States cooperates with Mexico on security is not a question, seeing as Mexico defends North America. The government of Mexico (through its president, Claudia Sheinbaum) has reiterated that it is committed to the bilateral relationship because it is aware of both the relationship’s present relevance and its future potential.

Cynthia López Castro, member of the Mexican Senate, member of the North America Commission, and Atlantic Council Millennium fellow (2024-2025)

• How Sheinbaum can strengthen US-Mexico ties in Trump’s first 100 days – Atlantic Council
• Experts react: Claudia Sheinbaum is Mexico’s new president. Here’s what to expect. – Atlantic Council
• Following President Trump’s announcement around potential 25-percent tariffs on imports from Mexico, what are the possible economic implications for both the United States and its southern neighbor? The measure could go into effect as soon as February 1, 2025. This explainer provides key data and perspectives to understand this topic.

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

Learn more

The post Beyond the border: Your briefing on US-Mexico commerce appeared first on Atlantic Council.

The Canadian energy partnership is a case in point. Canada is the United States’ largest crude oil partner, by far, and many landlocked US markets lack alternative suppliers. Through the first ten months of 2024, the True North comprised about 62 percent of all US crude oil imports. Mexico is also a significant player, accounting for about 7 percent of all crude oil imports over the same period (and more in markets along the southern border). It is also the largest purchaser of US natural gas and petroleum products, as well as a supplier of crude oil to US refineries.

Tariffs on Canada and Mexico, the two largest crude oil exporters to the United States, would have profound implications for US energy markets. That’s because crude oil imports, including from these two countries, are transformed by US refineries into crude products for domestic consumption or export.

Take heavy oil imports (HTS Code: 2709001000). Notice that Canada is by far the largest exporter of heavy crude oil to the United States. In some US markets, such as the Midwest, there is no alternative import supplier of heavy oil.

Nor can domestic US crude production completely replace imported crude. US crude oil production is typically of light, sweet grades, while the United States’ “complex” refineries are optimized to run on heavier grades—such as Canadian and Mexican crude. Indeed, imports account for about 39 percent of the crude used by domestic refineries.

Accordingly, if the United States imposes 25 percent tariffs on imports of Canadian crude oil, domestic energy prices would likely spike, especially in states in the US Midwest. Most of the economic literature suggests that costs would be passed on immediately to consumers in the form of higher retail gasoline and diesel prices.

Tariffs on crude oil imports will also impair US exports of crude products, like fuel oil, diesel, and gasoline. Additionally, over time there could be negative impacts on the US natural gas trade, as countries in Latin America, Europe, and Asia potentially see reliance on US supply as a political vulnerability. Mexico, the largest recipient of US oil and gas exports, could also look to liquefied natural gas (LNG) to hedge against the reliability of the US supply.

To see how tariffs could harm US exports, consider the recent US-Colombia trade spat. Due to a dispute over migration, Trump threatened a 25 percent tariff on Colombian imports, with a potential increase to 50 percent, while Colombia threatened its own retaliatory tariffs. While imports of Colombian crude only comprise about 3 percent of total US crude oil imports, this isn’t true across all markets and products. Colombia provides a significant amount of heavy crude oil imports (HTS Code: 2709001000) to the United States—and especially to Houston, where it shipped more than 137,000 barrels per day through the first eleven months of 2024, according to the US Census Bureau.

Since Houston exports more refined products than any other US district, tariffs on Colombian oil would, all things being equal, raise the prices of heavy US crude products, such as marine fuel, diesel, and gasoline. Accordingly, tariffs on Colombian (or Canadian, or Mexican) imports would likely make US exports relatively more expensive and therefore less competitive in international markets—even before considering second-order consequences, such as reciprocal tariffs.

Disruptions to US crude product exports could also have geopolitical ramifications across Latin America, including for the US-China competition. Several Latin American countries lack domestic refining capacity and rely on the United States for their energy security needs. To hedge against US unpredictability, Latin American countries may seek out other arrangements, including by finding alternative suppliers.

If US crude products become less attractive for importers across Latin America and beyond, China might attempt to exploit the opportunity. China is the world’s largest refinery market, by capacity, and its domestic gasoline and diesel demand may have already peaked due to a combination of electric vehicles and LNG for trucking. Accordingly, Chinese refineries may increasingly seek to export crude products abroad, including to Latin America, although it’s worth noting that Chinese global fuel exports are currently subject to export quotas.

US policymakers should think deeply before placing tariffs on energy imports to Canada or Mexico. Domestic markets will be impacted by higher taxes on crude oil imports because they will raise refiner acquisition costs. In many US markets, such as states in the US Midwest, there is no alternative to Canadian oil imports, so the inflationary impact will be immediate and likely proportional to the size of the tariff.

The United States should also not discount the potential impacts of retaliatory tariffs. While Mexico is most likely to retaliate against US tariffs by imposing duties on agricultural products, any serious reduction of US exports of natural gas or petroleum products to Mexico would sharply lower prices in the United States, potentially impacting domestic crude oil production. Refinery economics would be punished to the extent that importers substitute crude oil from other countries. If Mexico and Canada are targeted, there’s no question that Brazil, Argentina, and other major markets in Latin America will be watching as well. Rather than establishing US energy dominance, tariffs on energy products could accelerate the desire of major US hydrocarbon partners to diversify trade with other countries, including China.

Energy tariffs could impact the competition with China in other ways. Tariffs on Canadian electricity and advanced energy exports might hamstring the US artificial intelligence (AI) development complex and military capabilities. In 2023, the United States imported 33 terawatt hours of electricity from Canada, helping power US data centers needed for AI. If domestic electricity prices rise, then US AI capabilities would suffer. Additionally, Canada is a significant exporter of lithium-ion (Li-ion) batteries to the United States, and these batteries often have dual-use implications, including for drones. If the United States places tariffs on Canadian Li-ion imports, then it could diminish US and allied military capabilities.

Trump has made it clear that he seeks to address migration and fentanyl trafficking, and that he intends to do so with the threat and possible use of tariffs. These threats have certainly drawn the attention of US neighbors. But the short-term gains earned by threatening or imposing tariffs could lead to harmful direct and second-order consequences. A number of factors need to be weighed, and it would be useful if the administration paused major actions until its appointees were in place so they can provide strategic thoughts and input before precipitous actions are taken.

David Goldwyn is president of Goldwyn Global Strategies, LLC, chairman of the Atlantic Council Global Energy Center’s Energy Advisory Group, and the former special envoy and coordinator for international energy affairs at the US State Department.

Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center and Indo-Pacific Security Initiative and editor of the independent China-Russia Report.

This article reflects their own personal opinions.

The post Tariffs on Canada and Mexico could hurt Trump’s quest for US energy dominance appeared first on Atlantic Council.

While trade barriers will likely restrain BYD’s access to the US market—at least in the short term—the company’s presence in Mexico isn’t about the United States. It reflects a broader ambition to use EVs to embed the company within Mexico’s critical infrastructure.

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Without a sure export market in the United States, BYD’s ambitions in Mexico could challenge the country’s underdeveloped EV infrastructure. BYD plans to expand auto sales sixfold in the country—but with fewer than 3,000 public charging stations, Mexico needs to invest $1.73 billion annually in its charging infrastructure over the next six years to keep up with demand.

Chinese firms, with their experience building renewable energy infrastructure, are filling this gap—and exploiting an opportunity to expand into Mexico’s critical infrastructure. BYD and partner companies are quickly deploying chargers to support Chinese EV ownership in Mexico. Vemo, a Mexican cleantech company, is actively working with the company to double the number of BYD-compatible chargers in Mexico to 1000 in 2025.

Moreover, Mexico’s grid already faces an energy deficit and will struggle to keep up with rising power demand from EVs. In November 2020, China’s State Power Investment Corporation (SPIC) acquired Mexican renewable energy company, Zuma Energia—now the second-largest private renewable energy producer in Mexico—which is involved in fast-charging facilities, storage, and solar panels. As of September 2024, SPIC reported investments of more than $1 billion in Mexico and expressed its intention to continue expansion in the country. 

An opportunity for Mexico

Mexico has much to gain from securing a piece of the EV market. New manufacturing facilities could create high-paying jobs, expand one of Mexico’s main export industries, and attract new investments. Jorge Vallejo, BYD’s general director in Mexico, stated that the new EV plant will create around 10,000 new jobs in Mexico.

Currently, EVs remain out of reach for many consumers. In Mexico, the cheapest Tesla model costs a prohibitive $40,000. However, localizing production could lower prices by reducing transport costs and bypassing tariffs.

Other automakers in Mexico are already struggling to compete with BYD. The Song model, BYD’s $30,000 plug-in sport utility vehicle, is edging out rivals. A local factory threatens to slash prices even lower.

EVs are just the first step

BYD is a risky business partner because of its ability to rapidly integrate itself within a country’s energy system, quickly replacing competitors in not only the EV market, but the larger cleantech industry.

BYD’s goal in Mexico is not just to sell electric vehicles. Similar to how the company has operated in Brazil, first come the EVs—then, BYD provides the manufacturing logistic software, charging systems, storage, and generation needed for the EV ecosystem to operate.

BYD is not just an auto company, it’s a software company, with its own chip-making subsidiary and artificial intelligence (AI) program. The company produces batteries, trucks, skyrails, energy storage systems, digital logistic management software, communication equipment, and 5G and AI technology. BYD uses this expertise to vertically integrate itself into a country’s energy system, allowing it to dominate large parts of the green economy.

In Brazil, where Chinese brands have a 9 percent share of new car sales, BYD builds electric buses, operates solar farms, supplies trains, partners with lithium miners, and manufactures consumer EVs. For BYD, EV production is a beachhead for gaining access to broader energy infrastructure, creating dependency on Chinese technology and investment to support the very industries Chinese companies help establish.

In Mexico, China’s footprint in the energy system is growing. In 2023 alone, Chinese companies announced over $12.6 billion in infrastructure projects in Mexico, focusing on EVs, mining, transit, container ports, and telecommunications. China-based miner Ganfeng has also been involved in a years-long dispute with Mexico over the rights to mine lithium in the Sonora desert.

The party’s favors

BYD’s rise in Mexico comes at a time when Chinese companies are under scrutiny for unfair trade practices, supply chain meddling, and security concerns, which have prompted several Mexican states to dial back tax and resource incentives for BYD.

But this means little for a company that is essentially at the service of the Chinese Communist Party (CCP). Since the late 1980s, China’s Go Out policy has encouraged investment abroad to obtain domestically scarce strategic resources. By acting as a key player in the CCP’s economic efforts, BYD gains unfair advantages in an increasingly competitive global automobile market. High subsidies, strong domestic policy support, and access to military intelligence that could guide transnational business decisions give BYD the competitive edge needed to make it one of the top-selling automakers in the world.

BYD’s ties to the CCP run deep: it has supported China’s military-civil fusion strategy, integrating defense and civilian research to bolster national objectives. In 2019, the company received a prestigious state award for contributions to military technology and has developed at least three military-civil fusion enterprise zones focused on research and development in the defense industry, as directed by the military.

BYD’s leadership maintains an extensive interpersonal network—and even a revolving door—with CCP leadership. BYD founder Wang Chuanfu has held a number of CCP posts, including as a delegate to the People’s Congress of Shenzhen from 2000–2010.

Perhaps uncoincidentally, BYD is also one of China’s most heavily subsidized companies. In 2022, BYD received $2.1 billion in direct subsidies from the Chinese government, significantly higher than other domestic manufacturers. These subsidies help BYD’s expansion efforts, especially as countries concerned with Chinese influence impose tariffs on Chinese EVs.

BYD did not become the world’s largest EV manufacturer by mistake. The CCP has called on BYD to “go out” and conquer foreign markets, and it has supported the company’s efforts through military collaboration, funding, and heavy subsidies. This intense collaboration has made it difficult to differentiate BYD’s corporate strategies from government orders.

A larger prize at stake

Through its vertically integrated approach—from electric vehicles to renewable energy infrastructure—BYD not only captures market share, but also secures lasting influence over the systems driving Mexico’s clean energy transition—to the geostrategic benefit of Beijing.

China’s expansion into Mexico’s EV market, led by BYD, is more than just a response to rising local demand for affordable electric vehicles. It is part of a wider strategy to embed Chinese influence in Mexico’s broader energy and infrastructure systems—and signals a much deeper geopolitical play.

Mexico’s demand for EVs is quickly growing—and BYD’s potential to dominate the market is undeniable. The rapid vertical integration of Chinese firms into sectors needed to support EV adoption can leave Mexico increasingly dependent on China for critical energy and industrial systems.

As Mexico looks to capitalize on the EV boom, policymakers must weigh the long-term trade-offs of Chinese partnerships. While BYD promises immediate economic benefits, the country risks ceding control over strategic assets and becoming overly reliant on Chinese technology and investment.

For Mexico to achieve sustainable, independent growth in cleantech, it must balance foreign collaboration with efforts to strengthen its own domestic capacity and regulatory oversight.

Haley Nelson is assistant director at the Atlantic Council Global Energy Center.

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EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Following President Trump’s announcement around potential 25 percent tariffs on imports from Mexico, what are the possible economic implications for both the United States and its southern neighbor? The measure could go into effect as soon as February 1, 2025. This explainer provides key data and perspectives to understand this topic.

The post Explainer: US tariffs on Mexico appeared first on Atlantic Council.

The post Busch quoted by Semafor on US leverage over Mexico in USMCA trade talks appeared first on Atlantic Council.

The USMCA is set to terminate in 2036 at the close of its sixteen-year term. When the trio meets in July 2026, they can renew the agreement for a second sixteen-year term. However, if any one of the three decide not to renew the agreement, the trio will meet every year until they either agree to renew the USMCA—or run out of time before it expires in 2036. Although cumbersome, this process is designed to provide an opportunity for the three countries to regularly adapt the terms as they see fit. No other trade agreement has such an adaptable structure, providing an unprecedented opportunity to optimize trade within North America.

It’s possible that few other trade agreements will also have as much political pressure as the USMCA in 2026, with a range of issues now attached to its renewal including immigration, shipment of illegal drugs, and concerns about Chinese goods subject to tariffs making their way freely to the United States through the USMCA. The incoming administration’s fixation on the United States’ trade deficits with Mexico and Canada is perhaps the most traditional topic under review. 

The Trump administration’s proposed approach to these concerns is to create uncertainty through higher tariffs in order to negotiate better terms in the agreement. If the Trump administration does increase any tariffs on USMCA partners, except due to national security concerns, it will violate the terms of the agreement under Article 2.4. Canada and Mexico would likely retaliate by levying import duties of their own, effectively removing the free trade advantages provided by the USMCA. This will prove expensive and destabilizing for any company dependent on the highly integrated North American supply chains. These are the very same exporters on whom the administration relies for support. Before the administration would need to take that approach, it’s important to understand the economic leverage—and dependencies—each country has with the others. 

At the negotiating table

Canada and Mexico rely on the US economy far more than the United States relies on either of them—although the relationship is important for all three. Mexico and Canada sold 80 percent and 76 percent, respectively, of their exports to the United States in 2023. Comparatively, 32 percent of US exports in 2023 went to Canada and Mexico combined. 

The asymmetry here engenders a higher level of political importance for the USMCA within Mexico and Canada. Employment in Mexico is especially dependent on trade with the United States. When negotiations begin in 2025, Mexican President Claudia Sheinbaum will be under an entirely different level of pressure from her citizens to maintain favorable trade relations with the United States and Canada. The cards are favorably stacked for the United States to have the heaviest hand in negotiations––even without the threat of higher tariffs.

In support of US jobs

Even so, the United States has deep political interests in maintaining the USMCA. From Washington’s side, the agreement’s guiding objectives—creating more balanced trade in support of high-paying jobs in the United States—has been a point of continuity for businesses, receiving bipartisan support throughout the last four years. Of all the jobs in the United States that are supported by exports abroad, 33 percent are supported by exports to Mexico and Canada. No other regional trade relationship has a larger impact on US exporter jobs.

Although jobs supported by the USMCA make up only roughly 2 percent of total jobs in the United States, the agreement has outsized importance within key Republican constituencies. The incoming Trump administration, with its promise of creating a “manufacturing renaissance” with “millions of jobs” will need to consider that exports support roughly 40 percent of manufacturing jobs in the United States.

As for the USMCA, roughly a quarter of the US jobs supported by exports to Canada and Mexico are in manufacturing, with automobile manufacturing employing the most individuals. Manufacturing export jobs have a relatively greater importance on employment in red states—as well as key swing states such as Michigan and Wisconsin. These linchpin states helped the incoming president win the 2024 election; trade disruptions here could have high domestic political costs for the administration.

If the United States increases import tariffs and Canada and Mexico apply retaliatory tariffs, US exports will be more expensive and less profitable. Oxford Economics estimates that the proposed 25 percent tariffs would decrease trade in North America by 50 to 60 percent, which would push Canada into a recession in 2025. US exports to Canada, and, by extension, export-supported jobs would likewise falter due to slow demand. If the incoming Trump administration wishes to improve the odds for US exporters, it should maintain favorable trade conditions with the top buyers of US goods: Canada and Mexico.

Manufacturers are also importers

Of course, Mexico and Canada are not only buyers of US goods, but are also suppliers of US inputs. Tariffs will increase the cost of importing these goods, which will weigh on manufacturers’ overall production costs. Historically, higher input costs have been shown to have a negative impact on manufacturing employment. The increased input costs from the March 2018 steel tariffs directly lead to the loss of approximately 75,000 manufacturing jobs by the middle of 2019. 

Furthermore, trade within North America is highly integrated to the point that it might best be described as “circular.” Supply chains are so connected in part because of the incentive structure provided by the USMCA and its predecessor, the North American Free Trade Agreement. To qualify for duty-free trade, goods must meet rules-of-origin requirements, which generally require at least 60 percent of the value of a good to be made with regional inputs, or “content.” This influences companies to develop supply chains that cross North American borders multiple times throughout the production process—locating each phase of production where they can optimize costs. As a result, for each dollar that the United States imports from Mexico in manufactured goods, close to 30 cents is likely made up of US content, according to assessments based on the structure of these supply chains. The United States’ trade deficits with Mexico and Canada, therefore, might be viewed as much less problematic than deficits with other partners because the imports from these countries help generate demand for exports to these partners and are made up of US goods.

Assuming Mexico and Canada would retaliate in the event of US tariffs, each time a good moved across borders throughout the production process, the importer would have to pay a tariff, raising costs at every stage of the production process. A US company operating in Mexico, for example, might then be incentivized to relocate fully to the United States to avoid the tariff. On the other hand, the cost differential in doing so could be so great for some products that it might be more profitable to continue producing outside of the United States—even with the tariffs in place. In this case, consumers would still pay higher prices while supply chains stay intact.

With any increased barriers to trade among the United States, Mexico, and Canada, the administration should expect businesses to face added costs and risks from secondary effects. This includes the added costs companies would face purely from navigating the new legislative changes and in adjusting supply chains accordingly. For example, companies would likely attempt to receive exemptions from tariffs while adjusting production plans in the interim, which has labor costs and may cause production delays. These costs will weigh on small- and medium-size companies the most, as they have fewer resources to dedicate to managing their global supply chains.

Igniting a manufacturing “renaissance”

If the incoming administration wants to accomplish its goal of a US “manufacturing renaissance,” it should consider updating how the USMCA incentivizes manufacturing and fairer wages within the continent.

One such incentive is the regional content requirement. To improve the agreement in a way that generates political support, the United States should better enforce these requirements by evaluating nonregional (i.e. Chinese) companies that operate in North America to better determine if the content is truly local. The United States, Mexico, and Canada should consider if a 100 percent Chinese-owned business should be able to reap the benefits of the USMCA. It also matters how this legislation is written; the 2026 negotiations should prioritize closing any loopholes in its description of regional content.

Automotive manufacturing has the most advanced incentive structure under the USMCA and might be used as a model for a wider range of commodities. Under the USMCA, each vehicle must be produced with 75 percent regional content to satisfy the rules-of-origin requirements. Furthermore, 40 to 45 percent of the value-added content in any auto import must be made by workers making at least sixteen dollars an hour. This reduces offshoring incentives by making production in the United States more competitive, allaying a key fear.

To meet its objective of supporting US jobs, the White House could advocate for higher value-added content requirements or add a minimum wage requirement for critical manufactured products beyond automotive goods. To minimize disruptions to businesses and supply chains, the administration could propose a phased approach, whereby regional content and wage requirements would increase gradually throughout the next decade. This would still have to be targeted, of course, in order to make supply chains cost-effective, but would be a more business-friendly way to change the incentive structures to favor US and North American manufacturing.

The incoming administration has a strong enough advantage for the coming negotiations that it can expect to improve the agreement––and ensure the USMCA remains in place long after Trump leaves office.

Sophia Busch is an assistant director at the Atlantic Council’s GeoEconomics Center.

The post Trump has an advantage in upcoming USMCA trade talks. Here’s how his team can use it. appeared first on Atlantic Council.

So far, Trump’s foreign policy appointments have sent a clear message to Mexico. Security and the fight against fentanyl will be at the center of the Trump administration’s efforts. The challenge for Mexican President Claudia Sheinbaum and her administration is to articulate a response not only to security pressures but also to the economic implications of tariffs that could be immediately imposed.

In the year ahead, Mexico will have to manage several fronts of domestic policy and negotiations with the United States at the same time. Since coming to office in October 2024, Sheinbaum has taken several steps on security and trade that should help smooth relations with the incoming Trump administration. But the challenges during Trump’s first one hundred days in office will require more profound efforts to rebuild and strengthen US-Mexico ties for the years to come.

National security

The changes and innovations that Sheinbaum is implementing on security are already palpable. This includes institutional reforms to reinforce the Federal Secretariat of Security. These reforms are expanding its intelligence and investigation capabilities to prioritize the use of technology and data. The goal is to use these new capabilities to develop more effective strategies against criminal organizations in Mexico. A few weeks after this reform began, and also a few days after the first call between Trump and Sheinbaum, Mexican authorities carried out the largest fentanyl seizure in the country’s history, confiscating over a ton of pills in Sinaloa.

But those initiatives alone might not be enough for Trump. Besides concrete results and sustained efforts, it will likely take more persuasive strategies and greater evidence of crime reduction to convince him of Mexico’s commitment to binational security. This will be difficult to achieve, as the past several years have seen increasing mistrust and decreasing cooperation between the United States and Mexico. International Narcotics Control and Law Enforcement aid to Mexico, for example, has been significantly reduced.

The challenge for Mexico is to recover trust and propose new cooperation frameworks to avoid US unilateral action against crime. Mexican authorities clearly understand the significant risks of a potential intensification of the US unilateral approach. One recent case is the spiral of violence generated after the arrest in El Paso, Texas, of Sinaloa cartel leaders in July 2024. The lack of US coordination and communication with the Mexican agencies to accomplish this capture highlights the difficult hurdles that must be overcome to restore US-Mexican cooperation on transnational crime.

As Trump has maintained his stated willingness to use US military forces to strike Mexican cartels, the risks that US unilateral action poses to the bilateral relationship are even higher. Such measures, without appropriate coordination with Mexican authorities, could lead to more instability and violence throughout Mexico, creating even more distance and mistrust. However, such measures from the United States may not be avoided if Mexico does not develop new policy frameworks to cooperate with Washington on security. 

During the following one hundred days and beyond, Sheinbaum must continue her effort to innovate and improve Mexico’s security policies. But just as urgent for her administration is the need to rebuild trust and cooperation with US security agencies to ensure that unilateral US action does not upend her initiatives. 

Trade cooperation

In 2023, Mexico was the United States’ main commercial partner, and data suggest that Mexico maintained this position during 2024. In 2023, Mexican exports to the US market totaled $475 billion, surpassing China’s exports, which amounted to $427 billion. There are several factors behind Mexico’s recent strong trade numbers with the United States, including US tariffs on China and Mexico’s preferential status under the USMCA. But another important factor is the high level of diversification in the Mexican economy. This diversification is the greatest in Latin America and is based on the export of manufactures and successful industries, such as the automobile sector.

This diversification is a major strength of Mexico’s economy, which helps it attract foreign direct investment. It also creates opportunities to accelerate growth benefiting from an increase in “nearshoring,” as an Adrienne Arsht Latin America Center report highlighted in September. The capacity of Mexican economic structures to break the patterns of the commodity trap is attractive to foreign investors looking to concentrate on high-value-added production chains. At the same time, foreign investment increases the diversification of exports and the integration into North American markets, creating a virtuous cycle.

However, international and domestic factors could affect growth perspectives. Internationally, the imposition of US tariffs would considerably reduce the benefits of the United States-Mexico-Canada trade agreement, which began during the first Trump administration. New US tariffs could generate significant economic disruptions in employment, supply chains, and consumer prices. Domestically, several institutional changes in Mexico, such as the reform to the judiciary, have triggered uncertainty, worsening the government’s debt outlook.

Faced with these challenges, Sheinbaum’s economic strategy has been to reinforce collaboration with the private sector. On January 13, she officially launched the Mexico Plan, which is intended to strengthen industrial development policies and economic decoupling from China in coordination with business leaders and organizations. 

Although these efforts point toward a promising direction and could help its relations with the United States, it is uncertain whether the Mexican government will be able to quickly and successfully implement these proposed policies. This is a key question considering that in the next one hundred days, Trump will likely increase pressure to achieve rapid results, particularly regarding Mexico’s efforts to decrease its dependence on China and increase its capacity to stop Chinese products from flooding its markets to then make their way into the rest of North America duty-free.

With Trump poised to take office once again, it is a pivotal moment for the US-Mexico relationship. Decisions taken in the following months will shape the two nations’ bilateral ties for years to come. Sheinbaum has taken initiatives on security and trade that will help her navigate the new US-Mexico landscape, but her administration will need to take more decisive steps to increase bilateral trust. Proactive engagement between her government and the incoming Trump administration will be key to opening new avenues for mutual economic prosperity and binational security.

Rene Dominguez Castro is assistant director for Mexico, at the Atlantic Council’s Adrienne Arsht Latin America Center and a former senior advisor in the Federal Government of Mexico.

The post How Sheinbaum can strengthen US-Mexico ties in Trump’s first 100 days appeared first on Atlantic Council.

But such unilateral military action would come with risks, as the cartels have a significant capability to retaliate. In addition, even considering military action would first require strengthening complementary efforts with the Mexican government and domestically among local and federal government agencies in the United States.

Mexican cartels are not merely criminal organizations; they operate as paramilitary entities with deep financial resources, global supply chains, and sophisticated logistical networks that extend into the United States. It is unlikely that such groups would passively absorb US attacks. Instead, as history shows, cartels are highly likely to retaliate both preemptively and reactively. They possess a substantial capacity for terrorism that, when coupled with their established presence within the United States, could escalate conflict far beyond what proponents of a purely military solution may anticipate.

Given their extensive experiences and expertise in combating elusive terrorist networks, oftentimes operating quietly in the shadows while supporting partners on the ground, US special operators are ideally suited for this fight. However, US special operators and their families would likely find themselves in the cartels’ crosshairs. But there are ways that the United States should prepare for such retaliation before Washington even considers such action.

A proven capacity for retaliation

Mexican cartels have demonstrated an uncanny ability to adapt and retaliate against perceived threats, as demonstrated throughout Mexico’s history.

Soon after Felipe Calderón became president of Mexico in 2006, he declared a “war on drugs,” deploying military forces against cartels. The result was a sharp escalation in violence. The cartels retaliated by targeting law enforcement, military personnel, and government officials. Entire police forces resigned in fear, and public officials were assassinated in broad daylight. Beyond physical violence, cartels also employed psychological tactics, using brutal killings and public displays of bodies to instill terror among the population.

On October 17, 2019, Mexican forces arrested Ovidio Guzmán López, the son of drug lord and former cartel leader Joaquín “El Chapo” Guzmán. The Sinaloa Cartel swiftly unleashed widespread violence. Using armored vehicles, machine guns, rockets, and other heavy weapons, approximately seven hundred cartel “sicarios” conducted widespread attacks against civilian, government, and military targets across Culiacán. The cartel’s campaign of terror overwhelmed Mexican authorities in what has become known as the “Battle of Culiacán” and “Black Thursday.” This incident underscored the cartels’ operational sophistication, which ranges from coordinating large-scale attacks to leveraging public fear. And amid all the violence, the government released Guzmán.

Throughout Mexico’s recent history, cartels have routinely retaliated against perceived threats to their operations, including media organizations and civilian populations. Of the reporters who have been slain, some had written negative reports about the drug cartels themselves, while others have exposed corruption among those politicians that the cartels pay off. By controlling narratives and instilling fear, they secure compliance and deter resistance. In some years, Mexico has proven itself to be even more deadly for reporters than active warzones such as Syria and Ukraine.

Given these examples, it is not difficult to imagine how cartels might respond if US forces launched cross-border operations. The difference, however, is that the retaliation could happen within US borders.

Hitting home

The US homeland is not immune to the consequences of engaging in direct military action against Mexican cartels, and such a campaign would not see the cartels simply ceding the initiative and sitting on their side of the border waiting to be attacked. The very networks that facilitate drug trafficking, spanning from cities (such as Los Angeles and Chicago) to rural communities, provide cartels with the infrastructure for potential retaliatory strikes. Cartels have a history of assassinating government officials in Mexico, and they would likely adopt terrorist tactics in the United States against political figures, law-enforcement leaders, and even military personnel. Extensive cartel connections to Chinese underground banking and US-based gangs could readily facilitate such actions against targets inside the United States.

Beyond physical attacks, cartels could engage in cyber operations, employing such capabilities to gather information on potential targets as part of criminal dealings. Their financial power also enables them to influence local politics and law enforcement through intimidation and corruption. Cartel cyber activity could bear significant effects for the target of such operations; and if the target (for example, a government department or agency) suspends its normal operations to repair its security walls, those effects could expand across communities.

Increasingly, Mexican drug cartels have turned to the “cybercrime as a service” economy, infiltrating government and commercial institutions to advance their criminal interests. By potentially coordinating cyber activities with campaigns of terror in cartel-influenced US neighborhoods, these groups could sow panic and destabilize communities, driving Americans to call for a cessation of operations against the cartels in Mexico.

What must come first

Any US military campaign to combat the cartels would only succeed if accompanied by a robust partnership with the new Mexican administration, led by President Claudia Sheinbaum (who has expressed a desire to fight organized crime more aggressively). Joint task forces, enhanced intelligence sharing, and specialized training programs can bolster Mexico’s counter-narcotics capabilities. Equally important is addressing systemic corruption within Mexico, which has long hindered efforts to dismantle cartel operations. By empowering its partners, the United States can achieve a greater impact without exacerbating the violence that unilateral actions alone often provoke. When and where no other options exist, the United States should launch appropriate unilateral operations against high-value cartel targets at the invitation of the Mexican government and in support of counter-narcotics objectives shared by the United States and Mexico.

Domestically, the United States must prepare for potential retaliation from cartels. Washington should enhance interagency coordination—specifically between the Drug Enforcement Agency, the Federal Bureau of Investigation, and the Department of Homeland Security—to safeguard likely US targets and strengthen the United States’ ability to identify and neutralize cartel threats. Such coordination is outlined in the Department of Homeland Security’s 2016 National Protection Framework; it should include increased support to law enforcement countering cartel-affiliated gangs in the United States and measures to protect from potential cartel-led hacking or other cyber activity. Undertaking such initiatives to bolster domestic defenses now will set the necessary conditions before the incoming Trump administration can reasonably pursue a wider range of increased military activity directly against the Mexican cartels.

The United States will also need to address the sources of cartel power. The demand for illicit drugs in the United States fuels the cartels’ operations, making it imperative to invest in addiction treatment resources and public education programs. Reducing demand would undermine a significant source of cartel revenue. On the supply side, supporting economic development in Mexico can help create alternative opportunities for individuals who might otherwise be drawn into illicit activities. Such initiatives are not quick fixes, but they are essential components of a long-term strategy to weaken the cartels’ influence. Successfully doing so would also increase US influence in Mexico and the region, incentivizing mutually beneficial economic endeavors.

The risks of hubris

Deploying US special operations forces against Mexican cartels is worthy of serious consideration. But history and logic caution against underestimating the adaptability and resilience of these violent transnational criminal groups. Strong military action absent conscientious preparations and close collaboration with the Mexican government risks triggering a cycle of retaliation. It could, for example, bring a surge of violence to US soil, destabilize border communities, and strain domestic resources. Integrating increased military pressure with strengthened partnerships, domestic preparedness, and systemic investments would ensure that the effort is more sustainable and effective.

The opioid crisis is a danger to US national security that demands urgent action, but that action must be measured, informed, and strategic. Anything less risks compounding the very threats Washington seeks to eliminate and bringing a bloody war directly to US streets.

