Making Connections

Mexico’s Latin American ties

Mexico explores new opportunities in Latin America while sending a message to its northern neighbor.

After over two decades of partnering—almost exclusively—with the US, Mexico has started to pay more attention to its political and economic ties with Latin America as protectionist whinings north of the border threaten uncertainty among Mexican producers.

Strictly speaking, Mexico has never had to choose one or the other between the US and Latin America, though it is not hard to imagine that, at times, a conflict of interests may arise between the US and Latin America, putting Mexico in a difficult position, yet the signing of the North American Free Trade Agreement (NAFTA) in 1994 set the stage for the shift to deeper US dependency. Over the next two decades and during the Calderón and Peña Nieto administrations, Mexico continued much in the same direction and became one of the US’ closest trade partners.

Nevertheless, Mexico has not completely alienated itself from Latin American countries, most of whom speak the Spanish language and have a shared past with Mexico, and has by-and-large remained popular among its southern neighbors.
In 2007, for example, Argentina’s then-president, Nestor Kirchner, emphasized the necessity of Mexico’s integration in the Southern Common Market (Mercosur). Similarly, the former leaders of Brazil and Uruguay have stretched out a hand to Mexico, calling for Mexico’s full membership in the Mercosur trade bloc.

Though not a Spanish-speaking nation, Brazil is definitely a regional power to contend with and a major trade partner for Mexico. Brazil has been Mexico’s biggest trade partner in South America for some years, with bilateral trade between the two nations passing the USD10-billion mark in 2018, according to the Mexican Ministry of Economy.
Since the beginning of the two countries’ bilateral relations in 1924, the two nations have got along reasonably well to this day, notwithstanding a history of good-natured rivalry and awkward incidents such as the Odebrecht scandal.
When the Trump administration’s insistence on renegotiating NAFTA slightly curbed Mexico’s access to the US automobile market in 2018, Mexico and Brazil managed to finalize an FTA for light vehicles, which was a small relief for the Mexican car industry.

One should, however, not forget the element of rivalry in Mexico-Brazil relations, especially as both countries are relatively populous emerging economies that compete over similar markets, while trying to attract foreign investments from similar sources.Thus, it would not come as a complete surprise to many political commentators if a tension began to develop between President López Obrador and President Bolsonaro given their opposite political leanings. The two newly elected presidents have different views on important matters such as the refugee crisis in Latin America, the expansion of the private sector, and the issue of Venezuela.

Argentina may also sign an FTA with Mexico in the future, which will be a milestone in Mexico-Argentina trade relations. Although Argentina and Mexico are not presently major trade partners, they have a long-shared history as former members of the Spanish Empire, which makes their diplomatic ties important.
Argentina adopted a mildly supportive tone in defense of Mexico when President Trump started to put pressure on Mexico to pay for a proposed border wall. Mexico and Argentina have taken several steps in recent months to open up their markets to each other, particularly in the areas of agrifood and industry.
Mexico’s relations with other Latin American economies such as Chile, Peru, Colombia, and Ecuador, among others, have progressed in recent years in areas such as tourism, manufacturing, agriculture, and trade, with two-way trade volumes of USD850 million to USD5 billion.

The fact remains, however, that these figures are dwarfed by the volume of Mexico’s trade with the US. According to the World Bank, the two-way trade between the US and Mexico was well over USD522 billion in 2018, with up to 80% of Mexico’s exports heading for the US market. Under such conditions, the new Mexican administration is unlikely to put the country’s economy at risk by falling out with its northern neighbor, which may have become more difficult to deal with since 2016, though it will definitely try to rebuild its ties with the Latin American world.