Green(ish) sprouts, Mexico and some dark clouds.

Last week, we started to see some encouraging economic news as a transition back to a disinflationary cycle seems to have initiated. Following more than two years of pandemic-related disruptions, supply chains appear to be moving towards normalcy, and some larger trends suggest that “deglobalization” will benefit many emerging countries, including one of the US’ largest trading partners, Mexico. 

After several months of mounting tension, the Biden administration held productive meetings with China at the G-20 in Indonesia. Leaders convened at a moment of global uncertainty, with the war in Ukraine and concerns about persistent inflation, particularly in the European Union.

On November 8th, the US midterm elections took place, proving to be the most expensive and confounding midterms in some time. What many thought would be a red wave, turned out to be a referendum on Donald Trump, highlighting divisions within the Republican party and Democratic mobilization following the Supreme Court’s decision on Roe v Wade.

In the midterms, Republicans narrowly gained control of the House of Representatives and Democrats held onto the majority in the Senate. For a comprehensive overview on election outcomes, you can click here. The split in Congress will create roadblocks for both parties to pass substantive legislation in the next two years. The elections also have implications for foreign policy. For a good discussion on this, I’d suggest the following piece by the Council on Foreign Relations. 

As we enter the final weeks of the 117th congressional session, concerns remain about the willingness of Congress to address pressing issues, such as the debt ceiling. There is also talk about immigration, in particular legislation impacting Dreamers. I recently wrote an op-ed for the Dallas Morning News, “Stop Playing Defense with Immigration Policy”, which you can view here

Last week, a federal judge blocked the use of Title 42, a policy that has been in place since March 2020, allowing for the rapid expulsion of migrants at the border. Title 42 will now end in late December, creating logistical challenges amid the high number of border crossings and highlighting the need for continued cooperation with Mexico. 

Mexico will hold its presidential elections in 2024. In a controversial move, President Andrés Manuel López Obrador has proposed to overhaul Mexico’s autonomous electoral agency. On November 12th, Mexico City saw tens of thousands of people take to the streets to protest the reform, which critics say would threaten the country’s democracy. Opposition parties recently came out against the proposal, making it unlikely to be approved by Congress in the coming weeks. 

On trade, US Trade Representative Katherine Tai met earlier this month with Mexico’s new economy minister, Raquel BuenrostroThe two officials discussed Mexico’s energy sector and US corn exports. 

The US and Canada requested settlement talks in July regarding López Obrador’s initiatives on energy, claiming that they violate the US.-Mexico-Canada Trade Agreement (USMCA) by favoring state-owned companies. Yet, it is unclear if much will come from the consultations, which have already been extended beyond the initial 75-day period. Mexico seems reluctant to negotiate these matters, suggesting we’re in for a long-haul on this topic. 

In what may prove to be a particularly challenging political issue, Mexico appears to be moving forward with a decree to ban imports of genetically modified corn by 2024. The US is the top corn exporter to Mexico, with the vast majority of the corn genetically modified. A Wall Street Journal op-ed cautioned that such a move could begin a trade war, and Iowa Senators are already pushing for new USMCA consultations on the ban. A recent industry report forecasts that over a 10-year period the ban would cost the US economy $73.89 billion in economic output and over 32,000 jobs annually.  

Mexico’s economy continues to recover following the downturn brought on by the pandemic and related restrictions, with economic activity nearly returning to pre-pandemic levels. Last week, Fitch affirmed Mexico at a BBB ratingwith a stable economic outlook, forecasting that the country’s GDP will grow by 2.5 percent in 2022 and 1.4 percent in 2023. And nearshoring continues to offer great potential to Mexico, if properly capitalized upon.

Later this week, Mexico plans on hosting a Pacific Alliance Summit, with South American countries such as Colombia and Chile in attendance, to discuss regional integration and new trade agreements. That summit now appears to be in doubt. Many eyes are also looking towards the upcoming so-called “Three Amigos Summit ”, which will be hosted by Mexico for the first time in nearly a decade. While the date has not yet been announced, the three North American governments are expected to meet to discuss immigration, security, trade, and more. 

In Brazil, former President Luiz Inacio Lula da Silva narrowly won the presidential elections, ousting Jair Bolsonaro. In the face of rising divisions, experts have cited concerns about increasing governability challenges in Brazil and across Latin America, as the region undergoes a second pink wave of leftist governments. 

I’d encourage you to take a look at White & Case’s Latin America Focus:Outlook for 2023. This new resource from my colleagues here at the firm explores technology, carbon markets, the future of US-Latin America trade relations, and more. 

Finally, I’d like to wish those of you celebrating Thanksgiving a very happy holiday. As always, I hope you will stay in touch and reach out or follow me on FacebookTwitter, or LinkedIn


Antonio Garza