Doug Livermore is a member of the Atlantic Council’s Counterterrorism Group, the national vice president for the Special Operations Association of America, senior vice president for solution engineering at the CenCore Group, and the deputy commander for Special Operations Detachment–Joint Special Operations Command in the North Carolina Army National Guard.

Disclaimer: The views expressed are the author’s and do not represent official US government, Department of Defense, or Department of the Army positions.

The post US intervention against Mexican cartels carries major risks. Here’s how to mitigate them. appeared first on Atlantic Council.

2024 was a transformative year for Latin America and the Caribbean. Elections brought some surprises, but the region also bucked the global trend as continuity was the theme in the Dominican Republic and Mexico, where Claudia Sheinbaum made history as its first female president. Further south, Brazil played a pivotal role as the host of the Group of Twenty and Peru welcomed the Asia-Pacific Economic Cooperation (APEC) Summit, asserting Latin America’s leadership on the global stage.

Meanwhile, the region faced enduring challenges—from Nicolas Maduro’s ignoring electoral results in Venezuela to the growing influence of transnational criminal organizations. The region remains trapped in a low-growth economic environment with considerable strains on fiscal revenue, while a strong hurricane season reinforced the importance of building greater resilience across the Caribbean. China’s influence surged, with increased, notable new investments and Colombia’s decision to join the Belt and Road Initiative (BRI).

What might be in store for Latin America and the Caribbean in 2025?

How might the incoming Trump administration engage with the region? Can economies across the hemisphere grow beyond current predictions? How will leaders address security challenges? Might new tech hubs emerge?

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Eight Latin American countries attended this year’s G20 leaders’ summit. Besides Argentine President Javier Milei, Brazilian President Luiz Inácio Lula da Silva, and newly inaugurated Mexican President Claudia Sheinbaum, delegations from Bolivia, Chile, Colombia, Paraguay, and Uruguay traveled to Rio as guest countries of the Brazilian G20 presidency. These countries face shifting international winds and are growing apart as governments respond in different ways to external developments, from growing US-China competition to the incoming US presidential administration.

Brazil’s G20 marks the third year in a row in which an emerging market is setting the G20 agenda, following the presidencies of Indonesia (2022) and India (2023). In this context, these countries have paved the way for greater harmonization of objectives between developed and developing countries, pushing for progress in key areas, including climate finance, hunger and poverty, digital public infrastructure, and reforming international financial institutions. Over the same period, Latin American G20 members have worked together to raise the importance of regional priorities, such as development and climate finance and the reform of multilateral institutions. This year, however, policy coordination has become more challenging as governments veer apart from one another in how they plan to adapt to a changing international landscape, risking a division of the region into competing groups.

Here is how the three Latin American countries in the G20 approached this year’s summit.

Brazil

Brazil faced the challenging task of balancing the disparate demands and priorities of all twenty-one permanent members of the G20 with its own priorities: social inclusion, global reform, and sustainability. The end goal, the successful signing of a (nonbinding) final declaration, was a complex task in a heavily divided world, and key Brazilian priorities such as promoting a billionaire tax to finance hunger relief faced opposition from the United States. The proposal, which was supported by France, Spain, and South Africa, was actually most vehemently opposed by fellow South American nation Argentina. Brazil ultimately succeeded in gaining consensus for a declaration that espoused its key objectives, including calls for multilateral reform, cooperation for more effective taxation of “ultra-high-net-worth individuals,” and a redoubling of efforts to end world hunger and fight climate change, among other topics. 

Yet Brazilian leaders are also aware that they will have more opportunities beyond the G20 to shape the agenda. Next year, the Lula administration will host the 2025 United Nations Climate Change Conference (COP30) and will preside over the BRICS summit. It will be an important year for international climate negotiations that coincides with President-elect Donald Trump’s first year back in office, which has raised uncertainty about the United States’ continued participation in the Paris climate accords. This sentiment was perhaps best exemplified by Lula himself, who concluded in his final remarks that leaders had “worked hard,” but that they had “only scratched the surface of the deep challenges that the world has to face.”

Mexico

Under Sheinbaum, Mexico is reemerging as a more active participant in the G20 process and the world stage. This is the first time a Mexican president has attended the G20 in six years, ending that country’s limited presidential diplomacy under former President Andrés Manuel Lopez Obrador. During her participation, Sheinbaum signaled support for three areas of focus: gender equality, sustainable development, and digitalization. She also supported Brazil’s proposed Global Alliance against Hunger and Poverty—which was a high mark of the Brazilian presidency—and presented the Sowing Life program to divert 1 percent of global military spending to sustainable development and reforestation.

Mexico’s return to international fora pleased domestic and international observers, and images of Sheinbaum in meetings with world leaders have set a clear break from her predecessor. However, Mexico’s deep ties to the US economy present a different calculus for the Mexican president when compared to Lula for 2025 and beyond, likely inspiring greater caution in her approach to the international arena, particularly as she prepares her country for potential confrontation with the incoming administration in the United States. She did nonetheless use the stage to defend the government’s controversial judicial reform. Her first major international appearance in Rio de Janeiro set the stage for how she plans to move forward in years to come.

Argentina

The main source of regional misalignment among the three Latin American G20 members came from Argentina, which in past days had made a series of symbolic gestures at the United Nations (UN) to signal the country’s new course under Milei. The country had stood out as the sole vote against UN resolutions this month on indigenous people’s rights and combating gender-based online violence. Argentina also recalled its delegation from the ongoing COP29 in Azerbaijan, raising concerns over the country’s continued commitment to the Paris agreement and the international climate regime, echoing Trump’s own withdrawal of the United States from the agreement in 2017. (Milei was also the first foreign leader to visit Trump on the Thursday following the US presidential election.)

Brazil was quick to respond through Environment Minister Marina Silva and Vice-President Geraldo Alckmin, who criticized Argentina’s move. In Brazil, there was also apprehension that these moves by its southern neighbor set a bad precedent for what may happen during the leaders’ summit. Across negotiations over the G20’s final declaration, Argentine representatives sought to block the inclusion of references to gender equality, women’s rights, a tax for billionaires, and the 2030 Agenda for Sustainable Development. In the end, Milei decided not to block the leaders’ declaration but dissociated himself from those issues. An official involved in the negotiations told the Associated Press that Argentina adopted the statement “under intense pressure from world powers.” Other areas, such as the promotion of regional democracy, artificial intelligence governance, and the energy transition, fared better in exchanges over the communiqué. Underscoring the tensions between Brasilia and Buenos Aries, Argentina is the only country not to have requested a bilateral meeting with Lula in Rio.

Trade, Trump, and beyond

Developments in Europe are also changing diplomatic calculations in the region. For months, it was expected that the long-delayed trade deal between the European Union (EU) and Mercosur, a South American trade bloc, might finally be announced by European Commission President Ursula von der Leyen and her Mercosur counterparts during the G20 leaders’ summit. Brazil’s invitation of Paraguay and Uruguay, the bloc’s other members together with Argentina (plus Bolivia, which is completing its accession process), was partially inspired by this objective. France, however, has made its opposition to the agreement clear: French Prime Minister Michel Barnier warned last week that the government is “employing all means” to block it in its current form. French President Emmanuel Macron, who faces a steep legislative battle over France’s 2025 budget and is being pressured by farmers to block the deal, met Milei in Buenos Aires this past Sunday before traveling to Rio. After that meeting Maron told reporters that Milei “was not satisfied with the deal” and that he was “not satisfied with the way Mercosur worked.” Other EU members, including Austria, Hungary, Ireland, and Poland, may also step in to block the deal. Interestingly, French officials explained that Macron played an instrumental role to convince Argentina “to contribute to the international consensus” and refrain from blocking the G20 process.

Ultimately nothing transpired in Rio, although the agreement’s main proponents, including Germany, Spain, the Mercosur countries, and the European Commission, remain optimistic that significant progress may still be reached before the end of the year. This would constitute one of the largest trade agreements in history and would bring the two regions closer at a time when fears of renewed trade wars and higher tariffs are spooking international markets. Nevertheless, there is also concern that Argentina’s withdrawal from COP29 may still be used by the deal’s detractors in the EU to block progress over environmental policy, similar to how deforestation in Brazil has fueled anti-treaty momentum in previous years. European officials, including Kaja Kallas, the leading candidate to become the next high representative of the EU for foreign affairs and security policy, have made clear their belief that if the deal fails it will create a “void” that will be filled by China.

Meanwhile, Beijing presented a clear framing for Chinese leader Xi Jinping’s participation in the G20: “to champion cooperation, multilateralism,” a strategy meant to preemptively present China as an alternative to Trump’s “America First” approach to international affairs. The inauguration of the port of Chancay in Peru and the announcement of new economic cooperation agreements with partners in Latin America and the Caribbean further cemented the perception of China’s outsized competitive advantage vis-à-vis the United States in its ability to deliver tangible economic results.

As the G20 leaders’ summit concludes, its leaders should redouble their efforts to find common ground and work together, or they will face the risk of having their shared interests being swept away by rising global uncertainty and volatility.

Ignacio Albe is a project assistant at the Atlantic Council’s Adrienne Arsht Latin America Center.

The post How Brazil, Mexico, and Argentina approached this year’s G20 appeared first on Atlantic Council.

This paper is the fourth in the Freedom and Prosperity Center’s “State of the Parties” series analyzing the strength of multi-party systems in different regions of the world.

Across Latin America and the Caribbean, personality-driven political movements and political outsiders are increasingly prevalent, often at the expense of party-based politics. A theme of recent elections in the region has been a widespread embrace of political figures and movements vowing to upend the status quo. From Ecuador to Argentina to Guatemala, political outsiders have unseated the establishment. Meanwhile, recently formed, ideologically vague political movements in Mexico and El Salvador overtook the traditional parties that they broke away from to win landslide elections. With few exceptions, the region has failed to develop competitive, institutionalized, and programmatic parties. This breakdown in party systems and proliferation of personality-driven movements has not delivered better results. Improving institutionalized competition among programmatic, ideologically distinct, and identifiable parties would bolster Latin American democracy, delivering citizens freedom and prosperity.
 
Within the past decade, several countries with once seemingly institutionalized party systems, such as El Salvador and Mexico, collapsed as parties lost their grip on power to personality-driven figures and movements. Others, like Ecuador and Guatemala, have systems that appear to provide a wide variety of options to citizens through a great proliferation of parties. These systems are unpredictable to citizens, and parties are unable to develop the structure, ideology, and institutionality necessary to deliver solutions to citizen’s needs.
 
This piece examines how political parties across four Latin American countries in two types of systems have failed to serve as effective vehicles for delivering democracy, and what must change for parties in the region to succeed. We examine the breakdown of the formerly institutionalized party systems in Mexico and El Salvador, and the persistently weak parties in Guatemala and Ecuador. Each country’s experience illustrates how a lack of programmatic parties has contributed to poor governance, which fails to adequately deliver essential services to citizens, potentially undermining democracy and the freedom it should deliver. For each case, we reference data from the Atlantic Council Freedom and Prosperity Indexes and other sources to illustrate the critical role of parties in advancing democracy.

Issue Brief Aug 30, 2024

South Asia’s political parties need internal reforms to revitalize regional democracy

By Steve Cima, Geoffrey MacDonald, James Storen

This paper is the third in the Freedom and Prosperity Center’s “State of the Parties” series analyzing the strength of multi-party systems in different regions of the world.

Democratic Transitions Elections

Issue Brief Aug 30, 2024

Unloved but indispensable: Political parties in Europe

By Paul McCarthy, Thibault Muzergues, Patrick Quirk

The experience of the past decade has shown that despite their unpopularity, political parties remain indispensable for the functioning of democracies in Europe—when they are present, plural, and organized, democracy is doing well. To prove this assertion, this paper will look at four telling examples in recent European history.

Democratic Transitions Elections

Issue Brief Jun 11, 2024

The missing piece: Political parties are critical to democracy in Africa

By Santiago Stocker, Patrick Quirk, and Dan Scaduto

As many as seventeen countries in Africa will head to the polls in 2024. This piece analyzes the state of political parties in Sub-Saharan Africa, using Freedom and Prosperity Indexes data to show why multiparty systems are key to democratic strength.

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This pathbreaking new series delivers insights and policy recommendations from leading experts on how to enhance efforts to strengthen democracy in all regions of the world. 

The Freedom and Prosperity Center aims to increase the prosperity of the poor and marginalized in developing countries and to explore the nature of the relationship between freedom and prosperity in both developing and developed nations.

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The post The shift from party to personality politics is harming Latin American democracies appeared first on Atlantic Council.

Financial partnerships between Chinese money laundering organizations (CMLO) and Mexican cartels have made it more challenging for US law enforcement agencies to track the movements of drug money. Financial sanctions have so far proven an effective tool in reducing the growth in crypto-denominated fentanyl sales and should be used more frequently by the US government to tactically disrupt the trade of fentanyl and other illicit drugs.

How the illicit fentanyl supply chain works

Key actors in the fentanyl supply chain include Mexican cartels and CMLOs. Small pharmaceutical firms based in China send mail shipments to Mexico, where transnational criminal organizations (TCOs), such as the Sinaloa Cartel, La Linea, and the Jalisco New Generation Cartel manufacture large amounts of low-purity fentanyl and package it as genuine medication. The drug is then smuggled into the United States and sold to Americans.

Fentanyl smuggling by Mexican TCOs is facilitated by CMLOs offering low commissions, faster and less traceable transactions, and near-complete anonymity for actors involved. CMLOs use a trade-based money laundering scheme and underground or informal banking systems to circumvent law enforcement. CMLOs also rely on WeChat, a Chinese messaging and payment app. This complicates matters for US law enforcement agencies because officials cannot access financial transaction data without the help of Chinese authorities, who tend to cooperate in prosecuting international money laundering cases with significant delays.

Use of cryptocurrencies in fentanyl trade

Cryptocurrency’s inherent anonymity and lack of regulatory oversight are further exploited by practices like chain hopping and the use of markets on the dark web, which together allow criminal networks to avoid detection. CMLOs and Mexican drug cartels leverage these vulnerabilities—as well as the intricate nature of cryptocurrency transactions—to source chemicals for fentanyl production. In 2023, Chinese precursor manufacturers reportedly received $26 million in cryptocurrency payments for these chemicals, a soaring 600 percent increase from 2022, indicating its growing role in the financial network. However, cryptocurrency transactions likely still comprise a significantly smaller percentage of illicit finance compared to traditional money laundering methods.

According to TRM Labs, 97 percent of the more than 120 Chinese precursor manufacturers studied, which spanned twenty-six cities and sixteen provinces in China, offered cryptocurrency as a payment option. Geographic estimates by Chainalysis identified East and Central Asia, North America, and Europe as the regional sources heavily contributing to the crypto sent to these entities.

The dominant blockchains for fentanyl-related transactions include Bitcoin (60 percent), Tron (30 percent), and Ethereum (6 percent). Notably, cryptocurrency payments to Chinese precursor manufacturers on Ethereum alone surged by 2,000 percent from 2022 to 2023, while Bitcoin and Tron transactions grew by 600 percent and 500 percent, respectively. At least twenty of these precursor manufacturers were found to have direct links to markets on the dark web, collectively receiving $1.3 million in cryptocurrency from illicit drug marketplaces. Beyond supplying fentanyl precursors, some of these manufacturers facilitate the distribution of other drugs such as MDMA (ecstasy), further enabled by cryptocurrency transactions. 

How financial sanctions can disrupt the fentanyl trade

TRM Labs—a blockchain intelligence company—reported in 2023 that financial sanctions and US law enforcement actions drove the crypto-denominated fentanyl sales growth rate down to about 60 percent. This is a marked decrease from the average growth rate of 150 percent between 2019 and 2022. Sanctions targeting fentanyl networks have steadily increased since 2018 and, in October 2023, the Department of the Treasury designated a Chinese network responsible for manufacturing fentanyl precursors. In total, Treasury’s Office of Foreign Assets Control has sanctioned over 350 foreign entities and individuals for involvement in drug trafficking. Moreover, Congress is also drawing increasing attention to sanctions and recently signed into law the bipartisan FEND Off Fentanyl Act aiming to expand sanctions targeting fentanyl traffickers in Mexico and precursor chemical manufacturers in China. 

Using financial sanctions to successfully disrupt the illicit fentanyl trade will require three elements: (1) interagency coordination between the Treasury, the Department of Justice, law enforcement agencies and others; (2) international collaboration, especially with Mexican and Chinese authorities, including through the US-PRC Counternarcotics Working Group; and (3) vigilant identification and reporting by financial institutions of suspicious behaviors flagged by Treasury’s Financial Crimes Enforcement Network. Behaviors could include customers making low-value dollar payments or using virtual currencies, and companies conducting transactions involving precursor chemicals with no legitimate ties to the pharmaceutical sector. 

Kimberly Donovan is the director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. Follow her at @KDonovan_AC.

Maia Nikoladze is the associate director at the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. Follow her at @Mai_Nikoladze.

Mikael Pir-Budagyan is a young global professional at the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center.

Grace Kim is a young global professional at the Atlantic Council’s GeoEconomics Center.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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The post Financial sanctions can disrupt fentanyl flows to the United States appeared first on Atlantic Council.

But China’s growing might in cleantech is stirring unease in recipient markets due to perceived economic and national security risks. The United States has all but banned imports of Chinese solar cells and modules, and EVs. Other advanced economies may follow suit—for example, on August 26, Canada imposed tariffs on Chinese-made products.

With several developed countries becoming increasingly reluctant to absorb imports from China’s new three industries, China’s cleantech sectors need alternative markets to secure future export growth. Accordingly, Latin American’s approach to China’s cleantech industries could prove consequential. For now, growth in China-Latin America ties in the “new three” is driven primarily by Brazil, although electric vehicle shipments to the South American country have softened considerably in recent months.

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China’s Brazil bonanza

New three exports to continental Latin America have surged. The region’s total imports of Chinese solar panels, lithium-ion batteries, and solar PV rose from $3.2 billion in 2019 to $8.9 billion in 2023, with Brazil absorbing 63 percent of these imports by value last year.

Exports of the new three are relatively minor compared to China’s total exports to the region, which nearly reached $230 billion in 2023. Altogether, continental Latin America accounted for 10 percent of China’s exports of the new three for the twelve months ending August 2024. The region features, however, as one of the options China is presented with to find a market for its exports amid rising manufacturing capacity domestically. 

Electric vehicles are where Brazil’s outsized purchases of the new three are most striking. For the twelve months ending in August 2024, 73 percent of China’s exports of battery electric and plug-in hybrid vehicles to continental Latin America were directed toward Brazil.

Interestingly, there has been a sharp decline in EV exports to Brazil in recent months, while shipments to Mexico are rising sharply. Some of the recent decline is due to sales being brought forward to avoid an 18 percent tariff imposed by Brazil in July.

The same trend may be observed in Mexico, as its rising imports of Chinese EVs are likely tied to the phase out of a tariff exemption on October 1. Still, rising shipments to Mexico could also signal the start of a larger trend. Importantly, BYD is, for now pausing investment plans in the country.

Brazil’s market advantage

China’s apparent focus on Brazil for new three exports can be attributed to the size of the Brazilian market, strong environmental and policy fundamentals, and the influence of Beijing’s trade and investment diplomacy.

Brazil’s gross domestic product (GDP) measured $2.2 trillion in 2023, accounting for 34 percent of continental Latin America’s GDP. In a regulation-heavy region, China needs to prioritize markets for its early-stage exports.

In addition to Brazil’s size, the country is a favorable location for clean industry. Brazil is fertile ground for solar power, enjoying high solar irradiance in nearly all regions of the country. Since 2017, Brazil has added an average of 1 gigawatt per month of combined solar capacity in residential and utility-scale projects. The average price of solar electricity in the country has decreased by 68.6 percent since 2013, making it among the most competitive generation sources on the grid.

Brazilian policy supports domestic deployment of clean energy—and thus new three imports from China. Brazil provides import tax credits for electric vehicles, and has an emissions standards program known as Proconve, which mandates emissions limits for harmful pollutants. By extension, this program also incentivizes battery deployment, since electric vehicles perform well under this scheme.

The country has long-established solar support mechanism through its ProInfa tax credit scheme, and BNDES, the national development bank, provides cheap project finance. Brazil also incentivizes residential solar through a net-metering policy. Few other Latin American nations combine such sophisticated policy frameworks with favorable financing conditions, a key enabler of investment in a region beset with high interest rates. These policies have made Brazil an attractive market for Chinese cleantech firms. 

Finally, China views Brazil as a valuable diplomatic partner in South America, and the relationship could provide Beijing a regional foothold. Brazil is also an important economic partner—in Latin America, it is China’s largest trading partner and the largest recipient of Chinese investment. Globally, Brazil is China’s principal source of soybeans and second-largest source of iron ore, which are central to China’s livestock and steelmaking industries, respectively. China is, in turn, a critical export market for Brazil.

Brazil’s policy tightrope

However, Brazilian policymakers face a dilemma in their economic relationship with China. To spur productivity growth needed to boost real wages, Brazil would benefit from moving up the value chain for its exports.

In 2021, capital, consumer, and intermediate goods accounted for 93 percent of Brazil’s total goods imports, while raw materials represented 55.7 percent of Brazil’s goods exports. Brazil’s trade specialization in raw materials and lesser value-added goods has only increased over time—manufacturing’s share of GDP has shrunk by 23 percent since 1980. For this reason, re-industrialization was recently cited as “essential” for Brazil’s growth by its minister of labor and employment, with the energy transition counted as one of the six pillars of Brazil’s new industrial policy plan.

Brazil has sought to invest in domestic production rather than imports. During Vice President Geraldo Alckmin’s recent trip to China, he obtained commitments for nearly $5 billion in infrastructure investment. While Chinese commitments do not always pan out, they do signal diplomatic intent.

Additionally, Brazilian diplomacy coaxed Chinese EV manufacturer BYD to invest in a facility in Bahia—at the site of a closed Ford plant—BYD’s first such establishment abroad. Still, Brazil has a vested interest to ensure the Chinese market remains open to their exports of raw materials. This means the Brazilian government is not likely to take a confrontational approach on trade, which limits its ability to alter the nature of its economic relationship with China.

Brazil’s posture toward Chinese cleantech imports must balance competing interests. Cheap cleantech could provide low-cost equipment to expand the grid and accelerate decarbonization, all while providing short-term economic benefits. On the other hand, unfettered imports could weaken domestic manufacturing and give Chinese companies monopolistic leverage they could exploit.

Additionally, while there is little risk from “dumb” solar panels and lithium-ion batteries that do not connect to the web, Chinese-made Internet-connected vehicles pose potential security threats. Brazil, a major non-NATO ally, and other Latin American countries can mitigate economic and security dangers by ensuring that Chinese firms site production locally and share source code for connected vehicles. Additionally, Latin American countries could ban “over-the-air” software updates for Chinese EVs, or otherwise airgap them from the Internet.

Brazil, China, and the new three

As Chinese goods increasingly face scrutiny across North America, Europe, and other markets, the Brazilian market will loom larger as an alternative. China’s economic ties with Brazil are an inescapable reality, but Brasília should ensure the relationship serves its own objectives and does not inculcate dependency. Policymakers in Washington should also elevate Brazil as a strategic commercial partner, and work with the private sector to offer a credible, competitive alternative to Chinese cleantech.

Joseph Webster is a senior fellow at the Atlantic Council Global Energy Center.

William Tobin is an assistant director at the Global Energy Center.

This article reflects their own personal opinions.

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EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Joseph Webster

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EnergySource Jun 4, 2024

Brazil is buying lots of Chinese EVs. Will that continue?

By William Tobin

Brazilian imports of Chinese battery electric vehicles (BEVs) surged in 2023 as Chinese automakers sought—and continue to seek— global markets for their BEV surpluses. However, increasing protectionism in Brazil may force China to find new welcoming markets in other Latin American and Asian countries.

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EnergySource May 23, 2024

Without tariffs, the EU faces a flood of Chinese imports of the ‘new three’

By Joseph Webster

Europe faces a surge in Chinese cleantech imports following recent US tariffs. This should prompt Brussels to selectively impose its own tariffs while also strengthening domestic industries to protect its economic and strategic interests.

Central Europe China

EnergySource May 13, 2024

What US tariffs on Chinese batteries mean for decarbonization—and Taiwan

By Joseph Webster

In response to Beijing’s attempts to cement its dominant position across the “new three” technologies of solar photovoltaics (PVs), electric vehicles (EVs), and batteries, the Biden administration is poised to issue tariffs on key Chinese products. A look at China’s battery exports, and its associated battery complex, reveals both opportunities and risks for US and allied […]

China Energy Transitions

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post China’s cleantech growth strategy sets its sights on Brazil appeared first on Atlantic Council.

How will Sheinbaum, who won the presidency in a landslide and enjoys large legislative majorities, confront Mexico’s challenges? And how will her approach to governing affect the US-Mexico bilateral relationship? Our experts offer their insights below.

Click to jump to an expert analysis:

Jason Marczak: Sheinbaum’s methodological style was honed as head of Mexico City

María Fernanda Bozmoski: The new president has a chance to redefine Mexico’s role in Central America

Reed Blakemore: Pragmatism, not climate credentials, should define Sheinbaum’s approach to energy

Bosco Martí: The new administration must address infrastructure needs for Mexico to stay economically competitive

Charlene Aguilera: Sheinbaum should focus on ending violence against women and girls in Mexico

Sheinbaum’s methodological style was honed as head of Mexico City

In her inaugural address, the new Mexican president, who among other things is a climate scientist, laid out a message ranging from the prioritization of energy efficiency and renewables to the importance of investment security and nationwide unity. Sheinbaum, like AMLO six years earlier, will be initially focused as president on how she implements policies put in motion by her predecessor. For AMLO, it was the US-Mexico-Canada Agreement (USMCA), signed by his predecessor the day before he took office, that would then fall to his administration to first tweak and then implement. For Sheinbaum, it’s the new judicial reforms—a longstanding priority for AMLO that was passed in the final weeks of his presidency—and how she navigates their implementation. In her inaugural speech, she promised the reforms would bring “greater autonomy and independence,” but also referenced those who remain skeptical by noting that all will agree it was the best decision over time.

Mexico’s new president will be closely watched as one of the most powerful women in the world. Not only will she oversee the world’s fifteenth largest economy (and the second largest global economy led by a female head of state) but her coalition of Morena and its allies hold a supermajority in the Chamber of Deputies and a near supermajority in the Senate. This gives her sweeping powers to advance legislative policy—something that AMLO was not able to count on for most of his term.

Although she may not continue with all of AMLO’s traditions, with likely shorter daily mañaneras, or briefings to the press, a new expectation has been created that the president will spend significant time traveling across the country and minimal time abroad. She will be her own president but will also have the backing of her predecessor, who’s unlikely to retire quietly. Balancing multiple political interests will be essential for tackling some of Mexico’s larger challenges, from security to an expected slowdown in economic growth.

The expectation is that Sheinbaum will bring pragmatism and practicality to the presidency, as she did as head of government for Mexico City, where she’s known for reducing crime and implementing new, green policies. Her methodical approach to governing was evident the first time I went to visit her office and was presented with a two-hundred-plus page book listing her policy priorities for Mexico City.

Sheinbaum’s closely watched inauguration comes at a turning point for Mexico and just a month from when Americans will choose her US counterpart to work through the many complex bilateral issues.

—Jason Marczak is the vice president and senior director of the Atlantic Council’s Adrienne Arsht Latin America Center.

The new president has a chance to redefine Mexico’s role in Central America

Two things to look out for as Sheinbaum takes office as Mexico’s first female president: While she will likely focus on pressing domestic issues, such as rising violence and insecurity, her administration could also transform Mexico’s role in Central America, and along with it, regional patterns and dynamics on economics and migration. Her background as an environmental engineer suggests that she may prioritize environmental sustainability alongside social justice. This shift could lead to collaborative regional partnerships to combat climate change, which is a borderless issue. By partnering with neighboring countries on initiatives ranging from sustainable agriculture to renewable energy, Sheinbaum can address shared climate-induced challenges, such as flooding, droughts, and increasing water scarcity.

Additionally, Sheinbaum could accelerate regional economic integration by advocating for mechanisms that allow Central American countries to join the USMCA. This inclusion would create jobs across the region but also address root causes of migration by improving local economies. Such a move recognizes that Central American economies, while individually small, can achieve significant impact through collective action and economies of scale.

On migration, Sheinbaum has the potential to adopt a more humanitarian and proactive stance than previous Mexican administrations have done thus far. By enhancing protections for migrants and investing in social and youth programs in Central America, her administration could mitigate migration pressures more effectively than through enforcement alone. This aligns with her broader progressive values and could be positively received by the next US president.

Sheinbaum’s presidency offers a chance to redefine Mexico’s role in Central America through an approach that intertwines environmental sustainability, economic cooperation, and humane migration policies. She has a unique opportunity to build stronger ties with her southern neighbors, creating a more stable and prosperous region. Doing so would ultimately benefit the whole hemisphere.

—María Fernanda Bozmoski is deputy director of operations and finance at the Atlantic Council’s Adrienne Arsht Latin America Center, where she leads the center’s work on Mexico and Central America.

Pragmatism, not climate credentials, should define Sheinbaum’s approach to energy

As the first ever president to be a former member of the Intergovernmental Panel on Climate Change, Sheinbaum brings climate credentials to the National Palace that are worth getting excited about. Nonetheless, her overarching energy priority will be meeting Mexico’s rapidly growing energy demand in order to mitigate the growing frequency of extreme heat waves (particularly in Mexico’s southern states) and realize the economic opportunity of increased interest in “nearshoring” from its largest trade partner, the United States.

Encouraging investment in the electricity sector is critical to making this happen, but the depth of Mexico’s commitment to its national champions has risked being counterproductive. AMLO strengthened the role of Mexico’s state-owned energy companies in domestic markets, and he reshaped the authorities of Mexico’s judiciary, regulatory, and oversight agencies in ways that have increased uncertainty for foreign investors. This has yet to yield a much-needed acceleration of grid development across the country and complicated the prospects for new private investment, which Mexico desperately needs.

As the new standard-bearer for AMLO’s Morena party, Sheinbaum’s task is to manage the aftermath of these reforms amid the high stakes of Mexico’s energy opportunity. A vision for more centralized energy planning and infrastructure development is workable, but ultimately will be contingent upon the capacity of state-owned companies, such as the Federal Electricity Commission and Pemex, to be effective, reliable, and creative stewards of that vision. A crucial first test will be whether Sheinbaum and those she has designated to lead these institutions can demonstrate that such capacity is growing and that interest in public-private partnerships remains a priority. Doing so will be key to improving investor sentiment and will enable Sheinbaum to leverage the pragmatism that she’s known for toward a much wider set of energy goals. These goals include improving cross-border energy flows, empowering Mexico’s nearshoring ambitions, and positioning Mexico City effectively as a partner for energy and economic security on the continent and beyond. 

—Reed Blakemore is director of research and programs with the Atlantic Council Global Energy Center.

The new administration must address infrastructure needs for Mexico to stay economically competitive

Mexico’s infrastructure needs are vast and major investments are required for the country to successfully attract foreign direct investment and take advantage of nearshoring opportunities. The Bank of Mexico’s Regional Economies Report stresses that the construction of energy and transportation infrastructure projects will help trigger greater investment and contribute to an effective industrial policy. 

Over the last six years, Mexico’s government has invested approximately 1 percent of gross domestic product in infrastructure, but to meet current needs, the country should be investing closer to 5 percent. Given that the incoming administration of Sheinbaum will face budgetary restrictions, it will be important to rethink how infrastructure investments are financed and executed. 

The idea of the private and public sectors joining forces to build or improve infrastructure is clearly the way to go. Fortunately, under the concept of Strategic Mexican Companies, the Sheinbaum team has opened the door to this possibility; we can expect Altagracia Gómez Sierra, the head of the newly created Business Council, to provide more details in the coming months. 

The benefits of government and business working together are not only financial. It also allows for risk-sharing, enables building infrastructure at scale, and paves the way for social and environmental sustainability. Ambitious infrastructure development in Mexico will improve the country’s competitiveness and that of the North American region.

—Bosco Martí is a nonresident senior fellow with the Atlantic Council’s Adrienne Arsht Latin America Center and is the global director of institutional affairs and communications for Aleatica, a transportation infrastructure operator with presence in Spain, Italy, and key markets in Latin America.

Sheinbaum should focus on ending violence against women and girls in Mexico

“A young Mexican woman will be the emblem of the Mexican Government,” Sheinbaum announced on Tuesday. Already, the first female president of Mexico is bringing a new sense of hope to women and girls in her country. But for this hope to continue and grow, Sheinbaum will need new policies to bolster the country’s fight against femicides and violence against women and girls.

With at least ten women losing their lives daily to gender-based violence on average, the Sheinbaum administration must address this crisis head on, especially as the country undergoes extensive judicial reforms. The incoming government has the potential to be a leader in protecting women’s rights and ensuring that delivering justice for victims of femicides becomes a top priority for Mexico’s leadership.

