In the wake of Tesla’s decision last month to open a plant in northern Mexico, we’ve seen a modest uptick in the Mexican economy. Mexico’s inflation decreased more than expected last month. Remittances from abroad also rose 11 percent in February over the previous year, and Mexico’s year-on-year automobile production in March increased 13 percent with auto exports rising by 4 percent.
Nevertheless, President Andrés Manuel López Obrador put investors on edge with recent remarks that a transaction with Spain’s largest power company will usher in a “new nationalization” of the energy sector. Through this deal, Mexico purchased natural gas plants and one wind farm for $6 billion from Iberdrola SA, with Mexican officials asserting the purchase will bring state control of energy generation to over 55 percent. While the exact terms of the deal are somewhat vague, experts have questioned if Mexico would have gained more from building new capacity and have expressed concern about how this will affect public finances.
On March 24, the Mexican president sent legislation to Congress, which would give the executive branch broad, seemingly arbitrary authority to revoke licenses and administrative acts. This initiative could impact just about any entity doing business in Mexico. The president’s allies hold enough seats to secure the necessary majority vote. However, if the bill passes, the Congressional minority could deem the reform unconstitutional, leaving the ultimate determination of this matter with Mexico’s Supreme Court. For more information, I encourage you to take a look at a client alert prepared by my colleagues at White & Case here in Mexico City.
On trade, tension remains elevated as little progress has been made through consultations under the US-Mexico-Canada (USMCA) agreement. After more than six months of discussions and increasing pressure from US lawmakers, the Office of the US Trade Representative is expected to make Mexico a “final offer” in coming weeks to address concerns over the country’s energy sector. And last month, both the US and Canada initiated additional consultations with Mexico on the country’s proposed ban of genetically modified corn for human consumption. If Mexico doesn’t budge, the US could formally request USMCA dispute panels on both matters.
Members of Congress and others have been calling on the Biden administration to step up its pressure on Mexico to crack down on fentanyl production and smuggling. This has included pushes for more extreme measures such as deploying US military force in Mexico and designating cartels as Foreign Terrorist Organizations. The synthetic opioid has become the leading cause of death for Americans 18 to 49 years old. The Drug Enforcement Administration identified fake prescription pills that include a potentially deadly dose of fentanyl and brightly-colored opioid pills that target children.
Earlier this week, a Mexican delegation of senior officials traveled to Washington DC to meet with their US counterparts about fentanyl. Ahead of the meetings, the Mexican government launched a presidential anti-trafficking commission and late yesterday in D.C., officials made commitments to broadening and accelerating their coordination to counter the flow of fentanyl between the two countries.
On the domestic front, Mexico continues to grapple with increasingly alarming security challenges. 2022 marked the deadliest year in at least three decades for journalists and homicides topped 30,000 for the fifth consecutive year.The kidnapping and murder of Americans in Matamoros in March put the spotlight on Mexican cartels. In response to an uptick in violence, Mexico deployed 8,000 National Guard to the country’s tourist destinations over the Easter holiday.
Recent tragedies in the news have been a stark reminder of the failures of hemispheric migration policy. This past month saw the tragic fire in a Mexican detention facility in Ciudad Juarez that killed 40 migrants. It also appears that hundreds of US citizen children were separated from their parents by US border officials during Trump’s Zero Tolerance policy.
As I’ve written before, comprehensive reform from Congress would be a significant step towards addressing the decades-long challenge we face on immigration. But with the seeming inability for the two parties to find consensus on this issue, the Biden administration continues to pursue executive measures, including some moves not too unlike those of his predecessor.
In less than a month, on May 11th, the Title 42 expulsion policy is scheduled to lift when the COVID-19 public health emergency comes to an end. The Trump and Biden administrations have used Title 42 for over three years to rapidly expel migrants at the border to Mexico or their country of origin.
To prevent a spike in irregular migration, on Tuesday, the Biden administration announced a two-month coordinated trilateral campaign in Panama’s Darien Gap. In Title 42’s place, the Biden administration has proposed a new federal rule that would restrict asylum eligibility for most migrants at the US-Mexico border who transited through another country without requesting protection first there or who didn’t apply for parole or make an appointment at a port of entry. Mexico’s buy-in on migration will be crucial as the Biden administration negotiates a deal with López Obrador to deport non-Mexicans back to Mexico post-May 11th.
Looking ahead, in June voters in the State of Mexico and Coahuila will head to the polls to vote for governor. These state-wide elections will test the country’s controversial electoral reform, though parts of the legislation were temporarily suspended by Mexico’s Supreme Court due to a pending lawsuit.
The state elections will also help gauge voter sentiment going into the 2024 presidential elections, where López Obrador’s party is positioned well ahead of the opposition in all polls. Over four years into his presidency, López Obrador has consolidated authority in the executive and his approval rating continues to remain high, leaving the opposition with no clear consensus on how best to challenge the president’s party in 2024.
Here at White & Case Mexico City we’ll be closely tracking the latest developments to support our clients’ business interests in-country. You might have seen that White & Case was recognized as the “International Counsel Law Firm of the Year” at the Chambers Brazil 2023 awards.