President Biden used his first two virtual foreign visits to usher in a new era of North American relations with Canadian Prime Minister Justin Trudeau and Mexican President Andrés Manuel López Obrador.
During the meetings, Trudeau and López Obrador requested Biden’s support in securing U.S.-produced COVID-19 vaccinations, and the U.S. responded. Yesterday, the Biden administration pledged to send the AstraZeneca vaccine—which is awaiting FDA approval— to Canada and Mexico.
In the virtual visit, Biden and López Obrador also discussed pressing regional migration challenges. The leaders agreed to work together to curb the flow of irregular migration and promote development in Central America.
This week, the U.S. Department of Homeland Security announced that it expects 2021 border crossings to reach a twenty-year high. Over the course of the last month, thousands of unaccompanied migrant children have crossed the border. With resources stretched thin, many are being detained longer than allowed by law. In response, Biden directed Federal Emergency Management Agency to support housing the children.
In an interview several days ago, Biden made it clear that migrants should not come to the border. The Biden administration has said it needs time to rebuild an immigration system that was dismantled by the previous administration. In the meantime, it will continue to use a CDC order to expel most migrants who arrive at the border. Mexico has agreed to help the U.S. by drastically stepping up its own enforcement and taking back more expelled Central American families.
On Monday, Republican members of the House led a delegation to the border to bring attention to a crisis that they believe is the result of Biden’s promises to shift policy. And Republican Senators plan to visit the border next week.
These partisan trips highlight stark disagreements on immigration reform, one of Biden’s legislative priorities. Republicans have refused to sit down with their colleagues across the aisle until the situation at the border is resolved. Struggling to secure bipartisan backing for an immigration overhaul, the Democrats have decided to move forward piece by piece.
Yesterday, the House of Representatives voted on two immigration bills. One measure would provide a path to citizenship for over 2.5 million undocumented immigrants who arrived as children, and the other would offer legal status to 1 million undocumented farm workers. This legislation faces a difficult path through the Senate to Biden’s desk.
Last week, Congress approved a new $1.9 trillion COVID-19 relief package. The U.S. stimulus has boosted Mexico’s economic recovery. JP Morgan estimated that last year’s relief package added 3.5 percentage points to Mexico’s GDP in 2020, roughly seven times more than the impact of Mexico’s own limited efforts.
The U.S. COVID-19 relief has also stimulated remittances to Mexico. In 2020, remittances totaled an all-time high of $41 billion, a 14 percent increase from 2019 and 4 percent of Mexico’s GDP. The majority of this year-on-year increase came from individuals in the U.S. who sent a portion of their stimulus checks or earnings.
Mexico’s exports also reached a record, due to a rise in U.S. demand for goods. In the fourth quarter of 2020, exports were 5.5 percent higher than the same quarter in 2019. This increase in exports has favored the country’s northern industrial region.
While exports are up, Mexico’s business climate remains bleak. As I mentioned in my last newsletter, economic growth will be slow to rebound due to the lack of major fiscal measures to support businesses and consumers. López Obrador’s unpredictable stance on contracts will also continue to deter investors.
Last month’s energy crisis in Texas gave López Obrador a stronger political platform to push for greater state control of the energy sector. His allies in Congress recently passed a law that gives preference to the state-run electricity company CFE over private wind and solar farms. For more about the Texas blackout and future energy outlook, I recommend this White & Case piece.
Mexico’s new electricity law puts at risk $26 billion in foreign investment. Prime Minister Trudeau expressed concern about Canadian assets, joining U.S. Secretary of State Anthony Blinken who raised “energy concerns” during a virtual visit with Mexican Foreign Secretary Marcelo Ebrard.
In response to the new electricity law, a number of foreign companies filed lawsuits. Days later, a Mexican federal judge granted a suspension for the duration of the trial, arguing that the law could violate the constitutional right to free competition. This prompted López Obrador to request a Supreme Court ethics inquiry of the federal judge and threaten constitutional reform, likely after June’s midterm elections.
The midterm elections will set the tone for the rest of López Obrador’s six-year term. Maintaining his absolute majority in the lower house of Congress would allow him to rewrite the constitution ––in regards to energy and other crucial sectors–– and further concentrate power. The odds remain in the president’s favor. Recent polls showed that his coalition has a historic lead. Roughly 56 percent of voters support his coalition, compared to 29 percent who back the opposition.
At White & Case Mexico City, I continue to work alongside my colleagues to assess evolving developments in Mexico, mitigate business risks, and look for opportunities. As you might imagine, we’ve been closely following concerns related to supply chains in critical sectors. Along those lines, this White & Case piece gives an overview of Biden’s executive order to perform a 100-day review.
As always, I look forward to hearing your thoughts on these issues and hope you will connect with me via Facebook, Twitter, or LinkedIn.
Sincerely,
Antonio Garza