The judicial reforms, which seek to modernize and upgrade Mexico’s justice system, hold great potential for improving how gender-based violence is addressed. By reducing corruption and increasing efficiency, these changes could help deliver swifter and more decisive actions in femicide cases, which are often forgotten. Sheinbaum’s government can leverage these reforms to enhance accountability and strengthen institutions tasked with protecting women, ensuring that justice is accessible and effective, particularly in rural areas, where violence often goes unreported.

With her strong background as a committed public servant and as the former mayor of Mexico City, Sheinbaum is well-positioned to turn this moment of reform into meaningful progress. Ongoing collaboration between federal, state, and local governments will be key to implementing strategies that protect women, especially in underserved regions. Her presidency marks a significant opportunity to push forward a vision of Mexico where women are safe and justice is served. Through her leadership, Sheinbaum has the potential to make lasting changes that will leave a positive legacy in the fight against femicides and the broader protection of the rights of women and girls.

—Charlene Aguilera is a program assistant at the Atlantic Council’s Adrienne Arsht Latin America Center, where she contributes to the center’s Caribbean and Mexico work.

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On September 27, 2024, Deputy Director of the Adrienne Arsht Latin America Center María Fernanda Bozmoski was interviewed on Bloomberg’s Balance of Power about Kamala Harris’s visit to the US-Mexico border.

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With the trilateral representing over 30 percent of global energy demand, energy security is already a top priority. The United States and Canada are net energy exporters, but demand is expected to increase, particularly with the growth in artificial generative intelligence. Mexico has been managing an unreliable energy supply and oversaturated grids. Expanding cross-border pipelines and improving energy infrastructure can help ensure energy security across the continent.

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On the sustainability front, amid the global transition to a net-zero energy system, each trilateral member has invested in clean energy strategies, which are leading to collaboration. Opportunities to build further on these accomplishments abound, but will require major investments in renewables deployment, cross-border electricity transmission, and enhancing grid stabilization.

As the transition unfolds across North America, it also has the opportunity to maximize economic competitiveness in both clean technology value chains and low-emissions industrial activities. China’s dominance in the former has prompted the United States to diversify supply chains through incentives and tariffs, benefiting partners like Canada and Mexico. Additionally, reducing emissions in industries like natural gas, steel, petrochemicals, and cement offers North America a strategic advantage in emerging low-emission trade systems.

Cultivating a North American energy strategy that address all of the above will require harmonizing priorities, streamlining licensing and permitting processes across the three countries, and promoting market integration. These actions will bolster the competitiveness and security of North America in an increasingly multipolar market.

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Pragmatism can improve Mexico’s energy outlook

By David L. Goldwyn and Antonio Ortiz-Mena

Claudia Sheinbaum’s victory in Mexico’s presidential election marks a crucial juncture for the country’s energy future. Sheinbaum’s initial moves are a promising beginning to maximizing Mexico’s economic potential, which requires significant clean energy investment.

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The Senate vote came after the judicial reforms were given the green light by the Chamber of Deputies of Mexico’s newly inaugurated Congress in the wee hours of September 4 in a tally of 359-135. Protesters blocking access to the Chamber ahead of the vote forced deputies to instead convene at a local sports complex; the Senate vote also required proceedings to move locations due to protests. While the package has now cleared both houses of the legislature, the question of what comes next for the USMCA and for businesses and investors remains up in the air.

Mexican officials have been clear that the judicial reforms are an internal matter, including in response to an August 26 Washington Post editorial. But US senators on both sides of the aisle—who will likely influence the United States’ USMCA review—don’t see it that way. On August 27, four US senators noted that the legislation “may contradict commitments” made by Mexico in the USMCA. Meanwhile, House Foreign Affairs Committee Chairman Michael McCaul has said that the reforms “could put our two countries on a negative trajectory as we head into renegotiating USMCA in 2026.”

A potential new challenge to the underpinnings of the USMCA could represent a critical test for the future of North American economic integration and competitiveness, and it comes just as China looks to further assert its own commercial influence both regionally and globally.

For businesses operating under the USMCA framework, legal clarity is not just a principle but a practical necessity. It ensures that laws are applied without favor, contracts are honored, and disputes are resolved fairly. The judicial reforms, by introducing the popular election of more than 1,600 judges and magistrates, have concerned investors, who depend on relative consistency in rulings and question if that will continue once judges are ultimately decided by the people. After all, investors rely on a stable, certain, and predictable legal environment to make long-term investments.

Additionally, the reforms are expected to result in changes to regulatory agencies such as the Mexican Federal Economic Competition Commission, the Federal Telecommunications Institute, and the National Hydrocarbons Commission. All of these are critical to upholding labor, environmental, and trade standards enshrined in the USMCA. Stripping away or diminishing the power of these agencies could lead to questions of noncompliance from the United States and Canada, sparking trade disputes and bringing into question the provisions that permit the USMCA to function effectively.

At the same time, North America faces increasing economic competition from China, which is working to position itself as a viable alternative and partner for trade and investment. If North American commercial ties appear on the defensive, or worse, then the deepened economic integration of the three countries—increasingly essential to compete globally—could face new roadblocks that may ultimately impair their collective competitive edge.

With the sunset clause approaching, the USCMA will soon be under increased scrutiny, and it is clear that Mexico’s judicial reforms will have implications far beyond domestic politics. The reforms, for example, may be welcomed by those hoping to use the trade agreement’s review period to significantly alter the accord—a move that may prove difficult, perhaps even impossible, to reconcile among the three countries. Now, continued diplomatic efforts should be expected that reinforce the importance of maintaining strong regulatory agencies and judicial independence as part of the three countries’ shared USMCA commitments.

The USMCA is a linchpin for the vibrant and effective regional cooperation upon which thousands of jobs depend. The alternative—a fragmented and less competitive North America—would harm all three countries. It is thus imperative for North American leaders to find common ground and work together to safeguard the economic future of the continent. Our collective future depends on it.

Jason Marczak is the vice president and senior director of the Adrienne Arsht Latin America Center.

María Fernanda Bozmoski is deputy director, operations and finance at the Atlantic Council’s Adrienne Arsht Latin America Center, where she leads the center’s work on Mexico and Central America.

The post Mexico’s new judicial reforms could put the USMCA on shaky ground appeared first on Atlantic Council.

It is a crucial time in Mexican energy politics. While there are important challenges to address, Sheinbaum’s initial moves are a promising beginning to maximizing Mexico’s economic potential, which requires significant investment in clean energy.

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Uncertainties complicate investment in clean energy

Under Mexican law, the new Congress takes office on September 1, but the new president takes office on October 1. The current government intends to present constitutional reforms to the new Morena-dominated legislature—the ruling party that will now likely have a supermajority—in a manner that could challenge certain policy adjustments by the new government. To that end, AMLO has stated that electoral and judicial constitutional reforms are his legislative priorities—repealing the 2013 energy reforms, which enabled an influx of foreign and private investment in Mexico’s energy sector during the mid-2010s, is not.

The outgoing government introduced complexities to private investment, especially in clean energy. These include suspending auctions in oil, gas, and clean energy, giving priority to the state electricity system operator CFE’s established fossil-based generation over cleaner and cheaper alternatives, and suspending implementation of the clean energy certificate program, which incentivized conversion to less carbon intensive electricity. Several of these actions are now the subject of disputes under the United States-Mexico-Canada Agreement (USMCA), and have disincentivized foreign investment in manufacturing, due to companies’ strict carbon-emission reduction targets—for them to set up shop or expand in Mexico, they require access to clean energy.

The government has also taken steps to prioritize Mexico’s long-established fossil-based power sector, but production by national oil champion Pemex is at historic lows despite a consistent influx of federal spending to revive the flagging company, which faces a looming debt crisis. Meanwhile, CFE is struggling to power Mexico’s growing economy amid the burdens of extreme heat and other climate-exacerbated energy challenges.

The federal government is in a challenging fiscal position, as its budget deficit is forecast to grow this year.  In addition, there appear to be adverse market reactions to controversial, proposed judicial reforms, which include appointing judges by popular vote. Some foreign investors remain cautious, particularly in the energy sector.

Mexico’s golden economic opportunity requires clean energy to sustain it

Despite these investment challenges, Mexico holds vast potential as a nearshoring destination. For Mexico to capitalize on the USMCA and its proximity to the lucrative US export market, it will need to expand its energy supply not only for manufacturing, but also to power artificial intelligence use by data centers, which will increase demand for clean energy exponentially.

It will be in the interest of both US government and energy industry stakeholders to help Sheinbaum find a way to navigate among Morena’s different groups to develop a pragmatic policy approach that moves forward Mexico’s energy security and transition while maintaining a leading role for Pemex and CFE, which remains a central element of Morena’s policy platform. Public-private partnerships of many forms can be part of the solution.

It will be challenging but possible for Sheinbaum to retain the primacy of Pemex and CFE while also giving foreign and domestic investors full confidence that they will receive permits to build and obtain reasonable returns without fear that a popularly elected judiciary and weaker national regulators will undermine their projects.

Serious policymakers will be in charge

Sheinbaum wants to make her own mark on history as the first female president of Mexico, but faces a tough road ahead. The most important benchmarks will be her cabinet appointments, her commitment to a predictable and transparent policymaking process, and her engagement on the USMCA, which comes up for review in 2026.

The composition of Sheinbaum’s cabinet will be an indication of her intent to meaningfully address Mexico’s energy and fiscal challenges. So far, the news is positive, with serious policy professionals being tapped for high-level appointments. Current Finance Minister Rogelio Ramírez de la O, who is familiar with the overall fiscal challenge, including that posed by Pemex and CFE, is slated to remain in his post. Former Foreign Minister Marcelo Ebrard, a highly experienced and capable politician, was named economy minister and will play a steadying hand. Luz Elena González, an economist who until recently was finance secretary of Mexico City, will be the secretary of energy, demonstrating that the government understands the relevance of public finances for energy policy. Finally, current Foreign Minister Alicia Bárcena, who is experienced in environmental issues, will become environment minister and could be a relevant actor on energy transition.

The path forward

Sheinbaum’s commitment to clear, predictable policies will be an important marker of her style of governance. This can send positive signals to investors in areas such as energy import permits and infrastructure investment. Her approach to the 2026 USMCA review—which will be deeply impacted by whoever wins the US presidential election in November—will be another test of the Sheinbaum administration’s ability to navigate a delicate bilateral relationship. That review will be a top-line issue for both the US and Mexican governments, and early consultations are already underway. Energy will loom large in this review; both the US government and private stakeholders have a powerful motivation to ensure that energy disputes do not undermine the USMCA—they need it to remain strong enough to provide certainty for the wider cross-border relationship.

Sheinbaum has much to gain from reassuring investors, capitalizing on Mexico’s advantages in nearshoring, and addressing the country’s slow energy transition. She can creatively design a framework that respects Morena’s political stance on energy while increasing investor confidence. Sheinbaum will be looking for able and willing partners to craft solutions that maximize the potential of foreign investment and job creation in Mexico. Undoubtedly, the energy industry and civil society on both sides of the border all have a major interest in helping her succeed.

David L. Goldwyn served as special envoy for international energy under President Barack Obama and assistant secretary of energy for international relations under President Bill Clinton. He is chair of the Atlantic Council’s Energy Advisory Group.

Antonio Ortiz-Mena is a professor at the Center for Latin American Studies, Walsh School of Foreign Service, Georgetown University, and a partner at DGA Group.

The views expressed are the sole responsibility of the authors and not necessarily those of any institution with which they are affiliated.

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US-Mexico energy cooperation is vital to enable nearshoring

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Mexico’s nearshoring opportunity

Mexico features prominently in US ambitions to “nearshore,” whereby companies move their production facilities closer to home and away from far-flung industrial hubs—mainly China. This shift is influenced by the United States’ drive to build more resilient supply chains in the wake of the COVID-19 pandemic and heightened geopolitical competition with China.

Cross-border economic ties under the United States-Mexico-Canada (USMCA) free trade zone are growing. The United States and Mexico are now each other’s largest trading partner. This can be attributed to many factors, including a deteriorating trade relationship between the United States and China, which reinforces the argument for nearshoring.

Mexico presents a supply chain opportunity for the United States. But from the Mexican perspective, support for nearshoring is relatively subdued. The “national project” of AMLO and Sheinbaum’s Morena party emphasizes combatting inequality including by developing the country’s south and strengthening state-owned companies. By contrast, the bulk of nearshoring investments would be made by private companies and go toward Mexico’s industrialized north, along the US border. Perhaps as a result, nearshoring has not progressed as rapidly as many predicted. US investors will need to align with Sheinbaum’s agenda to build a Mexican energy system capable of turning nearshoring into a reality.

Is nearshoring even happening?

A closer look at investment data paints a mixed picture of nearshoring. On one hand, foreign direct investment (FDI) in Mexico—the only measure of whether investment in the country is rising—reached a record $20.3 billion in the first quarter (Q1) of 2024, a 9 percent increase over Q1 2023. Fifty-two percent of total FDI in Mexico originated from the United States. On the other hand, only 3 percent of this increase can be attributed to new investments, contradicting the narrative that large-scale nearshoring is occurring. Furthermore, manufacturing as a share of Mexico’s economy grew to only 21 percent in the first half of 2023, from a pre-pandemic level of 20 percent. Tesla, which in March 2023 announced one of the largest nearshoring projects, has yet to break ground on its facility in Nuevo León. Like other investors, Tesla has encountered rising costs and logistical challenges.

Grid constrains are stifling nearshoring

Nearshoring is being limited by structural issues faced by Mexico’s electricity sector. Mexico’s grid has struggled to keep up with rising demand. The country suffers an “energy deficit,” facing difficulty connecting new manufacturing plants to the grid and—by extension—to renewable energy sources. The latter is a potential sticking point for electric vehicle producers looking to relocate to Mexico such as Tesla, GM, and Ford. The Mexican Association of Private Industrial Parks notes that this issue has postponed some projects and has throttled nearshoring in the years since the pandemic.

Is Mexico’s electricity sector a constraint?

The fragility of Mexico’s grid presents another major nearshoring obstacle. This was made clear in early May 2024 when the electricity demand on the grid nearly exceeded the total available generating capacity, leading the national electric system operator, CENACE, to declare a state of emergency. It has been reported that much of this demand can be attributed to the rising use of air conditioning and electric cooling during a record-breaking, weeks-long heatwave. As Mexico gets hotter courtesy of climate change, demand for cooling technologies—particularly for industrial processes—is set to rise.

Mexico’s electricity sector needs to shape up to meet increased demand from nearshoring.

More competition is needed—US investors can help

Mexico’s electricity sector offers a promising path for the United States to align its nearshoring objectives with Sheinbaum’s agenda. But to do so, it must benefit state-owned companies and free up state funds for social programs aimed at reducing inequality.

Increased private sector participation in the electricity sector is a necessity for achieving greater capacity and connectivity to unlock nearshoring. One analysis from the National Autonomous University of Mexico argues that increasing private sector participation in the electricity sector would not displace the state-owned electricity company CFE, which controls 40 percent of Mexico’s electric generation capacity, produces 70 percent of its power with private partners, and controls the full transmission and distribution network of the national grid.

In fact, CFE could benefit from increased industrial demand driven by nearshoring. Increasing private sector involvement in power generation can even help CFE by freeing it to investment in other areas, such as upgrading its transmission and distribution network and strengthening its balance sheet in the long term.

New president, new opportunities

AMLO has tried to strengthen CFE by passing a measure in 2021 to discriminate against private sector electricity generation and negate the 2013 Electricity Industry Law, which was designed to promote competition in the sector. Although the measure has since been overturned by the Supreme Court, the administration has effectively halted new public auctions for independent power contracts, preventing growth in private sector investment. Despite this, the private sector drove the increase in solar and wind power from 2014-2020.

Reversing course on private investment will be critical to restoring and expanding the capacity of the electric system and lowering costs. In 2019, independent power producers generated electricity 35 percent cheaper than CFE.

Sheinbaum’s election may present an opportunity for greater private sector collaboration with the United States. Facilitating investment can both strengthen Mexico’s grid and bolster the Mexican state, outcomes that are in line with Morena’s socioeconomic justice goals. While Sheinbaum will likely continue to favor state-owned companies, the Wall Street Journal reports that she also aims to “attract billions of dollars in private investment for solar and wind farms, with the government keeping control and a majority share in the electricity market,” citing a close advisor to Sheinbaum.

How the US-Mexico partnership can boost nearshoring and the electricity sector

The United States should seize the opportunity to work with the incoming Sheinbaum administration to strengthen the Mexican energy sector, thereby enabling supply chain security gains through nearshoring. The relationship should uphold the mutually beneficial tenets of the USMCA, including its level playing field for private sector investment.

In addition, the United States should redouble its technical and regulatory cooperation efforts with Mexican electricity regulators as has been conducted through the U.S. National Renewable Energy Laboratory (NREL). The aim of this partnership should be to work toward goals which benefit the Mexican administration’s agenda while strengthening economic ties and boosting Mexico’s manufacturing potential.

US-Mexico cooperation on electricity sector regulation can facilitate private sector investment in generation that could decrease the burden on CFE as the sole entity responsible for expanding the grid. Ceding greater financing responsibility to the private sector—with CENACE retaining control of the national electric system—could enable CFE to expand its business alongside the private sector and permit the Mexican state to focus on investments that promote increased prosperity for all its citizens.

With higher private sector participation conducted in a manner that respects the central role state-owned companies play in Mexican society, the electricity sector in Mexico can be transformed into an enabler of the nearshoring trend.

William Tobin is an assistant director with the Atlantic Council Global Energy Center.

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On June 4, 2024, Deputy Director of the Adrienne Arsht Latin America Center María Fernanda Bozmoski was interviewed on Bloomberg’s Balance of Power radio show and podcast about President Joe Biden’s executive order slashing asylum claims in the US.

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On June 4, 2024, Deputy Director of the Adrienne Arsht Latin America Center María Fernanda Bozmoski was interviewed on Bloomberg Markets about expectations around the Claudia Sheinbaum presidency in Mexico.

The segment starts approximately 34 minutes into the video.

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A former mayor of Mexico City, Sheinbaum has a strong foundation in addressing urban challenges, governance, and social policies. Like her predecessor, outgoing President Andrés Manuel López Obrador, Sheinbaum will likely coordinate her policies under a narrative of addressing social injustice and advocating for Mexico’s most vulnerable. But unlike her predecessor, Sheinbaum is an environmental engineer and climate scientist by training. She appears poised to place environmental issues, including climate-change mitigation and adaptation, high among her social justice concerns. This would likely include seeking to advance issues ranging from sustainable agriculture to renewable energy.

At first glance, this may sound odd. Mexico is a major oil producer—the second largest exporter in Latin America after Brazil—and Sheinbaum has all but guaranteed that she will continue funding the state-owned oil company PEMEX, which suffers from a range of inefficiencies and carries debt of more than one hundred billion dollars. However, her scientific background and previous initiatives indicate a potential for balancing economic development with environmental sustainability. For example, during her time as mayor of Mexico City, Sheinbaum spearheaded the installment of solar power panels on top of a major market. Furthermore, she campaigned for president on a promise to address, early on in her administration, the water issues affecting Mexico City. Already during her first speech since the election, and probably in an effort to differentiate herself from López Obrador, Sheinbaum spoke about an upcoming renewable energy program for Mexico. Calibrating this balance will be crucial, as will working with regional partners. After all, Mexico and its neighbor Guatemala, for instance, face similar challenges of environmental degradation and the impacts of climate change, from flooding to droughts and a lack of access to water.

Another way in which Sheinbaum could partner with her Central American neighbors is by working together to seize nearshoring opportunities. Specifically, she and her regional counterparts could promote a mechanism whereby Central American economies would be able to join the United States-Mexico-Canada Agreement (USMCA). Nearshoring, or bringing international supply chains and production closer to the US market, can provide significant economic benefits, creating jobs and fostering economic stability in Mexico and throughout Central America. Promoting economic integration through the USMCA could provide a structured framework for this cooperation. The idea has been floated for a couple of years now, first by Costa Rica in 2022. This move would enhance the competitive edge of Central American economies, which in many ways are too small to make a difference on their own but together could create economies of scale. Bringing other Central American countries into the USMCA would allow these nations to benefit from the same trade advantages enjoyed by Mexico. It could also reduce many of the economic pressures that drive migration, namely a lack of jobs and insufficient wages.

Furthermore, Sheinbaum’s administration could adopt a more humanitarian approach to migration, focusing on protecting migrant rights and providing humanitarian assistance. While López Obrador touted his tree-planting “Sembrando Vida” program, Sheinbaum could take the programs a step further. This approach aligns with her broader progressive values—she is a self-described humanist—and can enhance Mexico’s role as a regional leader in addressing the migration crisis. During the campaign, Sheinbaum repeatedly mentioned increased investments in social and youth programs in Central America, which, if designed holistically and sustainably, could effectively curb migration from Mexico’s neighbors. This is particularly important now, as US President Joe Biden prepares to roll out an executive order that would allow the United States to temporarily close its southern border if a threshold of encounters with migrants at the border is reached—reportedly, an average of five thousand crossings in a week or 2,500 in a day.

Regional security is another area in which Sheinbaum could make a big difference. Almost three dozen candidates were assassinated during the current electoral campaign, and record-breaking violence in the country is resulting in more than thirty thousand homicides each year. Improved and increased intelligence-sharing between Mexico and Central American countries can help combat organized crime and violence, which are significant push factors for migration. This is also an area in which the United States and Mexico may look to double down on their cooperation. Sheinbaum has pledged to address the rampant impunity in Mexico—less than five percent of criminal investigations are solved and many crimes go unreported. While Sheinbaum is unlikely to approach the security issue in the severe manner of President Nayib Bukele in El Salvador, she has recognized the urgency of this issue for the livelihood of millions of Mexicans.

Sheinbaum’s presidency could bring about significant positive change in Mexico and its relations with Central America. Her administration’s policies on energy and environmental sustainability, economic integration, and migration will have an important impact on the future of the region. The first female president of Mexico has the opportunity to redefine her country’s role in Central America, address the root causes of migration, and promote a more stable and prosperous region. In this new chapter for Mexico and the region, the Aztec nation could very well be a strong and stable partner for Central American nations.

María Fernanda Bozmoski is deputy director, operations and finance at the Atlantic Council’s Adrienne Arsht Latin America Center, where she leads the center’s work on Mexico and Central America.

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On June 4, 2024, Vice President and Senior Director of the Adrienne Arsht Latin America Center Jason Marczak was interviewed on El Heraldo Radio about the priorities for Claudia Sheinbaum’s administration.

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On June 3, 2024, Deputy Director of the Adrienne Arsht Latin America Center María Fernanda Bozmoski was interviewed by Caitriona Perry on BBC News about Mexico’s new president-elect, Claudia Sheinbaum.

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The numbers show an incoming administration with a strong mandate. With 58.3 to 60.7 percent of the vote, according to the National Electoral Institute’s Quick Count, Sheinbaum will enter office on October 1 even surpassing the share obtained by the current president, Andrés Manuel López Obrador, who won in 2018 with 53.2 percent of the votes. Her margin of victory over the second-place finisher could range from 29.7 to 34.1 percentage points—on track to likely surpass López Obrador’s margin (30.9 percentage points) as well. 

Beyond the surprise in outperforming even some of the most generous polls, her party, MORENA, and its allies received a mandate in Congress that also surpassed expectations. In the Chamber of Deputies, the new Congress will convene in September with the MORENA coalition holding a supermajority (at least two-thirds of the seats), and it is within striking range to do the same in the Senate. Early signs indicate that the MORENA coalition will hold a minimum of 346 seats in the 500-person lower House and could hold anywhere from 76 to 88 seats in the 128-person Senate, with 85 seats required for a supermajority.

The significance here cannot be overstated. A supermajority allows for constitutional changes—from the direct election of judges to the independence of regulatory agencies—which could not be obtained thus far by the López Obrador administration. Explicit campaign pledges can now be advanced. This means a potential acceleration of the Fourth Transformation of the Mexican state as ushered in by López Obrador, especially if the outgoing president prioritizes constitutional changes once the new Congress convenes on September 1.

As López Obrador’s hand-picked successor, Sheinbaum will certainly continue with her predecessor’s policies, but she will also be her own president. A scientist by training and a former secretary of the environment, she will bring new technical expertise and pragmatism to the presidency. That was evident in her time as head of government of Mexico City, where she developed and then continuously followed up on the implementation status of her 220-page government plan.

Expect to see several of her priorities during her term running Mexico City to carry over to her presidential administration. For example, speaking with the Atlantic Council on the sidelines of the Cities Summit of the Americas last year, Sheinbaum showed an in-depth, technical perspective on sustainability—not simply as stewardship of natural resources, but also as an issue interconnected with education, social justice, healthcare, housing, and infrastructure. 

Sheinbaum mentioned throughout her campaign the need to move forward with the energy transition, comments that reflect her background in energy engineering. There will inevitably be a role for the private sector to play in this transition, but as with her broader perspectives, the view of the Sheinbaum camp is that the government should lead the charge. The public-private partnerships that Sheinbaum moved forward during her leadership in Mexico City could be a model she brings to her new administration to advance, for example, more renewable energy projects in Mexico.

Infrastructure will also likely be a priority for the incoming administration. In her acceptance speech early Monday morning, Sheinbaum spoke about the need for new highways, trains, airports, and ports. All of these strategic projects are critical for Mexico to take advantage of the investment opportunities related to nearshoring with the United States. But given the tight government budget conditions that the new government will face, completing these projects will not be easy. Here, too, watch to see if the new administration turns to public-private partnerships to move these projects forward.

Finally, Sheinbaum will assume office in October with not only a sizable domestic mandate, but also with an opportunity to deepen Mexico’s engagement beyond its borders. López Obrador rarely traveled abroad, and Sheinbaum followed suit as head of government in Mexico City. Even though she took office in 2018, her trip to Denver for the Cities Summit of the Americas last year was rarity. But if and when she goes abroad, she will generate much interest given the potentially transformative moment she will oversee in Mexico and her place in history as Mexico’s first female president.

Jason Marczak is vice president and senior director of the Atlantic Council’s Adrienne Arsht Latin America Center. He leads work on the economic and security impacts of greater efficiencies and reduced wait times at the US-Mexico border including presenting findings before the Mexican Congress.

Bosco Martí is a nonresident senior fellow with the Atlantic Council’s Adrienne Arsht Latin America Center and is the global director of institutional affairs and communications for Aleatica. He previously served as executive director for Mexico and the Dominican Republic at the Inter-American Development Bank.

The post Sheinbaum just won a massive mandate in Mexico. Here’s how she might use it. appeared first on Atlantic Council.

On June 3, 2024, Vice President and Senior Director of the Adrienne Arsht Latin America Center Jason Marczak was interviewed on DW News about the mandate for Mexico’s next president, Claudia Sheinbaum.

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On June 3, 2024, Vice President and Senior Director of the Adrienne Arsht Latin America Center Jason Marczak was interviewed on CNN’s Isa Soares Tonight about the mandate for Mexico President-elect Claudia Sheinbaum.

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The post Marczak interviewed on CNN’s Isa Soares Tonight about Mexican president-elect appeared first on Atlantic Council.

On June 3, 2024, Vice President and Senior Director of the Adrienne Arsht Latin America Center Jason Marczak was quoted by Reuters about Mexico President-elect Claudia Sheinbaum.

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On June 2, 2024, Vice President and Senior Director of the Adrienne Arsht Latin America Center Jason Marczak was interviewed by Helena Humphreys of BBC News about the elections in Mexico.

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The post Marczak interviewed on BBC News about Mexico’s presidential election appeared first on Atlantic Council.

On June 1, 2024, Vice President and Senior Director of the Adrienne Arsht Latin America Center Jason Marczak was interviewed on CNN Newsroom about the June 2 elections in Mexico.

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Following the official three-month presidential campaign, polling indicates that one candidate has a firm lead. Assuming former Mexico City Head of Government Claudia Sheinbaum performs on par with expectations—the latest Reforma poll gives her a 20 percentage point lead over former Senator Xóchitl Gálvez—the candidate of the governing MORENA party will become Mexico’s first female president on October 1. The lack of movement in this poll since the campaign season began on March 1 is noteworthy. Sheinbaum has only dropped 3 percentage points (to 55 percent support) in the last three months. Other polls give Sheinbaum a lead of anywhere from 11 to 22 percentage points, with voter turnout one of the major factors to watch on Sunday.

More uncertain is what will happen in Mexico’s Congress. What has scuttled attempts by the current Mexican president, Andrés Manuel López Obrador, to fully carry out some elements of his government’s plan has been the checks provided by Congress. With a simple majority of seats—rather than the supermajority of two-thirds of the seats—the MORENA coalition rallied to pass some important pieces of legislation, but it has been impeded from making major constitutional changes, including controversial proposals for the popular election of Supreme Court judges and eliminating independent regulators.

Thus, this Sunday’s vote will determine whether López Obrador’s hand-picked successor, Sheinbaum, could advance the outgoing president’s stymied constitutional proposals. Polls—although less numerous and harder to calculate given the sheer number of candidates up for election (628 combined senators and deputies)—indicate continuity in Congress. Polls by the newspaper El Financiero, for example, predict that the MORENA coalition will secure 49 percent of the seats in the Chamber of Deputies with opposition parties taking 40 percent. The check on power provided by Congress in this scenario, in which MORENA would lack a supermajority, would likely give assurance to international markets, since uncertainty around such reforms and their repercussions can generate anxiety for investors.

Counting the ways to count

How does Mexico’s unique vote-counting work? While the final congressional breakdown will take some time to determine, expect declarations on the presidential winner on Sunday night. Hours after polls close, results will begin to be shared from two different systems that count votes: the quick count and the preliminary electoral results program (PREP).

The quick count takes a predetermined, statistically representative sample of polling stations, and then it gives a minimum and maximum possible vote percentage for each candidate. Results are expected to be announced around 11:00 p.m. (CST), with all eyes on whether the margin of possible votes indicates a clear winner. The PREP, which is operational beginning at 8:00 p.m. (CST), reports results in real time from all polling stations as transmitted, which means that urban votes are likely to be accounted for earlier in the process. And to make things even more complicated, the official counting does not begin until June 5, thus the importance of the earlier vote-counting methods to give more timely results.

The other election

The next Mexican president will also have a keen interest in the vote-counting on November 5. The US election, and in particular how Mexico figures into the campaign leading up to election day, will set the stage for the coming years of bilateral ties. A newly inaugurated Mexican president may be forced to immediately respond to US campaign rhetoric.

Security and migration are top issues both north and south of the Rio Grande. While Sheinbaum has pledged to continue the current government’s focus on social and educational programs to reduce violence, Gálvez favors a strategy that puts greater emphasis on the security apparatus to combat crime. On migration policy, both candidates would continue to take a human-centered approach that recognizes and seeks to find solutions to the high demand for labor. A third important bilateral issue will be the review period of the United States-Mexico-Canada Agreement, also known as USMCA, as the 2026 sunset clause approaches. This is all the more important now that Mexico is the United States’ number one trade partner. Here, a new Atlantic Council report suggests several ways that the next Mexican administration can unlock even greater border commercial efficiencies and new trade and investment.

Amid a fast-changing global order, a prosperous Mexico and strong US-Mexico ties will be increasingly important for the United States. US and Mexican security and economic concerns are deeply intertwined, as are their people. Sunday’s vote will set a crucial marker for how the relationship develops for the rest of the 2020s.

Jason Marczak is vice president and senior director of the Atlantic Council’s Adrienne Arsht Latin America Center.

The post What to watch in Mexico’s elections: A supermajority and a superpower appeared first on Atlantic Council.

• Foreword
• Explainer video
• Related events

Foreword

Countries representing half the world’s population are voting in 2024. On June 2, just over five months before Election Day in the United States, Mexican voters will set a historic milestone with the election of the country’s first female president. Over the course of her six-year term, Mexico’s new president will face enormous challenges—internally and in the country’s relationship with the United States. But, like never before, there is also a unique opportunity to strengthen the commercial and economic ties that bind the two countries and reimagine how our shared border could better serve our shared interests.

Although the United States and Mexico have long been economically intertwined, in 2023, Mexico became the United States’ most important trading partner. Now more than ever,  with great geopolitical headwinds, the commercial ties that bind our two countries will be increasingly critical to advancing US economic interests globally. Here, greater border efficiency will yield economic gains alongside improvements in our shared security.

The Atlantic Council’s Adrienne Arsht Latin America Center, in partnership with internal and external colleagues and partners, sought to envision the future of two key aspects of the US-Mexico relationship: commercial flows and investment. With extensive feedback and numerous consultations with border stakeholders, including business owners, truck drivers, port operators, civilians, and local and federal elected officials, we sought out fresh perspectives and actionable recommendations. Our goal with this report is to spark dialogue among policymakers, business leaders, and civil society in both countries on the urgent need to address the immediate challenges of border efficiency and investment attraction over the next Mexican president’s term while paving the way for a more prosperous and secure future in our countries.

The Rio Grande and its surrounding towns are more than a physical barrier separating the United States and Mexico. Rather, they are a vibrant artery of commerce, migration, and cultural exchange. Livelihoods depend on our border, but inefficiencies prevent us from maximizing the possible economic opportunities and achieving the necessary security gains. The pages that follow build on previous center findings and emphasize the need for a nuanced approach to foreign investment, infrastructure development, and security measures that prioritize efficiency and our national interests.

This publication also seeks to bring the human dimension to the forefront. Public policy, after all, should reflect how to improve everyday lives. We consolidate the stories of real people affected by the US-Mexico border daily. The combined stories we have gathered over the last two years remind us of the impact of policy decisions. That reminder is particularly poignant with the 2024 elections on both sides of the border. Indeed, we stand on the cusp of a new chapter in our shared history.

This report is a call to action for visionary leadership and bold, pragmatic solutions to the complex issues facing the United States and Mexico. We urge policymakers to embrace policies and strategies that address immediate challenges while laying the groundwork for both an even more inclusive and prosperous future. Let’s seize this unique moment in time.

Jason Marczak
Vice President and Senior Director
Atlantic Council’s Adrienne Arsht Latin America Center

Online Event Thu, May 23, 2024 • 1:00 pm ET

Mexico’s path forward: A conversation with Ildefonso Guajardo

Ildefonso Guajardo discusses Xóchitl Gálvez’s view on a more efficient US-Mexico border and increased opportunities of economic investment.

Economy & Business Elections Latin America Mexico

Online Event Thu, May 23, 2024 • 2:30 pm ET

Mexico’s path forward: A conversation with Diana Alarcón

Diana Alarcón discusses Claudia Sheinbaum’s view on a more efficient US-Mexico border and increased opportunities of economic investment.

Economy & Business Elections Inclusive Growth Latin America

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

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According to recent studies, violence against women in Mexico has surged, with more than 70 percent of Mexico’s 50.5 million women and girls over the age of fifteen experiencing some form of violence. This brutal reality is heightened by the fact that many crimes in Mexico often go unreported, hindering governmental efforts to address the disproportionate impact of criminal violence on women in rural states such as Veracruz, Oaxaca, and Chiapas. It is a serious problem in Mexico, and it is also a concern for its northern neighbor. It’s in the United States’ best interest to take a closer look at the increased effect of organized crime on women in Mexico and the growing migration pressures it is generating.

It is no secret that Mexico stands as one of the most violent countries for women. For years, Mexico has struggled with inadequate resources and institutions to safeguard victims and prosecute offenders.

Even urban areas such as Mexico City, which have more access to resources and investment than rural areas, have struggled to create a holistic security agenda that can ensure women’s safety. However, between February 2020 and 2024, the incidence of femicide in the capital decreased by 20 percent, according to the Secretariat of Citizen Security in Mexico City. Although this value does not encompass the full dimension of the violence women face in Mexico, the decrease may be a result of certain components of the city’s security agenda. This agenda includes implementing gender-sensitive training for military and police personnel, bolstering female representation in law enforcement, improving access to mental-health and victim-support services, and streamlining abuse reporting mechanisms through preventative policing measures.  

The most severe violence against women predominantly occurs in remote Mexican states characterized by pervasive poverty and the presence of criminal organizations. States such as Oaxaca, Veracruz, and Chiapas, plagued by poverty and host to multiple cartels, pose significant threats to women’s safety. These states are notorious for their danger to women, even though they do not always report the highest number of femicides or other cases of gender-based violence given the fear of victims to come forward and lower law-enforcement presence. A 2021 United Nations Development Programme study in Mexico indicates that in areas controlled by drug cartels, violence against women intensifies, with relatives often refraining from reporting crimes out of fear of retribution. Such violence becomes a tool of intimidation and a display of dominance for these criminal groups, perpetuating a cycle of violence. These mostly rural states serve as hubs for organized crime due to weak state presence and proximity to key transit routes. As a result, the convergence of poverty, crime, and violence has prompted mass emigration to urban centers and the United States, particularly among vulnerable populations.

To address this dire situation, it is important for the administration that takes office later this year to pay closer attention to violence against women in these states. To start with, reliable data is needed. In Mexico, an estimated 93 percent of crimes go unreported. In 2023, 2,580 women were murdered but only 830 were categorized as femicides. Strengthening transparent and trustworthy institutions that collect accurate data in these areas is crucial to fostering an environment where victims feel safe to come forward.

Security plans that have shown some success in urban areas are often difficult to apply as a whole in more rural areas, due to the lack of infrastructure and resources. However, there are certain transferable steps that can help improve women’s safety. For instance, recruiting more and better female police officers to ensure greater representation in police forces can make women feel safer when coming forward about their experiences. Failure to address these urgent needs perpetuates inequality and undermines Mexico’s potential as an economic powerhouse.

Furthermore, the increase in gender-based violence in Veracruz, Oaxaca, and Chiapas is greatly impacting migration dynamics, particularly toward those migrating to the United States. A 2021 report from the International Organization for Migration sheds light on the reasons behind this migration trend, revealing that 11 percent of respondents left Mexico due to gender violence. Moreover, 7 percent of those women interviewed mentioned encounters between criminal groups as a main reason for migrating. This migration pattern shows the immense need for addressing the root causes of gender-based violence in rural Mexican states, as it directly influences migration flows and exacerbates the ongoing migration crisis at the US-Mexico border.

The United States can help address gender-based violence in rural Mexican areas. For example, the US State Department’s Safe from the Start ReVisioned program is dedicated to eradicating all forms and threats of gender-based violence that women and girls encounter. Given adequate resources and attention, such collaborative efforts between the US and Mexican authorities can bolster capacities to prevent and respond to violence effectively. Other potential initiatives, such as skills transfer, training in conflict resolution, and trauma-informed care programs, can empower local communities to address violence comprehensively. By implementing innovative strategies and comprehensive support services, the incoming Mexican administration, along with its US counterpart, can make important progress in addressing the root causes of gender-based violence while cracking down on organized crime and undocumented migration.

As Mexico prepares for this year’s historic election, there is a unique opportunity to prioritize the issue of gender-based violence and enact meaningful change. Now more than ever, it is imperative for political leaders to recognize the urgency of this issue and commit to implementing policies and programs that prioritize the safety and empowerment of women, particularly in rural Mexican states.

Charlene Aguilera is a program assistant in the Caribbean Initiative at the Atlantic Council’s Adrienne Arsht Latin America Center.

Isabel Chiriboga is an assistant director at the Atlantic Council’s Adrienne Arsht Latin America Center.

The post Mexico’s next president must address violence against women in rural areas appeared first on Atlantic Council.

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The United States has yet to ratify the UNCLOS due to historic opposition toward its international regulation of seabed resources in the High Seas. This lack of participation bars US companies from directly participating in what could be a significant new industry. It has already led to dominance of deep sea exploration permits by geopolitical competitors—China and Russia have together won nine permits, including in areas historically claimed by the United States. By ratifying the Law of the Sea treaty, the United States can bolster critical mineral supply security, enter deep sea markets, and enhance national security.

Governments and private industry have long worked to enable the extraction of minerals from the deep seabed  for a range of resources, including cobalt crusts, hydrothermal sulphides, and polymetallic nodules. Of these, polymetallic nodules are the most sought after—ocean processes create these billiard-ball-sized clumps of valuable metals. Ore grades in nodules significantly exceed those on land, making their extraction both cost and emissions efficient. The largest collection of nodules is located in an area called the Clarence Clipperton Zone (CCZ), which stretches the Eastern Pacific between Hawaii and Mexico. Recent technological developments, particularly in remotely operated vehicles and underwater vehicles, mean that deep sea resources are potentially economical today.

Reliable critical mineral supplies are increasingly important for the global economy and security. They are needed to meet clean energy needs, including electricity infrastructure, electric vehicles, and renewable energy. Many advanced technologies for defense applications, particularly electronics, require stable and growing supplies of these rare minerals. China dominates extraction and processing of most critical minerals, while the United States is a major importer for all minerals that deep sea mining might supply.

Governance of deep sea mining depends on location. Under UNCLOS, seabed resources within exclusive economic zones are governed by the relevant nation. Norway recently became the first country to authorize mining of such resources in their jurisdiction, but most resources are outside such zones. Resources in the remaining half of the ocean, called the High Seas, are governed by the International Seabed Authority (ISA). Although the United States played an active role in negotiating UNCLOS and considers most of it customary international law, it has not ratified the treaty due to Senate opposition to the role of the ISA. Among other reasons, some senators historically opposed the ISA’s international royalty mechanism, and expressed concerns about precedent for other domains like outer space. Without ratification, the United States cannot directly participate in the ISA’s governing process, and American companies cannot receive ISA mining permits.

These criticisms are not unfounded. The ISA has existed for decades and yet is struggling to establish a governance framework. The small nation of Nauru is forcing the issue legally, and the ISA is close to finalizing its mining permit system, without clear environmental protection. Global environmental groups have called for a moratorium on deep sea mining until scientists can conduct more research on environmental impacts.

Still, one of the primary objections (that an ISA-like royalty mechanism would be created for space exploration) to ratifying the law of the sea is no longer valid. In the last decade, the United States and many other countries have passed domestic legislation legalizing space mining without a space equivalent to ISA. This approach has been legitimized by the multilateral US-led Artemis Accords, which now has thirty-five signatories including all major space powers except China and Russia. The United States has secured a governance pathway forward for space resources that does not repeat the limitations of the ISA.

The letter calling for ratifying the Law of the Sea is the culmination of a growing bipartisan agreement around securing critical minerals in the face of an ongoing trade war with China. A group of bipartisan senators led by Senators Lisa Murkowski, Mazie Hirono, and Tim Kaine introduced a resolution explicitly calling for ratification. Congress, in both informal letters and directed reports, is pushing for studies on deep sea resources in US waters and the ability to establish domestic processing infrastructure. In late 2023, the US State Department initiated an extended continental shelf claim into the Arctic and Pacific oceans, exerting jurisdiction over seabed mining for certain areas beyond its exclusive economic zone, a practice explicitly outlined in UNCLOS. However, China and Russia have challenged this new assertion, arguing at ISA that the US cannot make the claim because it has not signed UNCLOS.

Ratifying UNCLOS would also bolster US diplomatic power. The Houthi campaign in the Red Sea is disrupting 20 percent of global maritime trade. Multiple submarine telecommunications cables in the Baltic Sea and Red Sea have been severed in the last year, threatening global internet connectivity. For more than a decade, China has been violating the principles of the LOS with their actions in the South China Sea and elsewhere. UNCLOS ratification would greatly strengthen US credibility in seeking international coalitions to push back against these challenges.

The future of deep sea mining remains uncertain. The burgeoning industry faces technical, economic, regulatory, environmental, and political challenges. The abyssal plains of the deep seabed hold unique biodiversity and are fragile, so mining activities must readily incorporate environmental best practices to limit impacts and gain social license to operate. Nevertheless, its potential benefits to meeting critical mineral supply are substantial, as are the geopolitical stakes of establishing a leadership position. The urgency of securing critical mineral supply means the time is right for the United States to reconsider its formal participation in UNCLOS.

Alex Gilbert is a PhD student in space resources and a fellow at the Payne Institute for Public Policy at the Colorado School of Mines.

Morgan Bazilian is the director of the Payne Institute for Public Policy at the Colorado School of Mines.

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Most immigrant traffic to the United States goes through and comes from Latin America. A lack of economic opportunities, climate vulnerabilities, political instability, and the pervasive influence of organized crime are often cited as push factors for these migrants. However, recent migration patterns also reveal a diversification of nationalities at the US southern border, underscoring the global nature of the challenge. In addition to regional events such as the collapse of Venezuela, political instability in Haiti, violence in Ecuador, and the ongoing and unrelenting crackdown in Nicaragua, conflicts such as Russia’s invasion of Ukraine and the war in the Middle East are also fueling the migration crisis. Most migrants at the US southern border in recent years originated in Mexico, El Salvador, Guatemala, and Honduras. However, despite the persistent conception of most migrants coming from Central America, in December, more than half of migrant encounters at the US-Mexico border involved citizens of other countries, such as Russia, India, Brazil, Afghanistan, Romania, Turkey, and others.

As such, Latin American countries and the United States should work together to develop and implement policies and strategies that address the driving causes of migration that are specific to the region and mitigate the region-wide risks of such a large migrant flow—much of which now comes from outside the region.

Specifically, the United States should work with the countries originating high numbers of migrants to improve conditions and thus prevent the need for people to leave their countries—whether from Latin America and the Caribbean or other parts of the world. That starts with a holistic security strategy to address the challenges of human, drug, and arms trafficking. Supporting local economic growth and human capital development, employing climate change mitigation and adaptation programs, and fostering coordinated, multifaceted responses to the drug supply chain would create a more secure hemisphere and decrease the number of people fleeing violence.

Additionally, the United States needs to recognize that its current policies aimed at deterring migration are ineffective and often harmful. The hardline policies that were put in place by the Trump administration and have largely been continued by the Biden administration have done little to nothing to curb migration flows. At the US-Mexico border, migration crossings have hit a record high, with more than three hundred thousand Border Patrol encounters with migrants in December. This context demands a reevaluation of current strategies aimed at deterring migration.

Instead of continuing its failed effort at deterrence, Congress should focus on developing humane, legal pathways to migration, recognizing pull factors in the United States, which will decrease the frequency of irregular migration. A straightforward recommendation is for clear, realistic timelines for US judges to expeditiously deliver decisions on asylum cases.

The United States should not take on all of the burden. There are opportunities to work in the region and support regional partners on integrating displaced migrants in third countries, from the region or from other parts of the world, to help alleviate the migration flow to the US border. A new report by the Atlantic Council also puts forward the idea of the United States supporting a regional task force “with the goal of jointly addressing the factors behind irregular migration and insecurity.” The idea builds on the existing work of countries such as Costa Rica and Panama, which are working hand in hand to establish more streamlined, efficient, and unified border crossings. Last week, these two countries, with the assistance of the Inter-American Development Bank, inaugurated a one-of-a-kind border facility. Building on the Atlantic Council’s recommendation for a regional task force to address these challenges, the United States, Mexico, and Guatemala are already moving in this direction. The three nations have just “committed to establish an operationally focused trilateral working group aimed at enhancing security, law enforcement processes, and infrastructure along their international borders”—a concrete manifestation of a collaborative approach to solving regional challenges.”

Migration and security are inherently interlinked issues, and the urgency for a collaborative, multifaceted approach to both cannot be overstated. The United States must work with and support other countries in the hemisphere to holistically mitigate the root causes of migration and create safer conditions for citizens across the region.

María Eugenia Brizuela de Avila is a nonresident senior fellow with the Atlantic Council’s Adrienne Arsht Latin America Center and a former minister of foreign affairs of El Salvador.

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Table of contents

Evolution of freedom

The Freedom and Prosperity Indexes have served as a useful tool for observers and policymakers alike to identify trends and historical evolution of countries. In the case of Mexico, the Indexes rank the country as “mostly free” and “mostly prosperous”. However, recent declines in several indicators are early warning signs of an erosion occurring, at least on some fronts. Complementing the findings of the Indexes with qualitative insights can provide a nuanced understanding of the drivers, trends, and challenges that Mexico is facing.

Between 2018 and 2022, Mexico’s overall freedom score dropped from 66 to 61, placing it 90th out of 164 countries. This decline in ranking is unique among Latin American nations, which maintained an average aggregate score of 65. During this period, the most significant declines came in Mexico’s legal freedom score, which fell from 53 to 47 (now ranked 117) and its political freedom score, which fell from 74 to 65 (now ranked 102). In contrast, the economic freedom score remained relatively stable at around 70 (ranked 52). While various political and economic factors likely contributed to these trends, it is worth noting that significant changes have occurred since President Andrés Manuel López Obrador (AMLO, by his acronym), assumed office in December 2018, which have had a notable downward impact on these freedoms.

When it comes to legal freedom, the subindex records significant declines with respect to judicial independence, clarity of the law, and bureaucracy and corruption that are attributable to previous governments, but which have been exacerbated since 2018. While legal institutions such as the Supreme Court of Justice and regulators remain relatively autonomous overall, a large driver of the declining trends stems from the current government’s direct and tacit attempts to undermine their functioning and independence.

For instance, the decline in judicial independence scores, from 60 to 47 between 2018 and 2022, is largely due to ongoing attempts to influence the Supreme Court and control their key decisions. Since taking office, AMLO has appointed four of the nine Supreme Court Justices. Notably, two of them have aligned with the president’s political agenda, and the other two, in the words of the president himself “turn out to be conservatives,” meaning that they are independent—as they should be—and do not abide by his mandates. Most recently, the president directly appointed a new Justice to a vacant seat on the Supreme Court—a political loyalist and former Morena party activist. The interference in key decisions is overt at times: for example, AMLO said it would be an “act of treason to the country” if the court ruled against the Electric Industry law, despite serious concerns over the law’s constitutionality. Two key rulings regarding this law were expected in September 2023, but have been delayed as the energy ministry introduced a legal complaint regarding potential conflicts of interest of two Justices of the court. The law prioritizes the state-owned utility CFE, undermining private sector participation (among other issues) but it is a key plank in the president’s nationalistic energy agenda.

The government is also attempting to undermine the Supreme Court in other ways, for instance by engaging in confrontational and polarized criticism of the court’s president, including endorsing public protests against her, underscoring and increasing the political pressure on Justices. The government also seeks to exert financial pressures over the court. On October 25, 2023, Congress approved cuts of US$815 million to the Supreme Court’s budget—granting the court 18 percent less than had been requested for the 2024 budget (and representing a 2.7 percent reduction compared to the 2018 budget, according to México Evalúa). Moreover, the party in government presented a bill (September 2023), supported by the president, to eliminate the Judicial Power’s trust funds, which was eventually suspended by the Supreme Court itself, proving that the measure would undermine the labor rights of workers, who were the final owners of the resources: the cuts aimed to eliminate fourteen trusts specifically earmarked for employees’ pensions and healthcare, as well as implement recent judicial reforms that have expanded the responsibilities of the High Court.

The decline in the clarity of the law score, from 48 in 2018 to 34 in 2022, is a result of several policy shocks which take a toll on business confidence. The current administration has created persistent uncertainty, especially regarding the enforcement of crucial regulations governing contracts, tariffs, and prices, that are necessary for maintaining a competitive market. This ranges from the cancellation of the Mexico City airport project, despite it being 70 percent complete, to hindering competition in the electricity and renewables market. As a result of this, on July 19, 2022, the United States and Canada initiated a consultation under the United States-Mexico-Canada Agreement (USMCA) to discuss Mexico’s energy policies, in particular claiming a violation of competition and clean energy commitments. The consultations are ongoing, though dispute settlement mechanisms have not been triggered as the parties are expecting the Supreme Court to rule on the constitutionality of the Electric Industry law.

The administration recently delivered yet another significant blow to business confidence. On October 5, 2023, the Federal Civil Aviation Agency unilaterally altered the tariff base regulation for the concessions of nongovernment airport operators—without any previous consultation. Ultimately, this uncertainty makes it difficult to assess the regulatory risks, and results in added costs for companies and cancellation of investments in the country.

Since 2018, there have been budget and staff cuts to key ministries and autonomous institutions, jeopardizing Mexico’s bureaucratic structure and redirecting resources to the president’s favored projects. In addition to the budget reductions to the Supreme Court, the 2024 budget proposes cuts for the health, economy, and tourism ministries (21 percent, 56 percent, and 77 percent respectively, compared to the 2019 budget, the first of AMLO’s presidency). Instead, resources are being redirected to ministries overseeing the president’s social programs and fiscally unviable pet projects, resulting in significant increases in funding for the energy, well-being, and defense ministries (609 percent, 266 percent, and 176 percent respectively). These shifts in spending reflect a broader trend towards centralized decisionmaking and an enormous role for the military—a tendency that has adversely affected the “bureaucratic effectiveness” indicator of the Index. The centralization of government procurement contracts is one example, which, together with a lack of delivery capacity, led to a severe shortage of medicines in 2021, according to an independent audit by Auditoría Superior de la Federación (ASF).

And while these changes have been justified on the grounds that they would reduce corruption, Mexico has not made much progress on this front, ranking 126 of 180 countries in Transparency International’s Corruption Perceptions Index in 2022, with a score of 31 out of 100, a decline from 35 in 2014. Particularly worrisome has been the involvement of the military in many economic activities, including managing ports and customs, executing the president’s infrastructure projects, and even owning a commercial airline. Citing national security concerns as a justification, these changes have led to opacity in the disclosure of government contracts and an increased practice of direct assignments instead of public and transparent bids—worsening rather than abating corruption concerns.

Most recently, before the year end of 2023, the president has raised the stakes: he has indicated that the autonomous institutions will be disbanded altogether, as (in his own words), “they don’t serve the people and are at the service of minorities.”

Another notable aspect contributing to the decline of legal freedom in Mexico since 2018 is the shifting security landscape, characterized by an increasing reliance on the military for day-to-day law enforcement activities, and the “hugs not bullets” policy, which essentially advocates for a nonconfrontational stance towards organized crime. The traditional presence of civil police has been superseded by the emergence of military police, or in some instances, direct military intervention in street-level security operations throughout the country, creating human rights concerns. And the lack of actions against organized crime has allowed it to become more powerful in certain parts of Mexico, resulting in a rise in violence and insecurity across the country. According to the Executive Secretariat of the National System of Public Security, homicides during the five years of AMLO’s government have reached 156,479 (as of November 2023), more than the whole six years of the previous administration.

On political freedom, the executive has sought to undermine the National Electoral Institute (INE), not only by attempting several constitutional and legal reforms, but also by significantly slashing its budget. The INE was established in the 1990s and serves as a crucial pillar of Mexican democracy, organizing elections and ensuring fair electoral processes. Although attempts to reduce the institute’s independence and power have so far faced congressional and wider public rejection, the president plans to present a new bill during his last year in government (2024), arguing—without proof—that the institute shows a “lack of independence and impartiality.”

On yet another metric, the decline in the legislative constraints on the executive score, from 54 in 2018 to 36 in 2022, also contributed to the overall decline in political freedom. AMLO’s landslide victory in 2018 gave his ruling Morena coalition a significant majority in Congress and, although it shrank in the 2021 midterm elections, the coalition still holds 55 percent of the seats in the House and 59 percent in the Senate. The pressure on ruling coalition legislators to vote as a bloc has, in most instances, allowed the president to capture Congress and enabled major reforms in education, labor, and energy. These reforms have been approved with little or no input from the ruling party, coalition partners, or opposition legislators, undermining the process of checks and balances. The Senate has remained an important counterweight, particularly with regard to constitutional reforms; and Congress too has recovered some of its balance, since the ruling party lost its absolute majority during the 2021 midterm elections.

The active undermining of the legislative processes and political pressure on opposition legislators to vote in line with the president’s priorities have also become more common. For instance, the reform of the electoral system was ruled unconstitutional (June 2023) by the Supreme Court due to violations of the legislative process. These included not giving legislators adequate time to debate and consider the bill, as significant last-minute amendments were submitted less than three hours before the vote, and further changes were unlawfully incorporated after its approval. This and similar incidents highlight the overt sidestepping of procedure that has become more common in this legislature. Overall, this undermines the proper functioning of the legislative body and weakens the separation of powers enshrined in the Constitution.

On economic freedom, the transformation of the relationship between the state and the private sector has been a defining characteristic of Mexico’s economic landscape since 2018. Central to this shift is the government’s altered perception, wherein the public sector is not solely viewed as a regulatory entity but as an active participant in economic activities, thereby fostering a growing inclination towards statization. Though property rights are granted in the Constitution as an individual freedom, this ideological shift has put such individual rights on a weaker footing.

In this evolving climate, several endeavors to assert state influence over private enterprises have been initiated, although not all have materialized into full-fledged nationalizations. Notably, instances have arisen where the government intervened in the decisionmaking of private companies, effectively nudging them to relocate their operations according to the state’s regional development agenda. An example is the relocation of a beer factory from the north to the underdeveloped south of the country. This is a concerning trend, wherein the state’s vision for regional development takes priority over the autonomy of private enterprises. This heavy-handed approach not only undermines the principles of competitiveness and private decisionmaking but also poses a direct threat to the fundamental tenets of property rights. Such coercive tactics, veiled under the guise of state-driven development, demonstrate a fundamental disregard for the traditional mechanisms of incentivization and market forces, creating an environment of uncertainty for private property holders.

Companies in the transportation sector, in particular railway concession holders, have recently been the target of government aims to influence private decision making. In May 2023 an attempt was made to expropriate rail infrastructure owned by Grupo Mexico’s Ferromex, to be repurposed for the Trans-Isthmic Corridor project; and in October 2023, the president issued a decree to pressurize concession-holders to invest in passenger trains and being obliged to change their business models to offer passenger services. These events are a window into the government’s approach to the private sector, offering some explanation for the deteriorating business climate and challenges to property rights reflected in the Index.

Preceding the recent developments, the challenges to property rights have long been exacerbated by the pervasive influence of organized crime, particularly through extortion and illegal impositions. This unfortunate reality has only been intensified by the implementation of the “hugs, not bullets” policy, inadvertently providing illicit entities with greater leeway to perpetrate their exploitative activities.

The erosion in freedoms is neither linear nor universal, but the examples above clearly point to some worrisome trends that have contributed to an overall decline in freedoms in Mexico, and which present clear warning signs for the way forward.

From freedom to prosperity

Mexico’s prosperity score has been stagnant since the start of the Index, oscillating between 61 and 63 since 1996 (ranking 90 out of 164 countries in 2022). Its aggregate score is now 4.1 points below the Latin America & the Caribbean regional average. The income indicator is virtually flat at 66.3, while the inequality score is remarkably low (at 15.7, falling from a high of 37.4 in 2002)—23.4 points below the regional average. This is a result of structural low growth, but also of the fact that Mexico had the worst post-pandemic recovery in North America and among the main economies in Latin America.

Mexico’s growth trajectory has not been volatile but rather the challenge has been stubbornly low growth relative to its potential. Data from the International Monetary Fund show an average 2.08 percent year-over-year (YoY) growth since 1990; this compares to 4.3 percent for Chile, 4.2 percent in Peru, 3.4 percent in Colombia, 2.6 percent in Argentina, and 2.3 percent in Brazil—some of whom have experienced very volatile growth trajectories. Unleashing further growth has come as a challenge, despite a sophisticated export sector, sound macroeconomic policy and a resilient private sector. This can be partly explained by the fact that investment as a percentage of gross domestic product (GDP) has for many years lagged behind its regional peers, remaining below 25 percent for most years since the 1990s, even dipping below 20 percent in 2019, according to the National Institute of Statistics and Geography (INEGI). However, some positive signs have emerged, with investment reaching 24.9 percent of GDP in the second quarter of 2023, and a more favorable external environment and positive trends such as nearshoring leading to an increase in private sector investment of 18.1 percent YoY in the first half of 2023, the largest increase since 1993.

Productivity is also an issue. Economy-wide labor productivity and overall productivity lag behind other emerging market G20 economies such as South Korea, Turkey, and Thailand.

The economic liberalization of the country in the 1980s and 1990s—which led to North American economic integration, a sound financial sector, and a much more complex economy—has greatly benefited Mexico, but its impact has not been felt by all regions, sectors, and groups. To put this in perspective, the average growth of the northern and central parts of the country reached 3.1 percent YoY between 2010 and 2019 according to Banxico data, and only 0.06 percent in the south, where most of the country’s marginalized population lives. At the same time, the large proportion of informally employed workers—55 percent of the labor force according to the 2023 labor force survey, only a slight decrease from the 2005 figure of 59 percent—is also a key driver of the inequality gap. Regional gaps in growth and informality contribute to drastically different levels of vulnerability and access to services. For example, states in the north like Baja California Sur, Baja California, and Nuevo León had the lowest percentage of multidimensional poverty as a share of their population in 2022 according to the National Council for the Evaluation of Social Development Policy (CONEVAL) (13.3 percent, 13.4 percent, and 16 percent respectively), while multidimensional poverty rates are significantly higher in the southeast with Chiapas, Guerrero, and Oaxaca (67.4 percent, 60.4 percent, and 58.4 percent respectively) topping the list.

That said, Mexico has made advances with respect to specific social indicators. For instance, the Index highlights significant improvements in education since 2000 (from 27.7 points to 48.1), although health has experienced an enormous decline of more than 5 points since then, dropping back to 78.1 points. Moreover, as the CONEVAL chart in Table 1 shows, the reduction of access to health between 2020 and 2022 happened at the worst possible time: the COVID-19 pandemic.

If we understand prosperity as the absence of social “lacks” (i.e., people’s needs are met), according to the country’s multidimensional measurement of poverty, Mexico has seen relevant improvements for several years, in spite of its low average growth. One of the reasons this has been possible is that there is now an anchor with which to assess the evolution of access to a “sufficient” income, to food and nutrition, health, education, social security, housing and services. Being capable of rigorous measurement helps align institutional aims and policies, which are in turn a prerequisite to effectively address lacks or shortfalls, and promote inclusion and prosperity. The other two vertices of the “prosperity triangle” are strong and sustained economic growth, and sound policies, which have not always been present.

While economic growth over the last five years has averaged just 0.63 percent per year, Mexico has managed to reduce poverty significantly. It has done so by almost quadrupling social program spending from US$8 billion in 2018 to US$30 billion in 2024, and increasing the minimum wage across the country (2018–24) by 182 percent—and by 324 percent in the “free border zone.”

Table 1. Change in deprivations in Mexico (2000-2022)

The future ahead

Mexico continues to preserve key technical and autonomous institutions, which have so far made it resilient to various affronts to political, legal, and economic freedoms, and which have helped the country sustain a basic level of prosperity, as reflected by the Index. However, the negative developments in some indicators should serve as early warning signs, while also pointing to the path forward, if the country wants to advance towards the next stage in democratic consolidation and progress in well-being standards.

The insights above suggest there is a clear path toward Mexico’s advancement on both the freedom and prosperity fronts. These can be summarized in three clear pillars: strong institutions, strong and sustained growth, and well-articulated and effective redistribution policies.

Mexico has a unique opportunity to capitalize on the current favorable external environment and attract investment that can serve as a pull factor for growth. Its sustainability will largely depend on productivity improvements, including to education, reskilling, infrastructure, and energy. The country remains a bastion of free trade in Latin America and holds a strong strategic position, being the United States’ largest trading partner. Amid US-China decoupling, gains from nearshoring could be significant. For the time being, this trend lays more in the expectation than the materialization front. According to Alfaro and Chor, Mexico is sixth in the list of countries to have derived the most market gains from the decoupling of the United States from China between 2017 and 2022. It should be in the top two.

Enormous expectations cannot cohere into more significant material investment commitments if the institutional framework continues to weaken, and this is one of the key risks that could lead to a further deterioration in Mexico’s Index rankings. In many ways, Mexico has de jure maintained the institutions and legal framework to support political, economic, and legal freedoms, including an independent central bank, an autonomous Supreme Court, and an independent National Electoral Institute. But a de facto deterioration is clearly occurring—in the form of political loyalists being appointed to key autonomous institutions, budget and staff cuts, a concentration of power, and a militarization of strategic economic activities. This cycle of deterioration is a risk to freedoms and prosperity in the near term.

In this sense, pendular politics also remains a significant risk, both to institutions and to sound evidence-based policymaking. The country will head to the polls in June 2024 and the signs of polarization are increasing. While disagreement and debate are essential components of a healthy democracy, the current discourse in the country is anything but constructive; and uncertain and ad hoc shifts in policy risk squandering the opportunities to attain strong and sustained growth, as well as improvements in prosperity more broadly.

Undermining institutions, pendular policies, militarization, the absence of solid foundations for strong and durable economic growth, and growing fiscal pressures, are a recipe for failure. On the contrary, policies aimed at strengthening and perfecting our institutional scaffolding, delivering good and sustained policies, ensuring the rule of law, improving competitiveness, enhancing productivity, and maintaining a sound fiscal stance, could make Mexico a success story, grounded on improved freedom and increased prosperity.

Vanessa Rubio-Márquez is professor in practice and associate dean for extended education, at the School of Public Policy, London School of Economics; associate fellow at Chatham House; consultant and independent board member. She is a member of the Freedom and Prosperity Advisory Council at the Atlantic Council. Vanessa had a twenty-five-year career in Mexico’s public sector, including serving as three-times deputy minister (Finance, Social Development, and Foreign Affairs) and senator.

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Jun 15, 2023

Freedom and Prosperity Indexes

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Geopolitics is rearranging FDI

Geopolitical tension and geoeconomic fragmentation have elevated uncertainty which, together with slow growth, have significantly cut back global FDI flows as a share of economic activity—from 3.3 percent of global GDP in the 2000s to only 1.3 percent in the past five years. In absolute terms, FDI has increased modestly: In 2023, global FDI flows reached an estimated $1.3 trillion or 3 percent more than in 2022.

The slowdown in FDI has disproportionately affected emerging-market and developing countries (EMDCs). FDI flows to developed countries increased by 29 percent, to $524 billion. But flows to developing countries decreased by 9 percent to $841 billion.

These shifts are not driven merely by economic factors: Detailed analysis of almost 300,000 instances of greenfield investment projects from 2003 to 2022 by the Center for Economic Policy Research (CEPR) shows an economically significant role of geopolitical alignment in driving the country allocation of bilateral investments. The friendshoring and nearshoring approaches used to derisk from economic dependencies have significantly affected the pattern of FDI flows of the two main protagonists—the United States and China.

The United States and China

Between 2019 and 2023, FDI flows from the United States to China fell from a 5.2 percent share of total FDI to 1.8 percent—or a drop of 3.4 percentage points of total US FDI outflow. By contrast, shares of US FDI to more geopolitically aligned countries increased—for example, plus four percentage points to India (from 7.6 percent to 11.6 percent); plus 3.4 percentage points to the UAE; plus 2.2 percentage points to Mexico; and roughly plus one percentage point to several Southeast Asian countries such as Malaysia, the Philippines, and Vietnam.

Due largely to the sharp drop of FDI from the United States, total FDI flow to China has declined significantly—from an annual average of $235 billion in the ten years 2011-2020 to $344 billion in 2021, $180 billion in 2022, and only an estimated $15 billion in 2023—mainly due to heightened geopolitical tension and slow growth in China.

Outbound FDI from China has also diminished from a peak of $196 billion or 1.9 percent of GDP in 2016 to $146 billion or 0.8 percent of GDP in 2022. Traditionally, China’s FDI outflow has favored developed countries in North America and Europe (accounting for more than 60 percent of the total) followed by Asia. In recent years Asia’s share has risen. For example, the share of China in ASEAN FDI inflow was 3 percent (8 percent including Hong Kong) in 2016 rising to 8 percent (13 percent including Hong Kong) in 2021. (That is still lower than the 23 percent share of the United States, the biggest investor in the region.) It is important to keep in mind that developing countries have received the lion’s share of China’s international construction projects financed by debt, now totaling $815 billion, mainly through participating in the Belt and Road Initiative (BRI).

The “connector” economies

FDI, especially from competing countries like the United States, Europe and China, have tended to flow to not only geopolitically close countries satisfying friendshoring and nearshoring criteria, but also—especially in the case of Western companies—to those having a minimum necessary political stability, legal, and regulatory environment and manufacturing capabilities including suitable labor supply. As a result, only a dozen or so countries have experienced increased FDI flows from both the United States and China.

In particular, five countries (Vietnam, Indonesia, Mexico, Poland, and Morocco) have been dubbed “economic connectors” by Bloomberg Economics. These countries have combined appropriately calibrated foreign policies and sufficiently developed economic capabilities to navigate geopolitical rivalry and benefit from geoeconomic fragmentation—which has driven the reconfiguration of global supply chains. Basically, they have been able to leverage the friendshoring and nearshoring approaches of the United States and China to attract more greenfield investment from both. They have also increased their exports to the United States (or to the EU in the case of Poland) and their imports (mostly of intermediate goods) from China.

The experiences of the five economic connectors show that there is a pathway for developing countries to navigate geopolitical tension while developing their economies. However, it requires those countries to be able to compete with fellow developing countries to attract trade and investment from either or both China and the United States (and other developed countries). Many may lack the capacity to do so, especially low-income countries and those without natural resources or basic manufacturing capabilities.

In short, the geopolitically driven fragmentation of the global economy has several dimensions: division between developed and developing countries; according to geopolitical alignment; and among developing countries themselves based on their abilities to compete for trade and investment in the reconfiguration of global supply chains. This has increased the complexity of the fragmentation process, probably making it more difficult to measure as well as more costly to the global economy than so far expected. Unfortunately, low-income countries will likely experience the worst outcomes.

Hung Tran is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center, a former executive managing director at the Institute of International Finance and former deputy director at the International Monetary Fund

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The post “Connector economies” and the fractured state of foreign direct investment appeared first on Atlantic Council.

How we got into this mess

To simplify this divisive debate, many Republicans want fewer migrants allowed into the United States. Republicans have particularly focused on what they call “catch and release,” a term Democrats consider pejorative (because it likens desperate people fleeing persecution or economic hardship to fish being caught for sport).

When migrants without visas enter the United States, often fleeing violence and extreme poverty in their home countries, many claim political asylum. Current law says that anyone who is physically present on US territory, no matter where they enter, with or without authorization, can ask for asylum. Border Patrol or other Customs and Border Protection (CBP) officials can deport individuals entering without authorization using an administrative process called “expedited removal” without going to immigration court, but not if the individual asks for asylum. Those asking for asylum are interviewed under a low initial bar that allow them to pursue their asylum claim in the United States through immigration court if they have a “credible fear” of persecution in their home country. However, because there are too few immigration judges and courts, it takes up to five to seven years to adjudicate most asylum claims. The federal courts will not allow most migrants without visas to be kept in detention for such a long period, because they have not been found guilty of a crime and there are not enough detention beds for millions of asylum applicants. This is especially true of family groups with minor children, for which judicial decisions against long-term detention are even more strict. Hence, judicial decisions require asylum applicants to be released until their cases are heard by an immigration judge.

However, current law says applicants cannot legally work in the United States until six months after they file their asylum claim in immigration court or with the Department of Homeland Security’s (DHS’) US Citizenship and Immigration Services (USCIS)—a restriction in the law that is not subject to adjustment either way by the executive branch. Until migrants get a work authorization document from USCIS or a decision on their asylum claim, most depend on public aid, funds from relatives, friends, or charities, or work without legal authorization. Currently, more than half of all asylum applications are denied, but many migrants get to live and work in the United States for years until they receive that final decision and, even then, many will not be sent home. This is what entices more than a million migrants a year to pay rapacious human-smuggling cartels so they can make a dangerous, costly trek north through Central America and Mexico to arrive at the southwestern US border.

Democrats and migration advocates, for their part, see the United States as a safe haven for those fleeing persecution and desperate poverty, and say the United States can and should allow asylum claims at the US border. Most Democrats also want to see those who came to the United States without authorization as children receive legal status and a pathway to citizenship. A significant number would extend this offer to law-abiding, hard-working adults who are already here. Most Republicans oppose any kind of what they call “amnesty” for those who came to the United States without authorization. Some businesses, however, see a benefit to having more workers in the United States, especially for low-wage service jobs.

US public opinion, in broad terms, wants to see an immigration system that is both just and fair—allowing deserving applicants to get asylum, while denying entry to those without a valid legal claim.

President Joe Biden was elected in 2020 after campaigning on reversing the restrictive immigration policies of the Donald Trump administration—but the Biden administration did not request additional resources to process large numbers of additional migrants. Starting almost as soon as Biden signed new immigration executive orders on January 20, 2021, congressional Republicans demanded the administration stop the increasing numbers of migrants who began arriving without visas at the US southwest border. In April 2022, the Biden administration released a detailed plan to address the rising numbers, but did not request additional funding for it. As the COVID-19 pandemic eased in 2022, the Biden administration prepared to rescind the authority under federal public-health law used by the Trump administration to turn many migrants away without giving them a hearing on their asylum claims. (Legal challenges to those Trump policies were before the Supreme Court in January 2021, but were dropped after the Biden administration reversed some of the policies.) The Biden administration announced a number of post-pandemic new steps in January 2023, which took effect in May. As has happened in the immediate aftermath of every major immigration policy change in the Obama and Trump administrations, the numbers of migrants initially went down, but then began to increase.

Significantly—and unfortunately—the June 2023 budget deal between Biden and then-Speaker of the House Kevin McCarthy (the “Fiscal Responsibility Act of 2023”) put fiscal restraints on the budgets of the departments of Homeland Security, Justice, Health and Human Services (HHS), and State—the departments that collectively fund the border and immigration system. For 2024 and 2025, the only way these departments can get additional funds to address growing needs is through emergency supplemental appropriations.

Understanding the Biden’s administration’s groundbreaking October border supplemental

On October 20, the Biden administration submitted a $105 billion supplemental spending request for Ukraine, Israel, and the Indo-Pacific, including $13.6 billion for border security and immigration. This package responded to Republican demands to condition more money for Ukraine’s defense on the Biden administration doing more about the southwestern border. Unlike regular budget submissions, in which each cabinet department lays out its separate request—making it difficult to see how cross-department programs support each other—this time the administration buried at the end of a detailed fact sheet an excellent laydown that showed with clarity how all the parts of the administration’s border supplemental request worked coherently. The administration wanted to do six things together:

• Address the delays in processing asylum and other cases by increasing the number of immigration judge teams by 375, around a 60-percent jump.
• Give CBP an additional $4.5 billion for expanded operations, including money for Federal Emergency Management Agency (FEMA) grants to local governments and nongovernmental organizations to provide shelter and services to migrants who were released after being given a notice to appear for their asylum hearing. This would help take the burden off states and cities that otherwise would need to provide aid for these migrants, because most applicants could not legally work. CBP would also get $849 million for inspection technology to detect smugglers trying to get migrants, drugs, and contraband into the United States.
• Provide additional government attorneys to process the increased number of asylum cases, and for additional investigators and other personnel, via $2.5 billion for the DHS Immigration and Customs Enforcement (ICE).
• Add asylum officers and technology to more quickly handle the increased workload of processing claims, with $755 million for DHS’ USCIS.
• Increase funds for law-enforcement agencies—including the Federal Bureau of Investigation and the Drug Enforcement Agency—for support functions, including testing DNA to ensure that adult migrants were not making false claims about being related to the children traveling with them.
• Increase migration and refugee-assistance programs at the Department of State by $1.3 billion.

The administration’s logic was to increase the capacity of the entire system that processes asylum and other immigration claims, thus shortening the time that applicants waited for a hearing and reducing the societal burden on supporting migrants until they got decisions in their individual cases. The additional funding for enforcement—and for people, technology, and programs to address smuggling of people and illegal drugs like fentanyl—was intended to respond to both Republican and Democratic concerns.

Administration officials testified before the House and Senate appropriations committees, conducted private briefings on Capitol Hill, and spoke to professional organizations, but did not embark on a major, nationwide public-outreach program to explain the logic of the border and immigration appropriations package to the US public.

Figure 1: Cases pending before immigration courts, fiscal years 1998-2022

If anything, the administration’s border and immigration supplemental could be criticized for not being large enough to erase the growing backlog in asylum cases that began to accelerate during the Trump administration. (See Figure 1.) The best available public study of immigration-court capacity said that to erase the backlog of cases that existed at the end of Fiscal Year 2022 would require increasing the number of immigration judge teams by two hundred each year for five years—implying that the administration’s request for 375 immigration judge teams needed to be thought of as a down payment, not an end state. The total number of pending asylum cases is now even greater, more than three million, likely requiring even more immigration judge teams to resolve the backlog over a five-year period.

Understanding the landmark bipartisan Senate compromise bill

After more than ten weeks of intense negotiations, the bipartisan Senate compromise bill that emerged was the first serious effort in more than a decade to do what Congress has almost never done on border security and immigration: combine major policy changes with the resources required to make those changes succeed. Congress traditionally separates authorizations and appropriations into separate committees that jealously guard their turf. As an Atlantic Council study in December 2020 explained, congressional responsibility for the homeland security enterprise is divided among eleven major committees in the House and nine in the Senate. The executive branch is little better, with four major cabinet departments having important roles (DHS, Justice, HHS, and State) and major policy decisions led by the National Security Council and the Domestic Policy Council, but funding decisions controlled by the Office of Management and Budget. As a previous Atlantic Council report highlighted, aligning policy and resources is a chronic problem in the homeland security enterprise. The bipartisan Senate supplemental, negotiated by key senators with Homeland Secretary Alejandro Mayorkas and the White House, represented a landmark in uniting policy changes with increases in resources that are needed to make the policy changes work.

First, on the resource side, the bipartisan Senate compromise proposed to appropriate more money for border and immigration security ($20.3 billion) than the administration requested ($13.6 billion). The bipartisan bill also made major shifts in how that money was allocated.

Some of these shifts were fundamental, and reflected Republican skepticism about how migration cases should be processed faster and more efficiently if the compromise version had passed.

• The Department of Justice’s request was cut substantially, but preserved a significant increase of approximately a hundred immigration judge teams. This reduction in judicial capacity from the administration’s October request was offset by an increase in the number of USCIS asylum officers, who would have begun to process cases under the negotiated policy changes for newly arriving migrants who otherwise would have had to wait years for an available immigration judge to hear their legal claims.
• ICE would get more than three times the requested amount, with the additional funding going to increase the number of personnel, increase detention space to 46,500 beds, and increase the number of removal flights to return migrants whose claims are denied. To fully unlock the full appropriation, ICE would need to report to Congress that it has increased detention space and the number of removal flights.
• USCIS would get substantially more than initially requested to increase the number of asylum officers who, under the new rules made possible by the compromise, could make decisions in most asylum cases.
• The compromise version substantially cut funding for supporting migrants awaiting hearings, but still proposed to give FEMA $1.4 billion from CBP for the shelter and services program for migrants awaiting a decision—which, under the new policy changes, should take six months rather than five to seven years.
• The Department of State did not get as much as it requested for migration and refugees, and much of the funding it would have received was to increase the capacity of Latin American countries to receive returning migrants whose claims were denied.

The policy changes in the bipartisan Senate version were compromises intended to bring on both Republican and Democratic support:

• No longer would there have been a low bar that allows most asylum applicants to stay in the United States for years while waiting for an immigration judge to hear their case.
• Instead, thousands of USCIS asylum officers would have made faster decisions on most asylum cases, ideally within six months, without waiting years for the case to be reviewed by an immigration judge. All asylum applicants would have undergone thorough security vetting. Each applicant would need to prove to the asylum officer by “clear and convincing evidence” that they qualify for asylum. The expectation, based on experience, was that most applicants would not qualify for asylum, but those who are found eligible would get immediate work authorization so they can support themselves.
• Asylum applicants would get the right to counsel, but at their own expense. (Children and those deemed incompetent would be eligible for government-provided counsel.)
• There was a limited appeal option for applicants whose requests were denied, but most cases would not have to be heard by courts. Those found not eligible for asylum would have been removed from the United States. ICE would have had significantly greater resources to carry out removals of those who did not qualify for asylum protection under the Convention Against Torture or other US laws.
• If the number of inadmissible migrants exceeded 8,500 in a single day, or five thousand a day over a seven-day period, the bill would have required the Secretary of Homeland Security to “close” the border to asylum claims. Migrants could still claim protection under other US laws, such as the Convention Against Torture, but the standard of proof for such claims is higher and very few migrants qualify for it. Based on current levels of migrants arriving at the southwest border, the border would have been “closed” to asylum claims for most of the past four months, according to those involved in the negotiations.
• Afghan allies resettled in the United States after the August 2021 US withdrawal from Afghanistan would have been allowed to stay and become permanent residents after they passed security vetting.
• The bill would have required additional training for Border Patrol officers, improvements in ICE’s “alternatives to detention” program, and upgrades to technology at CBP and USCIS.
• USCIS and ICE would get streamlined hiring authorities to hire the thousands of new officers and agents required to implement the bill.

The bipartisan Senate bill went a long way toward addressing long-time Republican concerns. If the bill had been passed and implemented (and funded) in subsequent years, it would have significantly reduced the use of “catch and release” because those migrants who qualified for asylum would get a much faster determination and be eligible for work more quickly. Those not eligible would have been removed from the United States much more quickly than at present.

For Democrats, the compromise bill did not address important issues like adults who came to the United States as children without authorization—called Dreamers, from the proposed Development, Relief, and Education for Alien Minors (DREAM) Act. Many Democrats also objected to the new asylum restrictions. However, for Democrats and migration advocates, the bipartisan Senate compromise promised faster determination of asylees’ eligibility and additional resources, including faster work authorization, to integrate those eligible into US society. This represented a significant improvement over the present situation, in which cities are being overwhelmed by needing to support those awaiting their court dates.

The bipartisan Senate compromise, while a definite improvement over the alternative of current funding levels and nothing else for a year, did have its flaws and limitations.

• The most serious concern was that the additional resources would not be sufficient to process all asylum applicants within six months of arrival. But even if more personnel and resources would ultimately have been required, the compromise bill was an important first step.
• The system set up by the bill would have taken at least two years to become fully operational—hiring and training the additional officers, agents, judges, and other personnel, buying the additional screening technology, and expanding needed facilities. In the meantime, the backlog of three million cases would not be reduced, and might increase further.
• The bill did not clarify the status of migrants already here, leaving millions of people in limbo for years, waiting for their claims to be heard. There is no bipartisan consensus on what to do about this.
• The bill tried to prioritize dealing with the current influx of new arriving migrants and did not have a clear plan or the resources to address the backlog of more than three million pending immigration cases. Even so, the compromise was a rational approach to the increasing numbers of migrants arriving every week. In an ideal world of bipartisanship, additional work would need to take place to develop an approach for eliminating the current backlog of cases.
• One of the most fundamental problems with the bipartisan Senate bill was that it did not end the incentives for people to pay smugglers to get them to the US southwest border. To be fair, a small group of senators trying to negotiate a complex legislative package has limits on what it could try to achieve in ten weeks. But the bipartisan Senate bill can be fairly described as treating the symptoms of the problem, not the underlying condition. Even so, as doctors say, the first priority is often to stabilize the patient before treating the underlying conditions. There are three approaches that could help with the underlying conditions.
  • Since July 2021, the Biden administration has had a “root causes” strategy, directed by Executive Order 14010, focused on reducing the “push” factors that drive migrants to leave home and make the dangerous and (to them) expensive journey north. Republicans, in particular, are leery of Democratic efforts to address the root causes of what is a global migration crisis. It is true that violence, extreme poverty, and the effects of climate change on agriculture are driving millions of people worldwide to believe they have no choice but to leave their homes in Latin America, Africa, the Middle East, or South Asia and come to the United States, Europe, or richer countries in Asia. Solving the root causes driving global migration will take a decade or more, at a global price tag that starts in the hundreds of billions of dollars, and there is no bipartisan consensus in Congress ready to take on even a significant part of this challenge.
  • Deciding who is eligible for asylum before migrants arrive at the southwest border would be a more practical, but still ambitious, approach. The Biden administration proposed this as a policy initiative and set up small “Safe Mobility Offices” in Guatemala, Costa Rica, Ecuador, and Columbia that are under-resourced but starting to show promise. However, the administration has not put forward publicly a comprehensive plan (that is, policy plus personnel plus resources plus legislative language) comparable to the October border supplemental or the bipartisan Senate bill. Under this approach, people in Latin America could appear before a US official in their home country, or at least in a nearby safer country, and get a binding determination of their eligibility for asylum before they travel thousands of miles in the hands of dangerous smuggling cartels. Setting up asylum “overseas processing centers” in countries like Colombia, Panama, or Mexico would probably be more efficient and less costly overall than dealing with more than one million people per year coming into the United States who are hoping they can win their cases—when the reality is that very few will succeed. (The United States currently does almost all refugee interviews and processing overseas, so there is precedent for this model.) Overseas processing centers for asylum applicants would take several years to develop, and each center would effectively become a small “American” city of several thousand US or international citizens (including US asylum officers, support staff, and security) in the middle of Mexico or several Central American countries. This would require negotiations comparable in complexity to setting up a US military base in a foreign country—which the United States has done many times. Even if a civilian overseas processing center is less expensive than a military base, three or four would likely cost tens or hundreds of millions of dollars each once salaries, housing, and facilities are included.
  • Tackling the criminal cartels responsible for most of the smuggling is another line of effort the Senate compromise did not emphasize. This would require increased efforts by US and Latin American law enforcement, military, intelligence, judges, and prisons. The limited success the United States has had against narcotics cartels shows that this will not be easy.

The shifting politics

The idea of joining a year’s worth of military assistance to Ukraine and Israel to more money for border security and migration arose in late 2023 after it became clear Ukraine would need more help against Russia’s invasion, Israel would need help after Hamas’s October 7 attack, and increasing numbers of migrants were continuing to arrive at the US southwest border after the end of the pandemic. Under the Biden-McCarthy budget deal, the only way to get additional funds was through an emergency supplemental appropriation.

In late November, Republicans said they would require immigration policy changes as a condition for passing additional military assistance to Ukraine. Over the next ten weeks, a group of Senate Republicans and Democrats, with participation from Mayorkas and White House officials, worked on what became the bipartisan compromise announced February 4. The secrecy of the talks had many stakeholders worried their core interests and values were at risk. In hindsight, it appears that the secrecy was what made compromises on several key points possible.

However, in mid-January, with the release of the bipartisan Senate compromise imminent and following a White House meeting with congressional leadership on the overall package, the table was overturned when former president and likely Republican presidential nominee Donald Trump said social media “I do not think we should do a Border Deal, at all, unless we get EVERYTHING needed to shut down the INVASION of Millions & Millions of people, many from parts unknown, into our once great, but soon to be great again, Country!”

This provoked a reaction from the former president’s supporters, leading Speaker of the House Mike Johnson to call the deal “dead on arrival” even before details had been released. Senate Republican leader Mitch McConnell, after initially supporting the bill when its text was rolled out on February 4, said on February 5 that Republicans should vote against a procedural vote scheduled for February 7. Biden addressed the nation on February 6, calling for public support for the bipartisan Senate compromise. A key procedural vote in the Senate to move the bill forward, which needed 60 votes, failed 49-50. On February 11, the Senate voted 67-27 to move forward with the Ukraine, Israel, Indo-Pacific, and humanitarian packages—everything except border security and immigration.

The debate on the Senate compromise was significantly affected by misinformation (and disinformation) about the bill’s provisions. Most notably, the bill’s number of five thousand inadmissible migrants who would trigger the border being “closed” to asylum seekers was twisted into the idea that five thousand inadmissible migrants would be allowed into the United States. (See above for the details of how this would really have worked.) The reality was that those five thousand migrants would be subjected to the full panoply of security checks and legal requirements for asylum, so that only the small number actually eligible for asylum would actually be allowed to stay in the United States. This provision started, ironically, from a Republican demand that the Biden administration “close the border” whenever there were large numbers of migrants trying to cross without authorization, and the five-thousand figure was a compromise that Democrats could accept in order to write the authority into law. (Democrats were no doubt aware that a future Republican administration would almost certainly use this authority.) Biden said on January 24 he would use this authority. Republicans claimed he did not need additional authority, but the Republican interpretation would be open to judicial challenges, whereas Section 244B(f) of the bipartisan compromise would have significantly narrowed the courts’ ability to overturn such a determination. This kind of attention to detail was largely lost in the claims by the compromise’s opponents.

Make no mistake: A year of not having additional resources to deal with the current numbers of arriving migrants will further severely strain the nation’s immigration system. Officials in cities like New York and Denver are saying they are at a breaking point. ICE is talking about having to release detainees to cover a $700 million shortfall. CBP will have to pull money away from increasing processing capacity for cargo and arriving lawful travelers—increasing delays and holding back the US economy. Taking away funds needed by FEMA for disaster relief will directly hurt the millions of US citizens who suffer from natural disasters and have nowhere else to turn. Strains on CBP and ICE personnel will likely increase turnover as many leave for other, less stressful law-enforcement positions. While Trump said he will run on his vision for border security, Biden said on February 6 that Democrats will ask voters to hold Trump and Republicans responsible for blocking the Senate compromise.

The prospects for either side getting a better deal after the November 2024 election are limited. If Biden is reelected, expectations are that he will still face a closely divided Congress, and the problems with the border and immigration system will likely have grown worse with congressional inaction during 2024.

If Trump is elected, his December 2023 vow to be a “dictator” on “day one” and close the US border should be taken seriously. Doing this through executive authority alone would lead to immediate court challenges, because the right to claim asylum is written into federal statutes. Even if Trump then demanded that DHS and Justice Department officials defy federal court orders and promised those officials pardons if they carried out his instructions, my assessment is that few federal officials outside of Trump’s immediate orbit would do it. They likely would not want to jeopardize their post-Trump careers by defying federal court injunctions to enforce existing laws that allow asylum applicants to remain in the United States until their claims are heard by an immigration judge. Courts and Democrats are likely to slow down some of Trump’s most ambitious plans. Democrats will point to the 2024 bipartisan Senate compromise as the best offer a Trump administration may get if it needs Democratic votes to pass a budget or statutory changes.

It is always possible that whoever wins in November 2024 will overreach in 2025 on immigration policy and a one-party approach in 2025 will go nowhere. It is also possible that the outcome of the failure of the bipartisan Senate proposal in 2024, plus a year of inaction, may convince a supermajority in the Congress that a bipartisan approach is essential, desirable, and unavoidable.

Thus, the details of the bipartisan Senate compromise could well become the starting point for talks in 2025.

Recommendations

1. Two core ideas of the bipartisan compromise should be maintained:
   1. Resource decisions and policy decisions on border security and immigration need to be linked—advancing one without the other will not work.
   2. In the absence of truly comprehensive immigration reform, increased funding for the back-office functions to process asylum and other immigration cases within weeks, not years, is essential. This will provide both Republicans and Democrats with important parts of what they want: an end to “catch and release” and an immigration system that is just, fair, and reflects US values.
2. The Biden administration should adjust its budget numbers for Fiscal Years (FY) 2025 and 2026 to include ramping up the hiring of additional officers, agents, judges, and support personnel needed to implement something like the bipartisan Senate compromise with the goal that something like the 2024 bipartisan compromise can be enacted sometime in late FY 2025. These additional personnel are needed to address the current backlog and numbers of arriving migrants, even if the policy changes could not be made. Hiring and training more people will take time to implement—and should be ramped up as soon as possible.
3. For future federal budget negotiations, the Biden administration should make funding for the Department of Homeland Security part of the “revised security category” that currently includes only military spending (budget account 050). This may sound technical, but it would have fundamental, far-reaching consequences to strengthen US security. Future negotiations between a Democratic White House and a Republican-led house of Congress (whether the House or Senate) are likely to involve tradeoffs between security spending and domestic spending. This was the essence of the negotiations during the past decade, including the Fiscal Responsibility Act of 2023. However, the 2023 budget deal ended up pitting more funding for homeland security against other domestic spending priorities. Instead, both Democrats and Republicans would benefit politically from thinking of border security and immigration as integral to the security of the United States, so no one thinks of DHS as a “non-security” program during federal budget negotiations.
4. The Department of Homeland Security and the homeland security enterprise need to think of their mission as: “We lead the defense of the nation against non-military threats.” To the greatest extent possible, both DHS and the homeland security enterprise need to become more nonpartisan and “above politics.” This was a core recommendation of the Atlantic Council’s Future of DHS report in September 2020. It remains valid today.
5. As a long-term goal, DHS and the homeland security enterprise will be better off separating from the most partisan, toxic aspects of immigration policy. At one time, monetary policy was one of the most divisive issues in US politics. Most college students who take US history courses hear of William Jennings Bryan’s famous 1896 “cross of gold” speech, with few understanding the parallels between the divisiveness of monetary policy then and immigration policy today. It took the Federal Reserve Act of 1913 to take the bulk of monetary policy out of the hands of Congress and the White House. Congress set broad goals—currency stability and full employment—and then let the Federal Reserve Board decide how to balance both goals. Over the past century, admittedly with some dramatic ups and downs, the US economy has led the United States to a level of prosperity and security without precedent in human history. Something comparable for US immigration policy could help drive both security and prosperity for the next century.

About the author

Fellow

Thomas S. Warrick

Nonresident Senior Fellow, Scowcroft Middle East Security Initiative

Adrienne Arsht National Security Resilience Initiative GeoStrategy Initiative

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Forward Defense, housed within the Scowcroft Center for Strategy and Security, generates ideas and connects stakeholders in the defense ecosystem to promote an enduring military advantage for the United States, its allies, and partners. Our work identifies the defense strategies, capabilities, and resources the United States needs to deter and, if necessary, prevail in future conflict.

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At the same time, 2024 will be pivotal in determining the agreement’s future. The governments elected in Mexico on June 2 and in the United States on November 5 will be responsible for conducting an important review of the USMCA scheduled for July 2026. The priority both countries’ leaders give to the agreement and the vision they adopt on integration will determine Mexico’s commercial relationship with its partners in the region going forward. The best way for Mexico to protect its economy and its North American trade relationships is by ensuring compliance with its USMCA commitments before 2026, reducing the pressures that it might be subject to from the other parties in the review.

How does the USMCA review process work?

Unlike NAFTA, the USMCA considered the possibility of the agreement coming to an end. Indeed, in Article 34.7 (Review and Extension of Validity), the agreement establishes a validity period of sixteen years (until June 30, 2036), but also a review clause in the sixth year (July 1, 2026). This sixteen-year period can be modified if the three countries confirm, in the sixth year, their intention to extend the USMCA for another sixteen years (until 2042).

However, the USMCA also considers the possibility that the parties do not agree to extend the life of the agreement in the sixth year. If they don’t, this leads to a periodic review of the treaty between the sixth and sixteenth year. During these ten years, the three countries can agree, at any time, to extend it an additional sixteen years.

These conditions were imposed by the United States during the renegotiation of NAFTA, reflecting the Trump administration’s unilateral and often protectionist vision for North American integration. The conditions also speak to the United States’ interest in ensuring that its partners offer greater concessions in each review.

What to expect from the review

First, the review of the USMCA is uncharted territory and can generate great uncertainty. There is no other trade agreement in which Mexico, the United States, or Canada face such conditions for extension. Uncertainty about the agreement’s permanence goes against the purpose of creating a legal framework that offers security to businesses. The mere possibility of the agreement having its validity cut short can raise doubts for companies about their investment decisions, particularly in Mexico, as it cannot guarantee long-term preferential access to the markets of the United States and Canada.

The trade war between the United States and China and US “nearshoring” efforts have allowed the issue of the agreement’s survival to appear secondary. However, this issue can’t just be swept under the rug. To mitigate this situation, Mexico must work hard to create an economic environment that provides greater certainty than what the USMCA offers and encourage investments even in a context where the agreement does not guarantee its long-term existence.

Second, 2024 will set up what could happen in 2026. The USMCA establishes that in the sixth year since its entry into force, the Free Trade Commission will meet to review its operation and consider any recommendation presented by a party “at least one month before the joint review meeting of the Commission takes place.” The governments of the United States and Mexico elected in 2024 will be responsible for reviewing the commitments made in 2026. Last December, the chief executive officer of the Canadian Chamber of Commerce, Perrin Beatty, urged Canadian Prime Minister Justin Trudeau to start work on this first review in 2024. For Mexico, the inauguration of a new government in 2024 represents an opportunity to carefully analyze its USMCA implementation, make necessary adjustments, and demonstrate its commitment and interest in being part of this agreement.

Any US administration is likely to seek to ensure that its partners meet their commitments. However, in the case of a Democratic administration, expect that the United States will continue to prioritize labor issues under the Rapid Response Labor Mechanism, a dispute settlement provision in the USMCA. For Mexico, the review could lead its partners to point out a long list of noncompliance and pending issues, such as “telecommunications, biotechnology, medical devices, food labeling, energy, customs and trade facilitation, and electronic payment services, among others.” Mexico will also have the opportunity to request that the United States comply with the determination of the USMCA rules of origin panel, which it has so far ignored. Therefore, when the new Mexican government takes office this October, it is vital that it quickly undertakes a comprehensive review of compliance with the USMCA and, above all, work to ensure that the three partners agree to extend the validity of the agreement for sixteen more years.

Third, it is important to establish that a review is not a renegotiation. Recently, some trade experts have talked about the 2026 review as a potential renegotiation of the agreement, which is unnecessary and undesirable. The USMCA is a broad and deep agreement that has barely been in force for three-and-a-half years. According to the USMCA text, reviewing means verifying the operation of the agreement. The treaty does not mention the possibility of renegotiating, which would entail a more complex process, requiring authorization from the US Congress and notification to the Canadian Parliament. A renegotiation would likely require concessions in all areas covered by the USMCA to ensure access to the markets of all three partners. It is crucial that the agreement’s provisions mature before its substance is changed once again. The review should result in a stronger agreement and ensure that the three countries fully meet their commitments.

This will be a year of intense political debates. Migration and drug trafficking will be two key challenges in the Mexico-United States relationship. Although trade has taken a backseat to these issues, Mexico is an important partner in “nearshoring” and strengthening manufacturing in the United States and North America as a whole. As of October 1, 2024, the new Mexican government will have the responsibility and the opportunity to demonstrate its true commitment to the USMCA and to North American trade. Mexico must position itself as a reliable and committed partner in regional integration and try to ensure a smooth 2026 review process. This could be achieved with Mexico advancing public policies and taking actions consistent with the commitments agreed to in the treaty.

Luz María de la Mora is a nonresident senior fellow with the Atlantic Council’s Adrienne Arsht Latin America Center, where she supports the Center’s Mexico work. From December 2018 to October 2022, she served as undersecretary of foreign trade in the Mexican Secretariat of Economy, during which she helped implement the USMCA.

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Following global trend lines, significant shifts in Latin America and the Caribbean—including presidential elections in Ecuador, Guatemala, and Argentina, unprecedented agreements with the Venezuelan government, a worsening security situation in many countries, and a pressing focus on climate change—set the stage for even more change to come in 2024.

Join the Adrienne Arsht Latin America Center as we explore top questions that may shape this upcoming year in the hemisphere.

What will the region’s newest presidents accomplish? How might Latin America’s ties with countries such as China and Russia evolve? What might be the role of the United States in an election year? Will the Caribbean see new, international attention to the specific threats faced by major climatic events?

Take our quiz to find out if you agree with what we’re predicting!

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Freedom of expression includes freedom of the press and access to information to promote social progress and better standards of life. Without these freedoms, democracies are not complete, and other human rights may be in danger. 

Reporters Without Borders (RSF, by its Spanish acronym) defines press freedom as “the ability of journalists, as individuals and collectives, to select, produce and disseminate news in the public interest independent of political, economic, legal and social interference and in the absence of threats to their physical and mental safety.” 

Press freedom is included in the Atlantic Council’s Freedom and Prosperity Indexes, as part of the civil liberties indicator in the Political Freedom Index. Mexico, considered Mostly Free, ranks 82nd of 174 countries included in the overall Freedom Index, with a score of 58.2 out of 100. Regarding Political Freedom specifically, it ranked 88th, scoring 60.8 out of 100. 

Mexico is very different to its neighbors to the north: the United States had an overall score of 79.2 and Canada 87.8, ranking them at 29th and 11th respectively in the Freedom Index. One southern neighbor, Belize, also outperforms Mexico on this Index, scoring 61.9 in 2021, although Mexico came out slightly ahead of Guatemala, which scored 54.3 in the same year.¹

In this chapter, we analyze press freedom in Mexico, considering the socio-territorial particularities and political landscape of the country. Specifically, our analysis includes the presence of drug cartels and transnational criminal organizations (TCOs) throughout the territory, the levels of marginalization, and the Mexican president’s stance on the press. 

Another objective of this chapter is to examine the outcomes of the Protection Mechanism for Human Rights Defenders and Journalists that the Mexican government implemented to confront violence against those who seek to uncover the truth and uphold human rights. In addition to the diagnosis made by the Office in Mexico of the United Nations High Commissioner for Human Rights,² an anonymous interview was conducted for this research with a journalist who requested protection under the Mechanism and experienced, first-hand, its advantages and limitations. 

According to the UN Educational, Scientific and Cultural Organization (UNESCO), fifty-five journalists were murdered worldwide in 2021, seven of them in Mexico.³ Journalists work to strengthen public interests, including freedom of expression, but unfortunately their integrity is often violated in different countries and under different circumstances. The past decade has revealed new trends. Long ago, murders of journalists occurred mostly in countries experiencing armed conflicts; but now, they are regularly committed in countries at peace, in two regions in particular: Asia-Pacific and Latin America. Most of these murders are committed in countries with large social inequalities and/or high rates of violence and crime. 

Article 19 of the Universal Declaration of Human Rights established that everyone has the right to freedom of opinion and expression.⁴ This right includes the freedom to hold opinions without interference and to seek, receive, and impart information and ideas through any media, regardless of frontiers. 

In Mexico, press freedom has been recognized by law since 1917 when the current constitution was enacted; nonetheless, censorship comes in the shape of threats and direct attacks from both sides: organized crime and the authorities. Also, new technologies add a different dimension: on one hand, they offer the possibility of a broad and rapid distribution of information, but on the other, journalists are exposed to online threats and harassment—and even to surveillance, making them and their informants more vulnerable. The low cost and high quality of surveillance technology mean these tactics are very easy and cheap to implement. 

It is also worth noting that most of the media in Mexico are in the hands of big national companies, which makes it difficult to rely on the quality of the news. But not only that, since the election of President Andrés Manuel López Obrador (AMLO) in 2018, he has started a campaign against journalists, whom he accuses of supporting the political opposition, calling them “biased,” “unfair,” and “the scum of journalism.” 

Mexico is considered one of the deadliest and most dangerous countries for journalists; a correlation between levels of organized crime and violence perpetrated against journalists is evident. From 2000 to 2022, 163 journalists were murdered in Mexico, thirty-eight of those during President AMLO’s tenure.⁵ Moreover, most of the killings occurred in states where some of the most prominent drug cartels operate. 

To protect journalists and human rights defenders from continued violence, the Mexican government launched a program in 2012 called the Protection Mechanism for Human Rights Defenders and Journalists.⁶ Although the Mechanism was deployed ten years ago, 2022 became the deadliest year for journalists in that period, proving that it has not been enough to safeguard journalists’ lives. In the following section we will describe the context of Mexican journalism, and discuss the Mechanism’s impact, ten years after its implementation. 

Mexico and its press, in context 

Mexico is a country of 126 million people, with 43.9 percent living in conditions of poverty. Twelve of Mexico’s thirty-two states have more than 50 percent of their population living in poverty.⁷ Also, Mexico is multicultural, with seventy-one indigenous groups representing more than seven million people who speak an indigenous language. Social, cultural, and economic inequalities are, as expected, concentrated in those indigenous groups, and disproportionate numbers live in states where illegal drugs are either produced or transported. Also, it is well known that corruption is a major problem in the country. Even though the current federal government declared it to be one of its top priorities, results show that actions have been too weak. The Mexican Institute for Competitiveness (IMCO), a non-partisan, nonprofit public policy research center, created its own Corruption Risk Index, focusing on public procurement by analyzing 260 institutions from 2018 to 2021. IMCO’s key findings included that federal institutions do not prioritize public bidding processes, that contract documents are often unavailable, and that contracts are frequently awarded to risky suppliers.⁸ 

Along with poverty and corruption, Mexico has another major problem: transnational criminal organizations (TCOs), commonly referred to as “drug cartels” and “drug trafficking organizations” (DTOs). In 2006 the federal government launched a war against DTOs, fragmenting the larger and more stable organizations and sparking greater violence. TCOs are not limited to producing and/or transporting drugs; instead, or in addition, they are responsible for kidnappings, extortion, and inflicting terror on communities. 

With prevailing poverty, corruption, and organized crime, national, regional, and local governance is poor. The press, thus, plays a central role in bringing relevant information on the most important local and/or national issues to public attention. Whether those issues include corruption in some government office or illegal activities of organized groups in a village, journalists are exposed to a very volatile, highly dangerous environment. 

Television is the most important format for news media in Mexico, but there is also radio, journals, magazines, blogs, and social media. There are dozens of national news media outlets, but broadcasting is controlled by Televisa, which in 2021 merged with US-based Spanish-language network Univision. There are seventy daily newspapers, twenty-four radio stations, and forty-four websites, all of them led by the Mexican Editorial Organization.⁹ Grupo Imagen is also an important multimedia conglomerate; other actors include newspapers such as El Universal, Reforma, and Milenio, and the news portal Latinus. There is also Azteca Noticias group. 

In Mexico, a privately owned commercial broadcasting system was developed over the years through the concession of a public good to a handful of private individuals—a flawed structure common to most Latin American countries. This concession system permits the federal government to apply pressure and influence over the press, and in some cases dictate what the press is to say. 

The relationship between the press and the government in Mexico has changed over the centuries. During the colonial period, the first press publications were conceived as an instrument of propaganda for the Spanish monarchy and ecclesiastical elites. Then, in the post-independence period in the nineteenth century, the press was a weapon that helped impose ideologies of groups that contended for power. Different media were controlled through newspaper closures, restricting access to paper, and, of course, censorship. Also, journalists were jailed or tortured. In the twentieth century, government strategies changed—at least on paper—especially after the revolution of the 1910s and the 1917 constitution, when press freedom began to be seen as a synonym for democracy. 

While Mexico’s constitutions of 1824, 1857, and 1917 showed progress in terms of citizenship and democracy, they also made it clear that the existence of laws did not guarantee citizens access to principles, rights, and freedoms. Undeniably, one of the revolution’s main causes and slogans was an electoral demand: “real democracy, no reelection.” However, the Mexican political system for many years was far from democratic. 

For much of the twentieth century, Mexican politics and public institutions were under the quasi-dictatorship of the Institutional Revolutionary Party (PRI). While the PRI allowed the opposition to participate in elections, they retained control over the media, which helped to ensure that the opposition had no chance of reaching any elected office. The PRI dominated for more than seventy years, from the end of the revolution in 1917 until the 1990s, and it maintained a regime that controlled municipalities, governorships, congress and the presidency. The latter office concentrated many constitutional powers, making the holder the central figure of the political system. 

During this period of presidential authoritarianism, the government changed its strategy toward the press and kept journalists close, at least those of them willing to support the regime. Some were even on the payroll of public bodies. As a result, the press became economically dependent on the government, and government influence over the content of the press was very large. 

In 1968 the government demonstrated that there was no freedom of the press nor freedom of expression, after former president Gustavo Díaz Ordaz ordered a brutal repression of the students’ movement, whose most urgent demands were freedom for political prisoners, public dialogue, and full freedom of expression.¹⁰ But, instead of negotiating or acceding to these demands, the result was the Tlatelolco Massacre, in which “hundreds of people were killed.”¹¹ The press, subjugated to the will of the government, stigmatized the students’ movement from the beginning, labeling them as “strikers,” “agitators,” and “terrorists.”¹²

After this dark episode in Mexican history—and confronted with the anger of the people and the loss of credibility—the national press began a period of professionalization that created space for independent and critical publications. However, it should be understood that professional, autonomous, free, and critical journalism has had to develop despite the media system and its elite owners and not because of them. 

The twenty-first century brought major commercial competition and political democratization. New electoral laws stated that political parties must be provided with resources to advertise themselves and the media was obliged to cover campaigns fairly and free of costs. But this just meant that media owners and publishers simply benefited from having a more diverse range of patrons. Social media has also provided cost-free opportunities to be informed, and this has become a challenge for the government-supported press, very often criticized for its bias and lack of objectivity. 

Despite some improvements, critical journalism has always had to paddle upstream to sustain its dissident model. Of course, this kind of press tends to face threats and violence, with aggressions coming from two sides: the government and organized crime. 

Press freedom and violence 

RSF present the annual World Press Freedom Index to compare the level of press freedom enjoyed by journalists and media in 180 countries and territories.¹³ The 2022 index, which comprises the period from January to December 2021, ranks Mexico at 127th with a score of 47.57 out of 100, thus classifying the situation for journalists as “difficult.” This did, however, represent an improvement on the 2021 index, in which Mexico ranked 143rd. Considering the events that took place in 2022, it seems very likely that the country will slide back down the rankings in the 2023 index. 

Physical threats and intimidation are the most widespread form of attacks against journalists, followed by physical assaults and kidnappings.¹⁴ Also, among the most recent and alarming challenges are digital attacks against journalists and their sources, harassment through social media, and unmonitored covert surveillance. As the Inter-American Commission on Human Rights says, the most extreme and violent method of curtailing the right to freedom of expression is the murder of journalists. This annuls the victim’s right to life, and entails other consequences besides: it has an intimidating and silencing effect on journalists’ peers; it affects the rights of the victims’ families to psychological and moral integrity; and it violates the rights of individuals and soci-eties to seek and receive information.¹⁵ 

The World Press Freedom Index comprises five indicators: political context, legal framework, economic context, socio-cultural context, and safety. What should be noted is that in the 2022 index, Mexico was ranked 179th out of 180 in the safety index—unsurprising, given that Mexico was the deadliest country for journalists for four consecutive years.¹⁶

From the year 2000 to 2022, 163 journalists have been murdered, most of them men.¹⁷ In addition, twenty-seven journalists are registered missing as of January 2023,¹⁸ including Cándida Cristal Vázquez, who disappeared on July 21, 2022 and who worked as a reporter and radio newscaster in Mazatlán, Sinaloa.¹⁹ Between AMLO becoming president in December 2018 and the end of 2022, thirty-eight murders and five disappearances have been counted; in 2022 alone eighteen journalists were murdered.²⁰ 

Also, the Press Emblem Campaign (PEC)—an international, independent nongovernmental organization dedicated to media safety and rights—found in its 2022 annual report that, along with Ukraine, Mexico was the most dangerous country in 2022 for journalists.²¹

In Mexico, as in most parts of the world, no one is held accountable for journalists’ murders. The Committee to Protect Journalists (CPJ) in its 2022 Global Impunity Index says that the vast majority of journalists’ killers continue to get away with murder. The index ranked Mexico in sixth place for impunity, and it would be even higher but for the index calculation factoring in Mexico’s relatively large population. Despite this, the CPJ considers Mexico to be the western hemisphere’s most dangerous country for journalists as it has the most unsolved journalist murders in the past ten years with twenty-eight cases.²² 

Political violence 

It is true that the news media has lost people’s confidence and that we live in the era of “fake news.” Young people now opt for social media as their main source of news, replacing journalists with influencers. But in Mexico, the connection between journalism and the public has weakened even further with the president’s daily attacks. 

Every morning, from Monday to Friday at 7 a.m., AMLO gives press briefings known as the mañaneras where he speaks about what he considers are some of the most relevant issues concerning Mexico.²³ He includes sections regarding security, impunity, and others, including fake news in a segment called “Who’s Who.” In this section, the president and the web content coordinator at La Jornada de Oriente, Ana Elizabeth García Vilchis, point out journalists and publications that they consider unprofessional and articles they consider untrue. 

Some of the journalists who have been name-checked in these briefings have indicated that they have been harassed online after being criticized by the president. In response, they accuse the president of using his briefings as a way to silence the independent press. But the president has his own point of view and classifies the media into two groups: the “good,” the media who cherish his pol-icies; and the “bad,” who he labels as neoliberal, corrupt, and elitist. 

President López Obrador has singled out several journalists and media outlets for particular criticism, most frequently the Reforma newspaper. He has even labeled foreign press like the New York Times and the Washington Post as “unethical.”²⁴ Some journalists interviewed by the CPJ in 2019 agreed that AMLO fosters a hostile atmosphere and that his comments seem like aggression or threats. Another freelance journalist said that AMLO, even if “he has always been somewhat authoritarian,” is better than previous governments, especially in terms that “he respects what the media can publish.”²⁵ 

On December 15, 2022, after the attempted murder of renowned Grupo Imagen journalist Ciro Gómez Leyva, a group of 180 journalists, reporters, editors, and other media professionals signed a letter accusing the president of being “politically responsible” for the crime and demanding an end to the harassment of their profession.²⁶ The journalists that signed the letter are mostly from Grupo Imagen, TV Azteca, Latinus, El País, Reforma, El Universal, ADN, and Foro TV and identify themselves as critical journalists, but some others—including the president—consider them old servants of the PRI regime. So when AMLO responded to their letter during the mañanera, he accused the signatories of being “spokespeople for conservatism” who served special interests, and criticized them for their lack of balance regarding AMLO and his regime.²⁷ He even took the chance to point out that there is a fierce campaign against his government, and that the attempted murder may have been a bid to try to destabilize the government.²⁸ He also commented that information should not be left in the hands of journalists, and assured viewers that he was not involved in the attack, and that he does not lead an oppressive state. 

Some of what AMLO says is true: the press does sometimes serve the interests of elites and powerful groups. But two days prior to the attempt on Gómez Leyva’s life, AMLO said that listening to Gómez Leyva’s program was “bad for the health” and that “if you listen to them too much, you may even get a tumor in your brain.”²⁹ At the time of writing (January 2023), no arrests have been made relating to this crime but the Attorney General’s Office of Justice of Mexico City is working on the case. Anyways, the message for the entire press after this attempt is that prominence does not guarantee security. 

Mexican authorities tend to say that the aggressions against journalists are not related to their work. However, President López Obrador launched in 2021 an open attack not just on journalists, but on ARTICLE 19, an international organization created to docu-ment censorship, to defeat the censors, and to help the censored. López Obrador said during a mañanera that the organization—and other “conservative” groups—was waging a “conservative” campaign against him. ARTICLE 19 responded with an article saying that the attack highlights his “grim record on impunity,” with 98 percent of journalist killings going unsolved.³⁰ It should be noted that the term “conservative” is, for AMLO, any person or policy that opposes or differs from his goal of “transformation.” It does not relate to any political or economic stance. 

Violence and electoral violence related to transnational crime organizations and drug-trafficking organizations 

Mexican transnational criminal organizations (TCOs) are present in 70 percent of the country and participate in a wide range of criminal activities beyond drug trafficking.³¹ Before 2006, there were only four dominant drug-trafficking organizations (DTOs), but after former president Felipe Calderón Hinojosa’s war on drugs, they fragmented into nine major groups: 

• Beltrán Leyva Organization 
• Cartel Jalisco New Generation (CJNG) 
• Gulf Cartel 
• Juárez/Carrillo Fuentes Organization 
• La Familia Michoacana (The Mexican Family) 
• Los Rojos (The Reds) 
• Los Zetas and Cartel del Noreste 
• Sinaloa Cartel 
• Tijuana/Arellano Félix Organization

The CJNG is the group with the most presence and fastest growth in the country. It controls various demarcations in the east and west, and is increasing its influence in northern and southern states. The current criminal landscape in Mexico is dominated by the battle between the emerging CJNG, which bases its operations on the trafficking of synthetic drugs, and the Sinaloa Cartel, historically the dominant organization in Mexico. 

These groups also act as umbrella organizations for many smaller local criminal groups; counting all of these, the number of TCOs grows into the hundreds. Many of them are involved in extortion, human smuggling, arms trafficking, oil theft, kidnapping, and homicide, among other crimes. These smaller crime groups are part of the big cartels’ strategy, dubbed “proxy war,” through which the national cartels control the distribution of drugs in various parts of the country. 

Organized crime is characterized by the fact that it seeks to neutralize governments and the state through corruption, preventing the investigation, arrest, prosecution, and detention of its members or their profits. For this reason, part of the DTOs’ profits is used to coerce public servants, intimidate politicians, and influence elections; criminal organizations are responsible for most of the political violence at the local level. 

During the 2017–18 federal and local electoral process, when more than 3,400 positions at the local and federal level were being contested, including the presidency, a total of 1,203 aggressions against politicians and non-elected officials took place. These resulted in 523 murders: 152 politicians and 371 public employees. This was the most violent electoral process in Mexico’s recent history.³²

The second most violent electoral process occurred just a few years later, during the 2020–21 electoral process: 1,066 aggressions resulted in 265 murders, most of them public servants and politicians, and in some cases their colleagues and relatives. It is worth noting that 75 percent of the candidates and contenders attacked were competing for municipal offices, and that 75 percent were candidates of the opposition to the state government. The state of Veracruz experienced the worst aggression of all, with 117 cases.³³

DTOs have sought to influence elections in a number of ways, including violence at polling places, intimidation and coercion of voters, and control of candidate selection—for instance, via campaign financing. This last point is a major problem, and includes issues such as unreported donations and the use of illicit resources to finance political campaigns, to mention just two avenues for corruption. This contributes to Mexico’s ranking of 64th in the Perception of Electoral Integrity Index.³⁴ By controlling municipal government DTOs can access privileged information and public resources and obtain protection from the municipal police. 

On election day in 2015, ARTICLE 19 registered twenty-seven aggressions against journalists covering the electoral process in different Mexican states.³⁵ These aggressions included equipment theft, reporters being illegitimately asked to delete their photos, threats, physical aggressions, identity theft on social media, information blackout, arbitrary detentions, and cyber-attacks on news portals. The five states with the most cases were Oaxaca (five), Puebla (five),³⁶ Veracruz (four), Guerrero (three), and Campeche (two). 

Also, on the 2016 election day, the same organization documented nineteen aggressions that included harassment, arbitrary detentions, intimidation, threats, and physical assault. The states where the aggressions occurred were Chihuahua (five), Mexico City (four), Sinaloa (four), Aguascalientes (three), Puebla (two), and Veracruz (one). In Veracruz, the day prior to the election, journalist Jorge Sánchez, director of the local newspaper La Unión de Medellín, received a call with a death threat. Sánchez is part of the Protection Mechanism for Human Rights Defenders and Journalists and the son of journalist Moisés Sánchez, who was murdered in 2015 in Medellín de Bravo municipality in Veracruz.³⁷ 

Other media outlets whose staff were attacked during the 2015 and 2016 electoral processes included La Unión de Medellín (Veracruz); El Sol de Puebla, Status, and e-consulta (Puebla); Yradiamos, Notimex, and El Heraldo de Aguascalientes (Aguascalientes); La Revista NCG, El Diario del Noroeste, Akronoticias, and Más Noticias (Chihuahua); Noroeste (Sinaloa); and Reforma (Mexico City). 

In the 2015 electoral process, four aggression cases were perpetrated by political party personnel or activists, and in 2016 journalists were harassed and intimidated, also by political party employees or members. On election day 2021 (June 6), sixteen aggressions were registered against journalists and a total of fifty-five since April 19, when ARTICLE 19’s hashtag to document such incidents was activated: #RedRompeElMiedo.³⁸ Again, most of the aggressors (50.9 percent) came from political parties, and their actions included harassment, intimidation, threats, physical aggressions, and information blackout.³⁹ This time, the abuses were registered in Baja California (six), Aguascalientes (five), Jalisco (five), Guanajuato (five), Guerrero (four), Sinaloa (four), and Yucatán (four). 

Many local journalists report the crimes of these DTOs, as well as corruption, and the links between politicians and criminals. Thus, it is not surprising that violence against journalists increases during electoral processes, nor that there exists a direct correlation between this violence and the presence of drug cartels in a territory. 

Also, we can see that the states with the highest rates of journalist murders are among the poorest in the country. Take the example of Veracruz, which, during Javier Duarte’s governorship (December 2010–November 2016), was the most lethal for communicators with eighteen journalists killed.⁴⁰ These are the territories where TCOs tend to settle, due to geostrategic characteristics. 

The following table presents the five states in which most murders of journalists took place between 2000 and 2022. 

The Mexican government and Mexican media outlets often tally homicides differently due to restrictions placed on reporting, and crime groups’ attempts to cover up the numbers and identities of their victims (although other times they show off their crimes as a strategy to intimidate or to incriminate another group). Also, there are the so-called “silent zones” that neither the government nor journalists can reach. With impunity being the norm after journalists are killed, the result is silencing and self-censorship of communicators. 

At this point, there is something that we should highlight: most of the journalists killed in recent years worked in local news. Similar to the rest of Latin America, 95 percent of journalist killings are committed in small cities, rural areas, transit areas, or border zones.⁴¹ Many of those murdered were covering security and political subjects and were the victims of organized crime. Sometimes journalists receive death threats before being killed, like Lourdes Maldonado López, who was killed in January 2022 and had even used a presidential mañanera in 2019 to appeal for the government’s help with protection.⁴²

As we can see, there is a fine line between the two “sides” that exercise violence against journalists and communicators. Corruption makes it hard to know what comes first, but what is a fact is that most of the recent murders, disappearances, and kidnappings of journalists are concentrated in states where organized crime has a strong presence. As noted by the Inter-American Commission on Human Rights, the journalists who are targeted most often are those covering local news on corruption, drug trafficking, organized crime, public safety, and related affairs.⁴³

Some of the journalists who are subject to violence and intimidation may opt to align with one powerful interest or another, which sometimes means failing to report or remaining silent. But, for those willing to keep covering sensitive news after receiving threats, the Protection Mechanism for Human Rights Defenders and Journalists was developed. This mechanism is discussed in the following section. 

The Protection Mechanism for Human Rights Defenders and Journalists 

As the state (i.e., the Mexican federal government) has failed to implement an effective response to criminal organizations, and as it is responsible for protecting, promoting, and guaranteeing human rights, including journalists’ rights, in 2012, it created the Protection Mechanism for Human Rights Defenders and Journalists. The Mechanism is a federal agency under the Ministry of the Interior backed by the Law for the Protection of Human Rights Defenders and Journalists, issued in the same year. 

Although it protects journalists and human rights defenders, this chapter will focus only on journalists. The Mechanism recognizes a journalist to be: 

Individuals, as well as public, community, private, independent, university, experimental, or any other type of communication and dissemination media, whose work consists of collecting, generating, processing, editing, commenting, expressing opinions, disseminating, publishing, or providing information, through any means of dissemination and communication that may be printed, radio, digital or image.⁴⁴

The Mechanism pledges to guarantee the life, safety, and personal integrity of journalists and human rights defenders through three types of measures: 

• Urgent Protection Measures: actions and means to immediately safeguard the life, integrity, freedom, and security of people, to be implemented within nine hours of the request. 
• Protection Measures: actions to protect from risks and safeguard the life, integrity, freedom, and security of people, but are not required to be implemented in a defined period. 
• Preventive Measures: actions and means to prevent the completion of the aggression. 

When a journalist reports an aggression or threat, the Mechanism evaluates the risk and designs a protection plan. Until 2019, when the Office in Mexico of the United Nations High Commissioner for Human Rights, at the request of the Undersecretariat for Human Rights of the Ministry of the Interior, published its diagnosis and recommendations to strengthen the Mechanism, 903 people were under its protection.⁴⁵ This number included both human rights defenders and journalists. 

In summary, the recommendations from the United Nations High Commissioner for Human Rights included the following: 

• The President’s Office and the Ministry of the Interior must serve as examples for state governments by fully adopting the recommendations.
• The Mexican state and the state governments must ensure personnel and financial resources for the protection measures and the daily operation of the Mechanism.
• It would be desirable to have an effective system to monitor the correct implementation of the protection plans and promote relevant sanctions when it detects non-compliance with the corresponding obligations. 

As the principal approach of the Mechanism is avoiding the realization of aggression or damage, it is expected that 2,400 people would need protection from the Mechanism by 2024. This number may be untenable and will make the Mechanism more inefficient; there is already insufficient personnel to process the files of those that currently have protection. 

Noting that the Mechanism did not address the root causes of risk, the UN High Commissioner also recommended that a new paradigm be adopted: a prevention approach. Also, the report recommended that the causes of risk should be eliminated, as the Mechanism cannot be the sole response to violence against human rights defenders and journalists. 

For the development of this chapter, we interviewed a journalist who joined the Protection Mechanism after receiving death threats in 2017 and 2019. This journalist sees the Mechanism as a positive—but small and reactive—response to a complex situation. In his view, it was created by the federal government to serve a privileged few, considering the general state of violence that the whole country lives in. 

He says his life changed entirely during the “five years, one month, and four days” that he lived under protection of the Mechanism. He was accompanied by security escorts, although this was “a daily reminder that you are at risk,” and meant that there was no privacy in his life. He added: “Even to go with a lady to the hotel, you go with an escort.”⁴⁶

The interviewee told us that, to protect their lives, some colleagues were transferred from different parts of Mexico to safe houses in Mexico City, under the protection of the Mechanism, although many had lost their jobs as journalists as a result. However, in spite of the Mechanism’s limitations identified by this interviewee, and despite the difficulties that protection imposes on one’s personal and professional life, he is clear that many of his colleagues would be dead without its protection. 

Another limitation this interviewee finds in Mexico is that, despite the risky situation in which journalists live, the media sector itself is not prepared to respond. There are no protection protocols or psychological assistance, no courses are provided, and they do not know where to go or what to do in case of imminent danger. He also says that sometimes media organizations promise support, but it never reaches the journalists. 

Even if there are many limitations due to lack of funding and other operative deficiencies, the interviewee recognizes the Mechanism as an important measure to protect journalists and human rights defenders. He directs most of his complaints against the prosecuting authorities, specifically the Special Prosecutor’s Office for Attention to Crimes Committed against Freedom of Expression, which has not only failed to advance investigations in his own case, but has even attempted to close it. The interviewee says that the Mechanism should not exist and instead, the government should provide access to justice: “It should be legislated so that threats become a serious crime. Without justice, there is no way the Mechanism can protect all human rights defenders and journalists.” 

It seems ironic that López Obrador’s political strategy against DTOs is “hugs, not bullets,” which means he would not pursue a war against the TCOs but would instead target the social conditions that allow criminal groups to thrive. But in the first days of 2023, two violent encounters with mafia leaders left more than a dozen dead and the city of Culiacán (Sinaloa) as a war zone for a second time. Even more ironic is that AMLO’s morning press conferences are regularly used to single out journalists instead of criminal leaders. 

Journalists are victims of violence from both the government and the DTOs. As our interviewee and the United Nations High Commissioner for Human Rights stated, there must be a focus on addressing the root causes of violence and, in the meantime, the Protection Mechanism must be strengthened so that freedom of expression agents can remain alive. 

Final thoughts 

Mexico is experiencing a grave human rights crisis. Violence faced by human rights defenders and journalists on a daily basis, which takes place in a context of practically absolute impunity that incentivizes its systematic reproduction, is one expression of the critical situation. Violence against journalists and its consequent impact on freedom of the press has been studied primarily as the result of two major underlying problems in Mexico: impunity, and the failed strategy against violence, mainly exerted by TCOs. 

A way to put an end to impunity is to build greater capacities—in quantity and quality—in law enforcement agencies, with better investigative capacities. Such capacity development involves political will and capital, large sums of public funds, as well as time and patience. But these kinds of actions are not enough when active impunity also exists, that is, a series of actions carried out with the explicit purpose of undermining investigations and not generating results, in which case it can be useful to implement an international mechanism for supervising the administration of justice in Mexico. 

Concerning the failed strategy against violence, the security measures adopted by the administration of Andrés Manuel López Obrador, despite the assurances that his strategy was to address the root causes of violence, have been to keep the armed forces as the main tool of public security in the country. It is necessary to strengthen the local police and leave national security challenges to federal bodies, removing the army from its current function. As long as these issues are not solved, violence against journalists will be a matter of statistics: Which year was worse? Which electoral period was more violent? Strengthening local police corps requires better salaries and social security nets, more—and more modern—equipment and weapons, continuous physical and use-of-force training, among others. Such investment of resources will pay in the long run through more secure communities. Therefore, politicians and decision makers must explain to society at large about the time needed for objective improvements to appear. But, since it seems hard to get to a point where the human rights violations crisis in Mexico—in which violence against journalists is immersed—is fully addressed, or that deep reforms are made to the prosecutorial system, it is necessary to keep and strengthen the Protection Mechanism to prevent greater damage. As the Mechanism is based on voluntary adherence, it cannot realistically cover the entire at-risk population. The Mechanism should have a strategic, proactive component coming from the secretary of the interior: if, through a risk analysis, it is found that a journalist or group is at high risk, the Mechanism would be automatically activated. 

But measures also need to become more sensitive so that the people under protection do not lose their jobs, their privacy can be respected, and their mental health is taken care of. Media companies need to be ready to act in case of risk: they must have their own protection protocols and provide training that allows journalists and media workers to develop their roles in safer conditions. And, when things become risky, media companies ought to do whatever is necessary to protect their colleagues and collaborators. 

It should be pointed out that a system of concessions and awards has deformed the performance of the media in Mexico. Suffice it to say that many media outlets cover the morning news briefings, no matter how absurd they may be, and no matter how much their own journalists are singled out in AMLO’s “Who’s Who” segment; not to do so would risk losing the concession. Journalists and human rights organizations have said that these mañaneras by the president and his spokespeople aggravate journalists’ situation and heighten their risk. 

Indeed, the widespread use of social networks and the constant bombardment of information makes it more difficult to filter content. As we have seen, fake news and disinformation have multiplied during the pandemic, and in similar crises like the 2017 earthquakes. But there are professional tools like Verificado—with no ideological bias—for citizens to discriminate real news from fake news. 

Freedom of expression is not complete without freedom of the press. As long as journalists and human rights defenders are subject to violence, we can conclude that neither freedom nor prosperity can be fully attained. 

Sergio M. Alcocer is president of the Mexican Council on Foreign Relations (COMEXI); former undersecretary for North America in the Ministry of Foreign Affairs; professor at the National Autonomous University of Mexico (UNAM) and part-time professor at the University of Texas at San Antonio. 

Jeziret S. González is a member of COMEXI and columnist with MVS News. 

The post Violence against journalists: A tool to restrict press freedom in Mexico appeared first on Atlantic Council.

Debate over the relationship between economic and political freedom and the prosperity of a society is not new. Scholars and policymakers have long questioned whether prosperity is the fruit or the seed of a free society. Are the two mutually determinant? In the long run can countries attain prosperity without freedom? Can freedom lead to an unprosperous society? In this context, the Atlantic Council’s Freedom and Prosperity Indexes are a powerful empirical tool, allowing us to consider these questions using reliable and comparable data. The Indexes have strengthened debate and interest over the relationship between freedom and prosperity in countries as varied as China, which they currently catalog as Mostly Free in economic terms but Unfree in political terms, and India, which is Mostly Unprosperous despite being Mostly Free in political terms. In these discussions the Indexes serve as key reference points to inform real-life policy debates and policy making. 

Still, there are cases in which our understanding of the prevailing conditions in a given country can benefit from additional information. This essay uses the 2022 Freedom and Prosperity Indexes (“the Indexes”) to analyse the case of Mexico, a country currently catalogued as Mostly Free and Mostly Prosperous. It attempts to demonstrate how the Indexes do not yet capture certain dimensions of democratic retrenchment and institutional deterioration now being seen in countries across the globe. Some of these dimensions are easy to see, while others are more subtle. The goal of this paper is to demonstrate the benefits of and need for an early warning system that can enable a more accurate analysis of the decline in freedom and prosperity in certain countries. To that end, this paper attempts to provide a qualitative extension to the Index data, drawn from recent developments in Mexican politics, in order to examine essential nuances that lie beyond the country’s current categorization. This exercise is particularly relevant as Mexico has, since 2018, experienced a wave of populism and polarization that has proven detrimental to political and economic freedoms and, ultimately, to democracy itself.  

It is important to note that Mexican democracy was far from perfect prior to 2018, the year in which the current government entered office on a single six-year term without the possibility of reelection. The country was facing profound challenges in the form of a culture of privilege, corruption scandals, and brutal inequality. However, it also enjoyed low but sustained economic growth, strong and well-managed public finances, and a clear route to unlocking higher productivity and achieving its full growth potential through sectoral reforms. But despite the expectations of many, Mexico has since 2018 seen a weakening of the rule of law and checks and balances, increased militarization of state functions, a lack of economic growth, and increased poverty levels. These trends in themselves constitute a worrisome backsliding of both freedom and prosperity.¹

By analysing the Mexican case, I will provide support for a better understanding of the correlation between these two factors and the potential risks to freedom, particularly in many countries that are considered Mostly Free. 

The case of Mexico suggests that the Indexes’ methodology is indeed useful in identifying and weighing the elements that make a country free and prosperous, and in providing a sophisticated standard to compare countries around the world. However, it also highlights the need to understand and assess additional rele-vant trends in order to deepen the analysis beyond the Indexes’ primary results. Qualitative analysis of factors that point to the potential for an erosion of freedoms can enrich the definition of the Freedom Index’s four categories (Free, Mostly Free, Mostly Unfree, Unfree). For example, a Mostly Free country—the most common category among the 174 countries included in the Index—might very well be on the brink of becoming Mostly Unfree due to circumstances that are best understood when the Index is complemented with qualitative information. 

Freedom, in the end, is fragile. Moreover, backsliding in democracy and freedom could well lead to a significant reduction in prosperity, whether as a result of a deterioration in the certainty that comes with clearly enforced laws and robust institutions, the diminished state capacity that institutional deterioration implies, or both. A closer look at a country’s particular features at specific moments will help us to better interpret the Indexes and render them even more useful. In sum, this essay aims to shed light on the shades of gray within the classification of Mostly Free countries of the Index and encourage analysts and policymakers to pay closer attention to countries when alarm bells over the future of freedom and prosperity start to sound. 

Mexico: Shades of gray in freedom 

Mexico ranks 82nd among 174 countries in the freedom component of the Freedom and Prosperity Indexes and is categorized as a Mostly Free country, with 58.2 points. But that aggregate score doesn’t tell the whole story about economic, political, and legal freedoms in Mexico today. When broken down by category, the Index ranks Mexico as 52nd in economic freedom (77.3 points), 88th in political freedom (60.8 points) and 122nd in legal freedoms (36.4 points).² A complementary qualitative analysis of recent political developments in Mexico allows us to better understand the processes taking place behind the scenes of the Index’s aggregate data. Facts on the ground suggest that freedom in Mexico is at risk due to an overt attack on institutions, checks and balances, and the rule of law. The Mostly Free tag should thus be interpreted with caution. To better understand why, it is necessary to look closely at the change of government in 2018, and what has happened since. 

In July 2018, Andrés Manuel López Obrador, widely referred to as AMLO, was elected president after three decades of political activism that turned him into the most well-known social leader in the country. While he was elected on the promise to “end corruption” and deliver well-being, or bienestar, he notably did not promise to protect individual freedoms or emphasize the importance of the rule of law. In fact, his view of checks and balances had been revealed years earlier in what became a common refrain in his speeches and at campaign stops, referring to what he called the “abusive and neoliberal” administrations of the past: “To hell with their institutions!”³

As president, López Obrador has also increasingly resorted to a narrative that minimizes the importance of economic growth and instead emphasizes the relevance of “happy people.”⁴ In his binary milieu—characteristic of populist leaders—there are “the people” on one hand, who he says he represents and defends, and the political and economic elites on the other, who he characterizes as “conservative,” “neoliberal,” “racist,” and “classist.”⁵

It is important to recognise that AMLO came to power in a social environment marked by profound disenchantment with democracy and the political and economic elite that had governed the country for the previous thirty years. The period between 1988—when Mexico’s democratic transition began—and 2018 was driven by a strategic vision shared by successive governments that consisted of integrating the country with the world economy (mainly via North America); allowing privatization in key sectors such as banking and telecoms; developing independent and technical bodies to provide checks and balances; and framing a nascent multi-party and pluralistic democracy based on institutions, laws, and regulations. 

Although Mexico did indeed profoundly reform its economic, political, and social landscape for the better, a series of significant failures that excluded large portions of the population from prosperity and allowed ample space for corruption and abuse created both enormous disparities and widespread resentment. 

AMLO’s polarizing discourse capitalized on built-up anger and frustration, and he won a landslide victory in the 2018 presidential election. López Obrador gained more than twice as many votes as his closest challenger, with a record-breaking 30 million votes in a country of 130 million inhabitants and 56 million voters.⁶ The scale of the mandate allowed AMLO to deploy an ambitious government plan that has, in many ways, negatively affected the environment for freedom and prosperity. 

A first step came before AMLO came to power. On October 29, 2018, the then president-elect announced that he would cancel the ongoing construction of a new airport in Mexico City, a flagship project of the previous administration that, according to López Obrador, embodied the corruption of the “neoliberal” regime.⁷ To support the cancelation, AMLO’s party, MORENA (National Regeneration Movement), organized a public consultation to ask citizens if they agreed with the decision. This marked the beginning of the administration’s habit of disregarding existing laws and regulations, and it happened before López Obrador was even sworn in on December 1. For its survey, MORENA decided not to abide by the Federal Law on Public Consultations which, among other things, mandates that public votes be conducted by the National Electoral Institute (INE) in order to be binding. Instead, a “citizen council” was put in charge of the vote, with funding left to “voluntary contributions,” mainly from legislators loyal to the president-elect. Despite the fact that less than 1 percent of Mexicans participated in the exercise, the future government proclaimed that “the people” had spoken in favor of canceling the airport. 

The political goal of the episode was to send a strong message that previous economic and political elites were no longer in charge, and that even large-scale and well-advanced projects could be canceled at the new regime’s whim, without concern for existing laws or market expectations. The cost of canceling the airport—which had been under construction for at least four years by that point—has been estimated at 126.7 billion Mexican pesos (approximately US$6.3 billion).⁸That doesn’t include the opportunity costs in terms of development potential that such a large-scale project could have delivered for a globally integrated economy such as Mexico’s, the fifteenth largest in the world. Before changing any law and prior to assuming power, the new government had already seeded uncertainty and damaged trust among domestic and international private sector actors. This event, on its own, will have lasting and damaging effects on investment decisions for Mexico, a key determinant of present and future prosperity. The cancelation of the airport was likely one of the reasons that in 2019, López Obrador’s first year in office, Mexico’s long-term trend of low but constant economic growth was disrupted. The country’s economy contracted by 0.2 percent that year, even before COVID-19 started to affect the situation. Moreover, by throwing away public resources already invested in the airport and demonstrating that contracts could be broken at will, it became clear from the start that the rule of law in Mexico was under serious attack, and that economic uncertainty would be the order of the day. It should come as no surprise that, according to data from INEGI—Mexico’s National Statistics Institute—private investment in the country has stagnated since 2018, as fixed gross investment was 11 percent above its 2013 level in July 2018, and it now stands 12 percent below.⁹ The downward trend started well before the pandemic hit and the country’s investment has not yet recovered. 

After the new government took office in 2018, a process to capture or diminish the power of autonomous institutions, the main checks and constraints on presidential power, began. Over the course of Mexico’s democratic evolution, a number of autonomous and technical institutions have been created to serve a wide range of functions and goals: quality statistical and geographical information (National Institute of Statistics and Geography, INEGI); the organization of free and fair elections (Federal Electoral Institute, now INE); safeguarding human rights (National Human Rights Commission, CNDH); ensuring transparency and accountability (National Institute for Transparency, INAI); regulating markets with technical autonomy (Federal Economic Competition Commission, COFECE; Federal Telecommunications Institute, IFETEL; and the Energy Regulatory Commission, CRE, among others); and ensuring purchasing power stability (Central Bank, Banxico, which was granted autonomy in 1994). The new regime well understood that these institutions were put in place to limit power, to create boundaries for government action, and to offer technical considerations for the regulation of markets. To weaken many of these and other autonomous agencies, López Obrador has used his legislative majorities to appoint unfit loyalists to lead some of them or fill vacancies on their boards, hobbling their institutional and decision-making capacity. 

These steps have already had significant effects. For example, a truly independent Human Rights Commission¹⁰ would have scrutinized the creation of a new Guardia Nacional (National Guard), under the command of the military, meant to control public safety. This key project of López Obrador’s contravenes the civilian nature of the Mexican state and is now being challenged in court as unconstitutional.¹¹ As a further example, López Obrador has de facto eliminated private sector investment in the energy sector, especially in clean energy and oil exploration and extraction partnerships, a move that is being challenged by the United States and Canada within the United States-Mexico-Canada Agreement (USMCA) dispute-settling mechanism.¹² This could have been prevented if COFECE and CRE had been allowed to maintain their autonomy, independence, and respect. Another strategy to prevent the proper functioning of independent agencies has been to leave vacancies open without making new appointments. In fact, in November 2022 the Mexican Supreme Court ruled that the failure to name candidates to lead COFECE was in violation of the constitution.¹³

The administration’s efforts to either eliminate or co-opt the sources of control on its power are evident enough,¹⁴ but perhaps too subtle to capture on a quantitative index. Changes in the way institutions are formed and operate affect the way freedom is experienced on a daily basis by both the Mexican people and stakeholders with interests or investments in the country. But these issues are often not reflected in constitutional or legal changes that can be easily identified. Instead, they are part of a series of new practices, and a political environment that favors discretion and personal politics over the predictability of laws and institutions. 

Furthermore, the relationship between Mexico’s three branches of government (executive, legislative, and judicial) suggests that checks and balances on presidential power are weakening across the board. AMLO has attacked the autonomy of the Mexican Supreme Court, made questionable appointments to the bench, and even publicly acknowledged that he has exerted pressure on the court on a range of issues in an effort to tip the scales in favor of the government’s interests and vision.¹⁵

Meanwhile, MORENA and its allies, the Labour Party, Green Party, and Social Encounter Party, have enjoyed a comfortable majority since 2018 that allows them to modify laws and regulations and to approve the annual budget without support from the opposition. Mexico’s legislature had actively served as a check on presidential power since 1997, when Ernesto Zedillo became the first president whose party did not have a majority in Congress. Today, it has been relegated nearly to the role of rubber-stamping the administration’s proposals. The most consequential pieces of legislation over the last four years have been drafted by the government and approved by Congress “without changing a comma,” in accordance with López Obrador’s wishes.¹⁶ The only backstop has come in the Senate, where the president lacks the supermajority needed to change the constitution without help from opposition legislators. 

In the context of scarce and increasingly expensive capital to finance development projects, which are essential for the creation of prosperity, the budgetary freedom that the government enjoys as a result of its congressional majority has enabled it to prioritize three pet projects: the Tren Maya, the Refinería Olmeca, and the AIFA airport. All three projects merit serious scrutiny in terms of their financial sustainability, contract transparency, and environ-mental impact. 

The Tren Maya (Mayan train), originally budgeted at US$6 billion, is now expected to cost around US$15 billion and rising¹⁷ and has raised concerns over the potential destruction of the Mayan rainforest, significant environmental damage to its ecosystem, and the threat it poses to both local communities and travelers, given the fragile underground system of caves and rivers that lies under the Yucatán peninsula.¹⁸ Despite the fact that the train project lacks legally required environmental assessments, and that the courts have ruled in favor of suspending construction on several occasions, the government has used legal sleights to continue building. Compounding the problems, a number of private investors withdrew their support for the project, assessing it to be financially unviable. This is why Tren Maya has become a “pet project,” funded by tax resources.¹⁹

The Refinería Olmeca (Olmec refinery), an oil processing facility built over a swamp in the president’s home state of Tabasco, was inaugurated before it started to function, and has flooded every time a strong storm washes over the region. As of October 2022, the project was 46 percent over budget and has yet to refine a single drop of oil.²⁰ The AIFA airport (Felipe Ángeles International Airport), meanwhile, was built by the military with little to no transparency, was exempt from public procurement regulations, and is a long way from proving itself either operationally and economically viable.  

When looking at how free Mexico really is, the significantly increased role of the military in public life is also worth consideration. Giving the armed forces the power to participate in a wide range of productive activities, in addition to control over domestic security, is in direct conflict with Mexicans’ fundamental freedoms. For almost the last century, Mexico’s military has been in charge of national security and helping respond to natural disasters such as earthquakes and hurricanes. This has been in keeping with the role assigned by Mexico’s constitution to the country’s Secretariat of Defence (SEDENA) and Navy (SEMAR). Starting with President Felipe Calderón (2006–12) and through President Enrique Peña Nieto’s term (2012–19), the military also collaborated with civilian authorities in limited ways to ensure public safety, especially in operations to capture drug kingpins and destroy drug labs or plantations. This was done under a temporary legal exception, the constitutional support for which was questioned by advocacy groups that were hopeful the military’s role in public safety would end under AMLO’s leadership. However, despite running a campaign that promised to “return the military to the barracks” and “strengthen civil police and security agencies,” the president has dramatically changed his position since coming to office.²¹ The military has taken over responsibility for public safety through the newly created Guardia Nacional and has expanded its influence into other areas that were previously reserved either for the private sector or the government. Today, the military controls ports, customs screenings, and airports; builds infrastructure projects such as the Tren Maya and the AIFA airport (the latter is also operated by the military); has built over 1,000 community bank branches; distributes gasoline, gas, and fertilizers; prints textbooks for public schools; detains migrants from Central America on their way to the United States; and may soon be running a commercial airline company “to lower costs.”²² And these are just some of the dozens of functions assigned to the military that have been documented by civil society organizations and which are legally intended to be in the hands of civilian agencies.²³ Moreover, given the secrecy that protects so-called security tasks from scrutiny, the military has been able to withhold important information about all its activities, including its budget allocations. The military has thus operated with little to no accountability, affecting the rule of law. Here the Mostly Free tag clearly starts to crack. 

When faced with criticism and questions from the media and civil society, the president has resorted to direct, personal attacks questioning his critics’ legitimacy and intentions. He has called out journalists by name, and even exposed the confidential tax information of those who confront him.²⁴ Before the administration assumed office, Mexico was already one of the most dangerous countries in the world for journalists.²⁵ But the intimidating environment for media and critics has only gotten worse. Those who oppose the government are referred to as “adversaries,” or “los conservadores” (the conservatives), and deemed ultimately corrupt, delegitimizing them as valid interlocutors. Time and time again, those who do not subscribe to the president’s thinking have been referred to as “enemies of the people,” “racist,” “classist,” “aspirational,” “hypocrites,” “angry,” and even “fascists.”²⁶ This level of confrontation on a daily basis (the president addresses the media every morning in rambling press conferences) has a clear “chilling effect” on freedom of speech. 

Mexico: Shades of gray in prosperity 

Given all the above, it is clear that the Indexes do not fully account for the fragility of freedom in Mexico—and all the ways it has been undermined in recent years. A similar, though less extreme, dynamic can be seen in the Indexes’ view of Mexico’s prosperity. Here, Mexico is considered a Mostly Prosperous country, ranking 53rd out of 174 countries. Broken down by category, Mexico ranks 64th in income, 69th in environment and 78th in health. So where does the 53rd position come from? Mainly from happiness. 

According to the Prosperity Index’s measurement, Mexicans are relatively happy, with a score of 71.4 (37th out of 174 countries). This result is not surprising, considering historical measures of happiness in the country derived from culture, social structures, and family safety nets.²⁷ But again, disaggregating the elements of prosperity helps shed light on important nuances. 

The pandemic hit the world’s economy in an unprecedented way, and Mexico was no exception. But Mexico’s decline in growth began before the pandemic, as did the negative follow-on effects of that lack of growth, including increased poverty, reduced access to healthcare, and decreased private investment. On most indicators, Mexico has not yet returned to its pre-pandemic levels. 

As is usually the case when approaching social science questions, proving causation here may not be feasible. Are the negative outcomes a direct result of the erosion of the rule of law and the environment of uncertainty that Mexico has experienced since 2018? It is difficult to prove. But if wealth creation is a prerequisite for better wealth distribution, the negative average growth rate of the last four years would suggest that increased poverty levels—and thus a lack of prosperity in absolute terms—are at least in part the product of a deterioration in individual freedoms, democratic retrenchment, and the resulting damage to government capacity and private sector certainty, both of which are essential for social progress and economic prosperity. The government has tried to blame the pandemic,²⁸ the war in Ukraine, inflation as a “global phenomenon,”²⁹ and even the Mexican Central Bank³⁰ for sluggish growth and the increase in poverty during its administration. But what is clear is that the country is today less prosperous than before December 2018. 

To be sure, this worrying trend is also revealed by a wider look at variation in the Indexes over time. Mexico’s freedom score in 2021 was 58.2, down from 59.4 in the previous measurement (2016). Mexico’s prosperity score in 2021 was 58, down from 60.7 in 2016. Hence, even if Mexico is categorized as a Mostly Free, Mostly Prosperous country, it is on a downward trajectory, and one that could worsen abruptly over the next few years if the rule of law continues to deteriorate and if an increasingly authoritarian regime advances further. When compared with the rest of the world’s economies, Mexico is a clearly middle-income country, the fifteenth largest economy in the world, and a member of reduced-membership organizations such as the G20 and the Organisation for Economic Co-operation and Development (OECD). But a closer look at relevant data—economic growth, inequality, income, extreme poverty, poverty, and access to basic rights and services, such as food and nutrition, health, education, social security, housing, and housing quality and services (electricity, water, sewage, overcrowding)—also supports the notion that prosperity in the country is deteriorating. 

Populism pills for Mexico? 

At first sight, it appears that Mexico’s light green colouring on the Freedom and Prosperity Indexes map is a positive sign. In digging deeper into recent political and economic trends, this paper aims to ask new questions raised by additional qualitative information. The Indexes are more relevant than ever, not only for Mexico but for the world. When accompanied with an in-depth analysis for each country that can add a prism through which to view the Indexes’ numbers, they can serve as even more powerful tools for analysis, decision making, and advocacy. Given the reality of what is taking place in Mexico, in analysing the country one needs to ask not just how prosperous or free it is today, but how likely it is that the country could fall into the Mostly Unfree and Mostly Unprosperous categories in the near future. 

Mexico is a large economy that is now fully integrated into North American value chains and, from there, with the world’s value chains. Its public finances are strong, and its fiscal stance is on a sustainable trajectory with a debt-to-GDP ratio below 50 percent. Macroeconomic variables look good despite obvious economic stagnation. Mexico is also a resilient democracy, with relatively free and fair elections organized by a still independent electoral authority, though this could become significantly weaker following reforms passed by the government at the end of 2022, which will be contested at the Supreme Court of Justice. But Mexico, like many other countries, is trapped by polarization and populism. And while populism might be producing immediate relief for some—as can be seen in the high approval rates of the president and high happiness measure in the Prosperity Index—these conditions will ultimately lead to long-term structural damage that will take decades to overcome. Constant deterioration of the rule of law and the concentration of power since 2018 has put Mexico on a slippery slope on which the norms and institutions that have sustained our economic and political freedoms could suffer deeper damage. 

Still, one needs to reckon with the fact that 60 percent of Mexicans approve of López Obrador’s actions.³¹ Despite the weakening of the institutional and democratic landscape and poor economic performance (this government is in fact likely to be the worst performer in terms of growth in the last forty years), many people are unbothered by the negative results because they have taken populism’s “poisoned pill”: an appealing narrative that vindicates those who have been left behind, those who legitimately aspire for a better life for themselves and their families, those who are rightfully distrustful of the government given historical wrongs, and those who now receive larger subsidies from the government. AMLO is an exceptional social leader capable of speaking to a wide audience, and he connects emotionally with his political base like no other Mexican president in recent history. People relate to his simple “us vs. them” dichotomy. While there are strong arguments pointing to the current government’s shortcomings in terms of performance, few can deny that the president is quite a successful politician. 

What is worrisome is that more and more leaders around the world have been elected in free and fair democratic processes, only to incrementally undermine institutions, consolidate power, and grow more authoritarian once in office. This is precisely why further data and analysis of trends and nuances are often a necessary complement to the Indexes. While Mexico is still classified as a democracy—and still is one—there exists a latent risk of the country becoming just a democratic facade in front of an autocratic regime. For anyone looking at the Freedom and Prosperity Indexes in the future, the lesson this paper intends to share is that, for many countries, freedom and prosperity are still fragile ideals that depend on a series of conditions that must be constantly upheld. Some of these might be obvious, but others are quite subtle and evolve in ways that are barely visible to an outside eye. It is thus important to complement the Indexes with layers of qualitative analysis that better detect when significant fractures are appearing in a system, before a country and its citizens suffer significant reversals in freedom and prosperity, or a return to the dark era of authoritarianism. We need to measure in order to understand, understand to advocate, and advocate in order to change for the better. 

Vanessa Rubio-Márquez is a former senator and deputy minister in the Mexican government. 

The post Mexico “Mostly Free”? Mexico “Mostly Prosperous”?: Uncovering shades of gray in the Freedom and Prosperity Indexes appeared first on Atlantic Council.

The USMCA has certainly been successful in increasing the volume of Mexico’s trade with the United States and Canada. According to the US Census Bureau, in April 2023, the United States imported more goods from Mexico than from any other country; in 2022, Mexico-US trade was almost 27 percent higher than in 2019, and Mexico-Canada trade grew 21.8 percent in these same years. Between 2020 and 2023, Mexico received fifty billion dollars in US and ten billion dollars in Canadian investments.

This increase in trade and investment flows is explained not only by the USMCA’s implementation, but also by the Biden administration’s decision to diversify supply chains, relocate production to North America, and “de-risk” from China. By seeking to reduce the vulnerability of supply chains in North America, the integration facilitated by the USMCA acquired greater relevance for companies, workers, governments, and societies.

Even though the agreement has spurred dynamism in trade and investment, its implementation has not gone without serious challenges and confrontations, which Mexico will need to address before the 2026 joint review. These include differences in the way the three countries have chosen to comply with the USMCA, heightened scrutiny on labor and environmental issues, and incomplete implementation of the agreement’s provisions.

Unsettled disputes

First, Mexico has faced difficulties on both sides of the USMCA’s dispute settlement mechanism, established in Chapter 31. Mexico’s use of this mechanism signals that it considers the agreement an effective instrument to defend its commercial and investment interests. Together with Canada, Mexico requested the establishment of a panel to settle its differences with the United States regarding the interpretation of the methodology to determine the regional value content of essential auto parts in cars manufactured in North America. The panel ruled in favor of Mexico, but there seems to be no interest in enforcing the ruling.

Mexico has also been the target of Chapter 31. Both the United States and Canada requested consultations regarding Mexico’s energy policy in July 2022 and restrictions on trade in genetically modified corn in June 2023. While both consultation processes could still lead to requests for the establishment of panels, the parties have been in conversation regarding the substance of their concerns.

Chapter 31 is of great value to the private sector in North America because it offers a legal tool to solve differences. The USMCA offers a dispute settlement mechanism that works, unlike the World Trade Organization Dispute Settlement Body, which is paralyzed. The USMCA’s panel reports are binding, and panel decisions are not affected by domestic political pressures.

However, it is the three governments’ responsibility to comply with the panels’ decisions, even if they are unfavorable, and to make sure that rulings are fully enforced. Not doing so undermines the value of the USMCA dispute settlement mechanism and the agreement itself.

High standards, heightened scrutiny

Second, Mexico has been subject to scrutiny on labor and environmental matters, reflecting US and Canadian national priorities and their need to respond to political pressure from their own domestic constituencies. Regarding labor, under the Rapid Response Labor Mechanism, the United States has initiated eleven cases against Mexico, and Canada has initiated one. Mexico’s labor authority has sought to address the concerns raised in each case, avoiding sanctions and prohibitions on exports.

On environmental matters, Mexico has faced questioning from its partners regarding compliance with its environmental legislation and its USMCA obligations. For example, in February 2022, the United States requested consultations with Mexico on the protection of the vaquita porpoise, which is associated with totoaba illegal fishing. In May 2023, the US Fish and Wildlife Service determined that Mexico has not done enough to prevent the illegal trafficking of totoaba, so later this month, US President Joe Biden could decide to impose an embargo on the trade of wildlife products from Mexico, in line with Mexico’s Convention on International Trade in Endangered Species of Wild Fauna and Flora obligations, which are also recognized in the USMCA. In labor and environmental affairs, the United States and Canada have used and may continue to use the USMCA mechanisms to pressure Mexico to comply with its obligations, since these issues are key to their own domestic political agendas.

Unfinished business

Third, Mexico has yet to fully implement several USMCA provisions. These include the Asia-Pacific Economic Cooperation Cross-Border Privacy Rules Framework, established in Chapter 19, which is already overdue. In addition, Mexico will have to become a signatory to the 1991 agreement of the International Union for the Protection of New Varieties of Plants as provided in Chapter 20. Likewise, the USMCA has a built-in agenda of future negotiations, such as the inclusion at the sub-federal level of provisions on state-owned companies and designated monopolies (Chapter 22), which should have been concluded in June 2023. Mexico needs to make sure that these provisions are enforced according to its USMCA commitments, since this will align its regulations and policies with those of its North American partners.

At the halfway point between USMCA’s entry into force and its first joint review, Mexico has seen a substantial increase in its trade and investment flows, which are key engines for its economic growth. However, Mexico still faces serious challenges in the full implementation of its commitments and in making sure that the United States also complies with a panel report favorable to Mexico. It is in Mexico’s interest to fully comply with the agreement while also requesting compliance from the United States, since that will provide certainty and predictability to investors in the region. This will facilitate the agreement’s extension at the six-year review in 2026 and will allow Mexico to promote opportunities for North American productive integration and the relocation of supply chains.

Luz María de la Mora is a nonresident senior fellow with the Atlantic Council’s Adrienne Arsht Latin America Center, where she supports the Center’s Mexico work. From December 2018 to October 2022, she served as undersecretary of foreign trade in the Mexican Secretariat of Economy, during which she helped implement the USMCA.

The post A midterm report card for Mexico’s USMCA progress appeared first on Atlantic Council.

This article was originally published in Spanish by El Heraldo de Mexico. An English translation of the article is included below.

As the war in Ukraine enters its second year and the cold war between the United States and China intensifies, it is interesting to see how other countries begin to adjust their security policies.

There are relative changes, often imperceptible when they occur in isolation, however, in concert and with context, these changes say a lot about the rearrangement of world geopolitics.

On April 4, Finland officially became the 31st member of the North Atlantic Treaty Organization (NATO). It is expected that the integration of the Finnish military forces into the NATO command and control system will be easy, thanks to the fact that Finland was part of the “Partnership Interoperability Initiative.”

That program establishes deep connections between NATO and non-member countries that allows them to establish systems and processes that facilitate cooperation. Countries like Australia, Georgia, Jordan, Ukraine, and Sweden are also members of that initiative.

Finland’s accession doubles Russia’s land border with NATO, but the military alliance not only gains territory from which to reinforce the alliance’s northeastern flank (and the Baltics), it also gains an ally with a significant military force, technologically advanced and with a historic grudge against Moscow.

Let’s remember that Finland was invaded by the Soviet Union in November 1939. At that time, Moscow feared that Finland would be used by Germany to attack the city of Leningrad (today Saint Petersburg).

At that time Finland was not a member of any alliance, but still managed to hold off the Soviet forces for months, in what was called the Winter War. In March 1940 Finland signed the Treaty of Moscow in which it ceded 11 percent of its territory to the USSR.

Together with Finland, Sweden applied to join NATO in May 2022, but remains waiting for Turkey to accept it. Under NATO rules, all member countries must approve the entry of new allies. Turkey requires Sweden to implement reforms to go after the funding networks of the Kurdistan Workers’ Party (PKK), an armed separatist movement branded as terrorist organization.

NATO’s Secretary General is confident that Sweden can be formally admitted to the alliance in July. This confidence emanates from the polls that put the main political rival of Turkish President Erdoğan, Kemal Kılıçdaroğlu (KK), 12 points ahead in the upcoming elections on May 14. KK announced that, if he wins the presidency of his country, he will lift the political veto on Sweden to join NATO.

On the other side of the world, in North America, Mexico, Canada and the United States carried out the NAMSI PACEX 2023 naval exercise off the coast of Manzanillo at the end of March. Fortunately, despite the current political rhetoric, the Secretary of the Navy (SEMAR) maintains a bond of cooperation with its partners, both of which are NATO members.

The spirit of these exercises serves to facilitate cooperation and interoperability between naval forces. It would be worthwhile for the Mexican armed forces to explore additional options to increase their interoperability capacity, so that when political resistance fades, Mexico has the option of formally and relatively easily integrate into the geopolitical camp of free democratic countries.

Former expert bio

Inigo Guevara Moyano

Nonresident Senior Fellow

Scowcroft Center for Strategy and Security Transatlantic Security Initiative

Americas Arms Control

The Transatlantic Security Initiative, in the Scowcroft Center for Strategy and Security, shapes and influences the debate on the greatest security challenges facing the North Atlantic Alliance and its key partners.

Learn more

The post Guevara in El Heraldo de Mexico on integration, interoperability, and resilience (in Spanish) appeared first on Atlantic Council.

This article was originally published in Spanish by El Heraldo de Mexico.

Russia’s war against Ukraine turned one year old on February 24. The conflict is generating a profound geopolitical realignment and, if it does not end soon, it is very possible that it will directly involve other powers and create an even deeper world division.

The world is now divided between countries that show solidarity with Kyiv, those that are indifferent—supposedly neutral [lukewarm]—and those that excuse or support Russia’s aggression. The latter are few.

Solidarity with Ukraine ranges from symbolic displays like lighting public buildings yellow and blue, to imposing economic sanctions on Russia, to direct aid in the form of financial resources, intelligence, and weapons.

The solidarity flowing to Ukraine constitutes the largest military mobilization in Europe since the Second World War. Support goes from countries like Canada and the US, to countries that were under threat and under the Soviet yoke during the Cold War, but also from countries that were until recently neutral. As an example, Morocco, broke its neutrality and announced in December that it would transfer its T-72 tanks to Ukraine.

It is estimated that Russia deploys 300,000 troops inside Ukraine. British intelligence estimates that Russia has lost 40 percent of its military strength and has already mobilized 97 percent of its deployable army, which has it very stressed. The Ukrainian counteroffensive, if well equipped, will make a significant change this Spring.

Countries willing to help Russia are attracting more and more international attention. Iran has agreed to receive 24 Russian Sukhoi Su-35 fighter jets in exchange for continuing to send drones and missiles. As a consequence, the EU announced sanctions against companies that trade with Iran, especially electronics. The most direct pressure came from the US, whose special forces intercepted a shipment of Iranian weapons destined for Yemen and forwarded them…to Ukraine.

Of all the countries that could support Russia, China is the only one that could drag out the conflict. Last week, the Chinese foreign minister met Putin in Moscow. Chinese military supplies—possibly drones and ammunition—would likely flow only with very favorable conditions for China—such as permits to exploit mineral areas in Siberia and/or the Arctic—but in the Russian perspective, these concessions will likely be acceptable to continue their war.

For China, having the option to support Russia is a strategic geopolitical opportunity, as it puts it in a position to 1) gain access to land and resources it longs for; 2) condition its support on a (violent) “reunification” of Taiwan; 3) prolonging the conflict could test the level of resolve and even the military capacity of the US and Europe, to intercede for Taiwan, although, on the other hand; 4) withholding it, could allow Russia to collapse, to later take over Siberia. There are many options, all very tempting for the Chinese Dragon.

Mexico continues in a supposedly neutral, lukewarm, position that does not benefit it in its relationship with Washington or with Europe. For countries with strong resistance to providing military aid there are also options: implement sanctions and donate humanitarian aid to relieve the Ukrainian civilian population. Unfortunately, it will be the people of Mexico, not just the current administration, who will go down in history as “lukewarm.”

Former expert bio

Inigo Guevara Moyano

Nonresident Senior Fellow

Scowcroft Center for Strategy and Security Transatlantic Security Initiative

Americas Arms Control

The Transatlantic Security Initiative, in the Scowcroft Center for Strategy and Security, shapes and influences the debate on the greatest security challenges facing the North Atlantic Alliance and its key partners.

Learn more

The post Guevara in El Heraldo de Mexico on the global divide on responding to the war in Ukraine (in Spanish) appeared first on Atlantic Council.

Taken together, their comments signal a broader recognition from the Biden administration of the power of local officials to help achieve national goals. But as Biden works to boost North American economic competitiveness vis à vis China, US governors and mayors are being left out of the conversation. They’re not the only ones: Local leaders across North America, from Mexico to Canada, are being left out of discussions geared toward improving the continent’s economic integration. Biden should tap into the economic and political power of local leaders, and he should start by including them in diplomatic summits such as the North American Leaders Summit (NALS).

Local leaders drive day-to-day collaboration throughout North America, yet they weren’t invited to the NALS last month. So while Biden, Mexican President Andrés Manuel López Obrador (known as AMLO), and Canadian Prime Minister Justin Trudeau met to “promote a common vision for North America,” that vision will be unachievable without the local officials who have built a regional web of economic integration capable of weathering national partisan shifts. Biden, AMLO, and Trudeau should embrace this web by encouraging local and national leaders to establish multi-level ties between their governments and to deepen subnational bonds across borders.

A web of economic integration

The North American countries have a crucial, yet also tense, relationship: That was evident at NALS, which took place amidst Washington and Ottawa’s ongoing disputes with Mexico City’s energy policies. The summit itself reflects this inconsistency in the North American relationship, as last month’s convening was the first in five years and was pushed back several times. The US-Mexico relationship has been complicated by national politics, including when former US President Donald Trump called for a border wall and when AMLO boycotted the US-hosted Summit of the Americas in 2022. The US-Canada relationship also experienced friction during the nineteen-month COVID-19 border closure, the longest border restriction the countries have shared in history.

But US mayors and governors routinely build a foundation of cooperation with their cross-border counterparts focused on practical priorities such as employment and economic growth. Mexico and Canada are the United States’ top trading partners, and the economic interlinkages are most obvious in border states. In 2021, Mexican foreign-owned enterprises in California provided nearly ten thousand jobs, while seven in every ten dollars invested in Baja California, Mexico, come from the United States. The same year, Mexican companies investing in Texas generated 5,364 jobs while Texan companies investing in Mexico created 9,110 jobs. The economic impacts are particularly clear in smaller states such as Vermont, where Canadian-owned businesses employed nearly three thousand people in 2021 and Canadian tourists have contributed two hundred million dollars annually to the state’s economy.

Such collaboration is bipartisan. In April 2021, North Dakota Governor Doug Burgum, a Republican, created the Essential Worker Cross-Border Vaccination Initiative with the Manitoba premier to vaccinate essential workers transporting goods and services across the border, ensuring that commercial flows between their communities remain ongoing. In April 2022, Texas Governor Greg Abbott, a Republican, signed memoranda of understanding with the governors of Mexico’s four border states to enhance border security and mitigate slowdowns in commercial border traffic. And in October 2022, California Governor Gavin Newsom, a Democrat, announced an agreement between Californian and Mexican border communities to support the construction of the Otay Mesa East Port of Entry at the San Diego-Tijuana border, which is being built as part of an effort to boost economic cooperation and trade.

Locally driven economic relationships pave the way for economic integration on a national level. Javier Martínez, founder and president of the Association of Mexican Entrepreneurs Los Angeles, told us that investment between California and Mexico drives the “incorporation of small and medium firms [into] the supply chains of the global firms,” strengthening national economic collaboration and opening opportunities for practices such as nearshoring. Local leaders are much more than implementers of national economic policies—they’re incentivized by the potential economic benefits to shape trade relationships from the bottom up. This was evident in 2017 and again in 2019, when Mexican and US mayors came together to support a modernized North America Free Trade Agreement and later urge the passage of the US-Mexico-Canada Agreement (USMCA). In 2022, US and Canadian mayors prepared a joint letter calling on their national governments to repeal the remaining COVID-19 border restrictions and hasten the return to pre-pandemic cross-border exchanges.

The collaboration spearheaded by local leaders is resilient to national partisan shifts. The aforementioned diplomatic disputes between the United States, Mexico, and Canada can impede cooperation and stall advancements in the North American relationship—yet these national-level tensions typically don’t stop cities and towns from promoting trade and tourism with their northern and southern neighbors. Initiatives by Biden, AMLO, and Trudeau to strengthen North American competitiveness may not outlast the national leaders’ terms if they don’t actively engage with the local leaders who have built the region’s economic integration and have a vested interest in its future.

A missed opportunity at NALS

At NALS, national leaders laid out their plans to mount a combined defense against China’s rising economic dominance by overhauling North American industrial capacity and integration. The gathered leaders announced steps to boost their roles in critical-mineral supply chains, which are currently dominated by China. They also pledged to organize the “first-ever trilateral semiconductor forum” as the next move in an escalating contest with China over control of the industry.

These policies aim to reverse a decline in US-based manufacturing that has led to a $382.9 billion US goods trade deficit with China and the US manufacturing workforce declining by more than a third. Because these local leaders have their communities in mind, they’re accustomed to reframing national-security objectives (such as semiconductor manufacturing) as priorities for their districts and constituents. Yet the roster for the trilateral semiconductor forum scheduled for early 2023 only includes “senior industry representatives” and “cabinet level participation” from the three countries. There is no mention of a role for mayors and governors who will play an essential role in forging the requisite economic and diplomatic cooperation from the bottom up.

How to implement this cooperation

North American national leaders should affirm local leaders’ role as trailblazers in their mission of advancing a closer economic alliance. They can do that by making space for local officials at the next NALS, whenever it takes place. The White House should work with US State Department’s Special Representative for Subnational Diplomacy Nina Hachigian to design parallel sessions at NALS that convene local leaders who represent communities that are part of critical-mineral and semiconductor supply chains to compare strategies and report out to national leaders. These sessions should focus on creating city- and state-specific NALS deliverables on economic cooperation and trade that resonate with communities in all three countries.

In contrast to the most recent NALS, mayors from across the Western Hemisphere will convene at this year’s inaugural Cities Summit of the Americas; it’s equally important to bring national leaders to spaces in which local leaders are gathering to ensure that neither perspective is siloed. The US State Department, White House, 24 Sussex, and the Palacio Nacional should ensure that cabinet-level officials and above are also represented at the Cities Summit so that they can get up to speed on their local leaders’ priorities and ideas.

In between the various summits, national leaders should support and expand bilateral initiatives led by cities and states. Many border communities have taken it upon themselves to set up economic commissions: For example, the Los Angeles Mayor’s Office, Mexico’s Foreign Ministry, and the Mexican Council of International Affairs launched the MEXLA commission to deepen ties including trade and energy collaboration. The Arizona-Mexico Commission created an economic development committee to strengthen development efforts, and the Texas Association of Business launched a Mexico Trade and Investment Policy Council to help companies navigate the Texas-Mexico business relationship. On the northern border, Michigan’s Economic Development Corporation established an international trade program that leads business delegations to Canada. Meanwhile, the Buffalo Niagara Partnership signed an agreement with two Ontario Chambers of Commerce to help local businesses take advantage of the cross-border economy and trade. Yet the landscape of bilateral cooperation across North America is made up of these sporadic examples that lack consistency and coordination. Hachigian should take stock of existing subnational initiatives to glean effective strategies and assess where more support is needed.  

To strengthen existing initiatives led by local leaders, Hachigian’s Unit for Subnational Diplomacy should assemble the knowledge of local leaders who have been fostering bilateral economic partnerships into a toolkit for all US states to use in building cross-border partnerships. Hachigian’s office can then work to disseminate these toolkits and trainings through existing subnational bodies, such as the National Governors Association and US Conference of Mayors.

The Unit for Subnational Diplomacy should also work with universities, research institutions, and local chambers of commerce to conduct a widespread review of state and city-level economic cooperation with Mexico and Canada to identify the benefits of advancing economic cooperation. This uncovered data can be shared with constituents to substantiate the value of maintaining international commissions, incentivize additional mayors and governors to deepen North American trade relationships, and plainly reveal the impact of local efforts to national leaders.

These steps will equip mayors and governors from all fifty states with the tools to champion economic integration initiatives, further strengthening their role as important advisors to national leaders and crucial players in future policy discussions.

North American local leaders are already getting the job done on the ground; they have earned a seat at the diplomatic table.

Willow Fortunoff is an assistant director at the Atlantic Council’s Adrienne Arsht Latin America Center.

Mary Ann Walker is a member of the Atlantic Council’s Adrienne Arsht Latin America Center Advisory Council.

The post Mayors and governors will drive the future of North American economic integration appeared first on Atlantic Council.

Atlantic Council research shows that a mere 10-minute reduction in wait times at the US-Mexico border can have increasingly positive effects on communities and economies on both sides of the border. The Adrienne Arsht Latin America Center, in collaboration with the Hunt Institute for Global Competitiveness and Colegio de la Frontera Norte, analyzed three major potential economic impacts of this reduction. The first, “The economic impact of a more efficient US-Mexico border: How reducing wait times at land ports of entry would promote commerce, resilience, and job creation,” looks at the impact of a 10-minute reduction for Mexico and the United States on a national level. The second, “The transformative power of reduced wait times at the US-Mexico border: Economic benefits for border states,” looks at the economic impact for the United States’ four and Mexico’s six border states. The third, and final report “US-Mexico commerce: Tracking the final destination and Mexico’s fiscal benefit with Greater Border Efficiency,” tracks the final destination and economic impact of commerce entering the United States via three key ports of entry. 

This interactive map summarizes the three reports’ findings. It separates the data into US national benefits, US border benefits, Mexico national benefits, and Mexico border benefits. The red dots analyze three specific ports of entry — San Diego, California; El Paso, Texas; and Laredo, Texas — tracking where cargo passing through each ends up in the United States.

Click along the map to find out more about the economic impact of a 10-minute reduction in wait times at the US-Mexico border. 

In-depth research and reports

Report Feb 17, 2023

The transformative power of reduced wait times at the US-Mexico border: Economic benefits for border states

By Alejandro Brugués Rodríguez, Noé Arón Fuentes Flores, David Gaytan, John Gibson, Mayra Maldonado, Jason Marczak, Jorge Eduardo Mendoza Cota, José Ángel Moreno, Roberto Ransom, and Ignacia Ulloa-Peters

Atlantic Council’s new data shows that a mere 10-minute reduction in wait times – without any additional action – can create thousands of Mexican jobs, grow the gross domestic product (GDP) of several Mexican states, and generate hundreds of thousands of dollars in new spending in the United States.

Economy & Business Inclusive Growth

Report Sep 27, 2022

The economic impact of a more efficient US-Mexico border: How reducing wait times at land ports of entry would promote commerce, resilience, and job creation

By Alejandro Brugués Rodríguez, John Byrd, Noé Arón Fuentes Flores, David Gaytan, John Gibson, Camila Hernández, Mayra Maldonado, Jason Marczak, Jorge Eduardo Mendoza Cota, Roberto Ransom, and Ignacia Ulloa

Improvements in border management and the adoption of new technologies at the US-Mexico border have the potential to enhance border security and generate economic benefits for the United States and Mexico through expedited flows of goods and people.

Economy & Business Latin America

Issue Brief Feb 27, 2023

Beyond the US-Mexico border: Destination of final goods, environmental impact, and future scenarios for border relations

By Atlantic Council

Three complementary analyses on the value and final destination of northbound commercial trade flows; the environmental impact of idling vehicles at the US-Mexico border; and three potential scenarion for the future of US-Mexico relations.

Economy & Business Energy & Environment

The post Ten minutes at the border: Revving the US and Mexican economies appeared first on Atlantic Council.

A joint analysis by the Atlantic Council’s Adrienne Arsht Latin America Center, the University of Texas at El Paso’s Hunt Institute for Global Competitiveness, and El Colegio de la Frontera Norte.

US-Mexico commerce: Tracking the final destination and Mexico’s fiscal benefit with greater border efficiency

By Edgar David Gaytán Alfaro, John Gibson, Mayra Maldonado, Jason Marczak, Roberto Ransom, and Ignacia Ulloa-Peters

This report determines the value and final destination of northbound commercial trade flows. Based on limited data, it finds that 45 percent of trade entering the United States remains in border states (Arizona, California, New Mexico, or Texas), while 55 percent is distributed to other regions across the United States. It also evaluates the tax revenue collected by Mexico’s six border states (Baja California, Chihuahua, Coahuila, Nuevo León, Sonora, Tamaulipas) stemming from increased efficiencies at the border. Read our report to find out more about the top 5 receiving states, as well as the economic impact that different regions across the United States would experience following a 10-minute reduction in wait times.

Our border environment, water, and air pollution

By The Hunt Institute for Global Competitiveness, University of Texas at El Paso

This environmental impact analysis evaluates the impact idling vehicles have on water and air pollution across the US-Mexico border. Reduced wait times can significantly reduce particulates in the air and water, which currently pose a significant threat to the health of people living in border communities. To find out more about the potential reduction in pollution following decreased wait times, read our report or view our infographic.

Border 2033: Three scenarios for the United States and Mexico

By Peter Engelke, Deputy Director of Foresight, Scowcroft Strategy Initiative; and Nonresident Senior Fellow, Global Energy Center, Atlantic Council

Foresight scenarios help us tell stories about how the future might unfold and are intended to stir imaginative thinking. In this report, we portray three scenarios of a world that might exist ten years from now in 2023 based upon uncertainties in the United States and Mexico’s relationship today. More specifically, we hypothesize what the US-Mexico relationship would look like if 1) there is little to no change in the manners that the United States and Mexico engage, 2) fears over border security leads to an increasingly hardened border, and 3) Mexico and the United States increase collaboration on border issues. Find the full report below.

Report Sep 27, 2022

The economic impact of a more efficient US-Mexico border: How reducing wait times at land ports of entry would promote commerce, resilience, and job creation

By Alejandro Brugués Rodríguez, John Byrd, Noé Arón Fuentes Flores, David Gaytan, John Gibson, Camila Hernández, Mayra Maldonado, Jason Marczak, Jorge Eduardo Mendoza Cota, Roberto Ransom, and Ignacia Ulloa

Improvements in border management and the adoption of new technologies at the US-Mexico border have the potential to enhance border security and generate economic benefits for the United States and Mexico through expedited flows of goods and people.

Economy & Business Latin America

Report Feb 17, 2023

The transformative power of reduced wait times at the US-Mexico border: Economic benefits for border states

By Alejandro Brugués Rodríguez, Noé Arón Fuentes Flores, David Gaytan, John Gibson, Mayra Maldonado, Jason Marczak, Jorge Eduardo Mendoza Cota, José Ángel Moreno, Roberto Ransom, and Ignacia Ulloa-Peters

Atlantic Council’s new data shows that a mere 10-minute reduction in wait times – without any additional action – can create thousands of Mexican jobs, grow the gross domestic product (GDP) of several Mexican states, and generate hundreds of thousands of dollars in new spending in the United States.

Economy & Business Inclusive Growth

Made possible by

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

Learn more

The post Beyond the US-Mexico border: Destination of final goods, environmental impact, and future scenarios for border relations appeared first on Atlantic Council.

​​​​​What you should know

• Nicaragua: On February 9, the Ortega-Murillo regime released and expelled 222 political leaders, priests, students, and other dissidents to the United States.
• US-Brazil relations: Presidents Biden and Lula da Silva met on February 10, during which they underscored the importance of strengthening democracy, promoting respect for human rights, and addressing the climate crisis.
• Ecuador: Ecuadorians rejected all eight items on a constitutional referendum backed by President Lasso, signaling anti-incumbent sentiments and the clout of pro-Correísmo opposition political forces.

Monitoring economic headwinds and tailwinds in the region

• Argentina: Annual inflation reached 98.8 percent, while activities in the construction and manufacturing sectors continued to decline.  
• Brazil: The government met with Mexico, Germany, Colombia, Chile, the World Bank, and the Inter-American Development Bank (IDB) to explore issuing green bonds this year. 
• Belize: The government launched two new projects in cooperation with Taiwan, a business support program focused on women and micro, small, medium-sized enterprises (MSMEs), and a flood warning system for disaster prevention.  
• Colombia: 2022 GDP growth is estimated to be 7.9 percent, down from 2021’s 10.8 percent growth. In 2023, growth is expected to further decline to 1.05 percent. 
• Peru: Continuing protests and supply shortages have led several mines to suspend or reduce operations, threatening copper production.  
• Suriname: President Santokhi expressed willingness to collaborate with neighboring Guyana on oil and gas exploration and development to position the Caribbean as an energy hub. 

In focus: Inflation and infighting

As regional inflation continues, political pressures are leading to criticism of central bank policy in Brazil and Colombia. Recently-elected presidents Lula and Petro have both questioned rate hikes as a method to tackle inflation, suggesting more flexible targets and alternative policies. The governor of Colombia’s Central Bank, Leonardo Villar, expects the region to require continuing tight monetary policy, which critics argue may complicate other policy goals such as growth. Roberto Campos Neto, president of the Central Bank of Brazil, has expressed his willingness to coordinate with the Lula administration to achieve growth and control inflation. 

Despite the public clashes, central bank policy in both countries remains independent. In Brazil, a 2021 law protects central bank autonomy and is unlikely to be repealed. In Colombia, the central bank has maintained a course independent of presidential advice for two decades. 

Health + Innovation

• Colombia: President Petro presented a health reform to Congress that seeks to improve primary care, expand access to treatment, raise healthcare worker salaries, and fight corruption by eliminating private sector management of payments.
• Brazil: Nearly three years since COVID-19 claimed the life of its first victim, the country has for the first time registered zero pandemic-related deaths in a day on February 12.
• Jamaica: The Bureau of Standards launched the Jamaican Standard Specification for Telemedicine, which provides the framework through which telemedicine may be safely practiced while upholding the integrity of the medical profession.

Geopolitics of vaccine donations: US vs. China

• The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

The post Aviso LatAm: February 18, 2023 appeared first on Atlantic Council.

A joint report by the Atlantic Council’s Adrienne Arsht Latin America Center, the University of Texas at El Paso’s Hunt Institute for Global Competitiveness, and El Colegio de la Frontera Norte.

Executive summary

The announcements and commitments made at the North American Leaders Summit in January 2023 reiterated the importance of North American competitiveness, inclusive growth and prosperity, and the fight against drugs and arms trafficking.¹ To achieve the goals and deliverables established during the summit, it is critical that the US-Mexico border be managed and perceived as an essential contributor to national, binational, and regional security and economic development.

A more efficient US-Mexico border has the potential to reduce border crossing times for commercial and noncommercial vehicles, generating positive externalities for the United States and Mexico including enhanced security and economic growth.² This report – the second in a two-part series – outlines the economic impact of reduced wait times at the border, focusing on the costs and benefits for border states in both countries.³

This report shows that a mere 10-minute reduction in wait times – without any additional action – can create thousands of Mexican jobs, grow the gross domestic product (GDP) of several Mexican states, and generate hundreds of thousands of dollars in new spending in the United States. Ten minutes is then hopefully the starting point for even shorter wait times and even greater economic gains and job creation.

More precisely, increasing border efficiency by 10 minutes can result in more than 3,000 additional jobs across Mexico’s six border states while increasing their combined GDP by 1.34 percent.⁴ Additionally, this reduction would allow for an additional $25.9 million worth of goods to enter the United States every month and lead to $547,000 in extra spending across the United States’ four border states.⁵ A forthcoming standalone short report will evaluate the final destination of traded goods and the economic benefits for states beyond the border.

In terms of Mexico’s border states, Tamaulipas would see the greatest growth in GDP (1.9 percent), followed by Baja California (1.6 percent) and Chihuahua (1.5 percent). Overall, this would generate a $2.2 billion increase in GDP and a $167 million increase in intermediate demand and a $3.2 million increase in labor income across Mexico’s six border states.

A 10-minute reduction in wait times would also lead to an average of 388 new loaded containers entering the United States from Mexico monthly. This translates to $25.9 million worth of cargo crossing through the United States’ four border states (Arizona, California, New Mexico, and Texas), a figure identified in the part-one of this study.⁶ New research shows that approximately 222 (57.2 percent) of these containers would enter via Texas ports of entry, carrying $17 million in cargo every month.

Separately, the 10-minute reduction in wait times would lead to 5,020 additional noncommercial monthly crossings, resulting in $547,000 in extra monthly spending by families and individuals traveling from Mexico to the four US-border states every month. The model estimates that these individuals would spend an additional $256,000 in California alone, representing nearly 50 percent of the total increase in spending. The clothing retail industry would experience the greatest gains across the board, with $132,000 in additional annual revenue from streamlined noncommercial crossings.

Results were informed by engaging local and regional stakeholders in roundtables, focus groups, and one-on-one interviews to identify areas for practical improvement in border management. These include investing in technologies, infrastructure, management, staffing, and supply chains. For instance, deploying high-tech screening technologies further away from ports of entry would facilitate a greater and faster flow of cargo and passenger information. Similarly, a collaboration between the United States and Mexico to develop joint, decentralized tools for border management and processing could ensure a more efficient flow of legitimate cross-border traffic while detecting illegal activity. Improvements in infrastructure and an increase in personnel staffing ports of entry would prevent bottlenecks and decongest queues that regularly spill over onto interstate highways and local roads.

While this report outlines the potential economic impact of a more efficient US-Mexico border for the border region, it also identifies new spaces for growth and new questions to be asked, studied, and addressed. For example, a lack of data in non-border Mexican states makes it difficult to estimate what the impact of enhanced efficiency in non-border inspection points would be for overall binational commerce and within each individual state. Similarly, limited US data exists to determine the final beneficiaries of new economic activity. New, reliable data is essential to understand the greater implications of streamlined border processes and tools in the United States and Mexico.

Made possible by

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

Learn more

Issue Brief Dec 15, 2022

Road to the tenth North American Leaders’ Summit: Spotlight on competitiveness and supply chains

By María Fernanda Bozmoski, Jacob Kaufhold, and Isabel Chiriboga

North American competitiveness and supply chains are at an inflection point. The three leaders must take the momentum of the last meeting and continue to advance key priorities. In an increasingly complicated global context, close collaboration and partnership on all fronts is key.

Report Sep 27, 2022

The economic impact of a more efficient US-Mexico border: How reducing wait times at land ports of entry would promote commerce, resilience, and job creation

By Alejandro Brugués Rodríguez, John Byrd, Noé Arón Fuentes Flores, David Gaytan, John Gibson, Camila Hernández, Mayra Maldonado, Jason Marczak, Jorge Eduardo Mendoza Cota, Roberto Ransom, and Ignacia Ulloa

Improvements in border management and the adoption of new technologies at the US-Mexico border have the potential to enhance border security and generate economic benefits for the United States and Mexico through expedited flows of goods and people.

Economy & Business Latin America

The post The transformative power of reduced wait times at the US-Mexico border: Economic benefits for border states appeared first on Atlantic Council.

On February 14, Transatlantic Security Initiative Nonresident Senior Fellow Inigo Guevara authored an op-ed in El Heraldo de Mexico discussing the importance of securing the airspace of Mexico.

Former expert bio

Inigo Guevara Moyano

Nonresident Senior Fellow

Scowcroft Center for Strategy and Security Transatlantic Security Initiative

Americas Arms Control

The Transatlantic Security Initiative, in the Scowcroft Center for Strategy and Security, shapes and influences the debate on the greatest security challenges facing the North Atlantic Alliance and its key partners.

Learn more

The post Guevara in El Heraldo de Mexico on securing the airspace of Mexico appeared first on Atlantic Council.

The post Goldwyn in The Hill: How to address vulnerability at our ‘third border’ appeared first on Atlantic Council.

​​​​​What you should know

• PAHO: Dr. Jarbas Barbosa took office on February 1 as the health organization’s new director, pledging to work in partnership with member states to end the pandemic and ensure that the region’s health systems recover stronger than before.
• IMF: The organization raised its global growth forecast to 2.9 percent, up from its original 2.7 percent. The outlook is also better for the region’s two major economies: up 0.2 percent for Brazil, to 1.2 percent, and a half point for Mexico, to 1.7 percent.
• Migration: The 250,000 migrants that irregularly crossed into Panama through the Darien Gap in 2022 represents a record high that is nearly double the 133,000 entries recorded in 2021.

Monitoring economic headwinds and tailwinds in the region

• Mexico: The national statistics agency reported that the economy grew 0.4 percent in Q4 of 2022 compared to the previous quarter.
• Argentina: The government will leverage new gas exports to Chile, and potentially Brazil, to improve its trade balance and pay down debt.  
• Brazil: Alongside Argentina, the government is floating the development of a common currency linking the two countries to facilitate trade. 
• Colombia: The Minister of Mines and Energy Irene Velez announced at Davos that the country will no longer approve new oil and gas exploration contracts.
• Jamaica: Third-quarter GDP grew by 5.9 percent over 2022 due to a resurgent tourism sector, which has boosted hotels, restaurants, and services, among other sectors.  
• Peru: Ongoing protests and road blockades have cost the country $550 million since the ousting of President Pedro Castillo last December. 
• Transatlantic ties: German Chancellor Olaf Scholz visited Argentina, Brazil, and Chile, to discuss the EU-Mercosur trade agreement and support for Ukraine. 

In focus: Energy expansion in Trinidad and Tobago

On January 24, the United States licensed Trinidad and Tobago to develop a natural gas project off the coast of Venezuela in the Dragon field region. The project will support overall Caribbean energy security, with a requirement that some of the produced gas must be exported to Jamaica and the Dominican Republic. To comply with US sanctions, Trinidad will pay for the gas with humanitarian aid. 

Atlantic Council experts reacted immediately, emphasizing the importance of this move towards meeting Caribbean energy demand. You can read more here. 

Health + Innovation

• Haiti: As of January 17, the Ministry of Public Health and Population has reported over 24,400 suspected cholera cases.
• Education: A World Bank study shows that by 2045, nearly 5 million people across LAC would fall into poverty due to pandemic-induced learning losses.
• Brazil: The Health Ministry announced that it will roll out bivalent COVID-19 booster shots as early as February 27.

Geopolitics of vaccine donations: US vs. China

• The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

The post Aviso LatAm: February 6, 2023 appeared first on Atlantic Council.

Former expert bio

Inigo Guevara Moyano

Nonresident Senior Fellow

Scowcroft Center for Strategy and Security Transatlantic Security Initiative

Americas Arms Control

This article was originally published in Spanish by El Heraldo de Mexico.

Last week, Germany and the United States took the decision to authorize the export of Leopard 2 and M1 Abrams main battle tanks to Ukraine, thereby changing the profile of Western military assistance.

This is significant since both countries have very restrictive policies for the export of military equipment since they impose on their clients the condition of requiring their authorization to re-export the material. That is, Germany must approve the shipment of Polish or Canadian Leopard tanks to Ukraine, even after they have been sold to these countries. The reasons range from ethical to political, economic, and technological, as they seek to prevent their clients from reselling material, they consider to be a kind of intellectual property to third parties.

Countries that buy weapons from Germany and the US must accept these conditions and do so largely because of the quality of the equipment, the after-sales service, and the reliability of their supply chains. There will be those who have had isolated bad experiences, but the data is clear, the United States is the largest arms exporter in the world, it controls 40 percent of the market, while Germany is in the top 10, controlling 5 percent.

The German authorization came after weeks of deliberation and was tied to the US agreeing to deliver the M1 Abrams. The amounts do not seem significant (Germany will donate 14 and the United States 31) but pledges from many other countries have been added to this authorization, at such a rate that Ukraine expects to receive 321 good quality tanks in the coming months.

The quality of these tanks will give Ukraine a competitive advantage: the Leopard 2 is a 60-tonne beast, considered by many analysts to be the best tank in the world, while the M1 Abrams is so powerful that it uses jet fuel instead of diesel. This qualitative change will take months to take effect as Ukrainian troops must receive adequate training and there is a necessary industrialization process, so Ukraine needs to continue receiving military aid including Soviet or Russian-made equipment.

The head of the US Southern Command, General Laura Richardson, announced during an event hosted by the Atlantic Council last week that the US was encouraging countries in the region to donate or sell their Russian/Soviet-sourced military equipment to help Ukraine.

In Mexico, the Navy, Air Force and National Guard have some 40 Mi-17 helicopters, 30 BTR-60 amphibious armored vehicles, a couple of dozen Ural heavy trucks and Igla anti-aircraft missiles. They were all opportunity purchases between 1994 and 2011: the Berlin wall had just fallen, and ex-Soviet equipment was offered at very low prices in those years. Over the years they have proven their use, but many are out of service, and what is certain is that most of them will have to be decommissioned in a few years, as purchasing spare parts is going to be a nightmare in the international market.

The Mexican armed forces began processes to replace them with Western equipment several years ago, but these projects are frozen under this administration. The Mexican government has a great opportunity—both political and commercial—to get rid of the Russian equipment, offering it at market price, in exchange for credits to continue its modernization processes. In plain terms, transfer this equipment to the US in exchange for credit to buy new equipment. Otherwise, all that equipment will remain in disuse and convert to junk, instead of becoming an asset both for the finances of the people of Mexico, and for the defense of an outraged country.

The Transatlantic Security Initiative, in the Scowcroft Center for Strategy and Security, shapes and influences the debate on the greatest security challenges facing the North Atlantic Alliance and its key partners.

Learn more

The post Guevara in Heraldo de Mexico on sending Soviet-era weapons from Mexico to Ukraine (in Spanish) appeared first on Atlantic Council.

​​​​​What you should know

• Brazil: The Supreme Court will investigate whether former President Jair Bolsonaro incited the January 8 attack on Congress and other government buildings in Brasilia.
• Peru: People—mainly from remote Andean regions—descended on the nation’s capital to protest against President Dina Boluarte in support of her predecessor and demand elections and structural change in the country.
• Trade: The value of goods exported from Latin America and the Caribbean (LAC) increased at an estimated rate of 18.8 percent in 2022, a downward trend from 27.8 percent in 2021, due to higher prices and low volumes.

Monitoring economic headwinds and tailwinds in the region

• Argentina: The government will buy back overseas bonds equivalent to over $1 billion to improve its debt profile, looking to send a positive signal to markets despite low reserves levels.
• Brazil: Vice President Alckmin said that Lula’s administration wants to remove a key tax on manufacturing and importing, the IPI, as part of a broader tax reform package. 
• Guyana: The government announced $43.4 billion in funding for a new natural gas power plant, alongside distribution infrastructure improvements, to promote business and development. 
• Multilaterals: During his inauguration, new Inter-American Development Bank (IDB) president Ilan Goldfajn announced three key priorities for the bank: social issues, climate change, and sustainable infrastructure. 
• Mexico: The 2023 North American Leaders Summit concluded with new agreements to promote sustainability, strengthen supply chains, and respond to migration. 
• Peru: The national statistics institute (INEI) said the economy expanded 1.7 percent year-on-year in November, marking a slight slowdown from the rise of 2.0 percent in October.

In focus: LAC in Davos

Latin American and Caribbean public- and private-sector leaders gathered alongside their counterparts from across the world in Davos, Switzerland, for this year’s Global Economic Forum. Colombia’s finance minister Jose Antonio Ocampo used the opportunity to push for a stronger agreement on minimum taxes for multinational companies. Brazil’s finance minister, Fernando Haddad, and environmental minister, Marina Silva, discussed Brazil’s positive economic outlook, environmental stewardship, and desire for regional integration. 

Spanish prime minister Pedro Sánchez also delivered a speech, in which he emphasized Spain’s role in building ties between Europe and Latin America, as Spain prepares to take over the Presidency of the Council of the European Union later this year. 

Health + Innovation

• Vaccines: The Canadian government will donate $33.4 million to the Pan American Health Organization (PAHO) to increase access to COVID-19 immunizations for populations across the region. This donation is in addition to a prior contribution of $40 million in 2021.
• Belize: The country will celebrate 34 years of relations with Taiwan through the construction of a new general hospital in San Pedro.
• Nutrition: A new United Nations report found that 22.5 percent—or 131.3 million people—of the region’s population cannot afford a healthy diet, citing a country’s income level, the incidence of poverty, and level of inequality as contributing factors.

Geopolitics of vaccine donations: US vs. China

• The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

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