Last night, president Biden appealed to the nation, and the world, for $100 billion in funding as a show of continued support for both Israel and Ukraine.
This address comes almost two weeks after Hamas launched a brutal attack against Israel with Israel subsequently launching a counter-attack against Hamas in Gaza. As the conflict continues, so too, does a mounting humanitarian crisis with Palestinian civilians unable to evacuate. Meanwhile, concerns have emerged over the possibility of an expanding crisis as Iran confirmed their involvement in the Hamas attacks and Iranian-back Hezbollah intensifies their presence along Israel’s northern border.
Russia’s offensive against Ukraine also continues with Ukrainian president Zelensky confirming, for the first time, the use of US-provided long-range missiles this week against Russian targets in occupied Ukrainian territory and Russia’s continuation of lethal airstrikes against Ukrainian cities. This week, Russian president Putin also met with Chinese president Xi while evidence increases of North Korean support for Russia through the alleged delivery of weapons.
While the human costs of these two conflicts rise, we don’t yet know what the economic and geopolitical impact of these volatile situations will be. What is certain is that we are now living in a turbulent moment “that may be the most dangerous time the world has seen in decades.”
In North America, the US and Mexico have been busy with high-level dialogues on both the economy and security. On September 29, multiple cabinet secretaries from both countries met in Washington for the third High-Level Economic Dialogue meeting since 2021, which focused on increasing manufacturing, improving pharmaceutical regulations, and climate change. Notably, the energy and corn conflicts were not discussed.
On October 5, Secretary of State Blinken traveled to Mexico City for high-level security talks, which focused on curbing fentanyl and migration to the US. However, after the meeting AMLO continued to deny that fentanyl is produced in Mexico and critiqued the Biden administration’s decision to reinitiate border wall construction. Overall, the effects of these talks on US-Mexico collaboration are yet to be seen, but president Lopez Obrador has committed to a one-on-one with president Biden in mid-November at the APEC summit.
In the midst of these meetings, Mexico’s presidential candidates are gearing up to begin their campaigns. Xochitl Galvez, the Frente Amplio candidate visited California in late September, meeting with Mexican community leaders and farm workers. Morena candidate Claudia Sheinbaum has pledged to make a similar trip. Former Foreign Minister Marcelo Ebrard – the Morena candidate runner-up – filed a complaint against Morena’s candidate selection process and, Morena has until October 25 to respond. Ebrard has suggested a third party candidacy, though recent polls show Sheinbaum with a comfortable lead regardless of his decision.
As the 2024 presidential campaigns also get underway in the United States, an increasingly common talking point of Republican presidential hopefuls is the use of military force in Mexico against fentanyl trafficking and criminal groups. Fentanyl seizures at the US southern border spiked this year, with 9,909 kilograms seized in the first 10 months of fiscal year 2023 compared to 6,396 kilograms in all of fiscal 2022. However, such military interventions are unlikely, and such a rhetorical excess is counterproductive to strengthening the bilateral relationship.
In economic news, Mexico’s economy took a moderate tumble early in the month. On October 5, Mexico’s stock index temporarily fell by roughly 4 percent following the announcement of unexpected price changes on airport tariffs. The stock index quickly rebounded and Mexico’s airport operators have now reached an agreement on the tariff increases. Additionally, inflation rose slightly from 4.44% to 4.47% in September for the first time since April. That said, BBVA continues to report their real GDP growth estimate at 3.2% for 2023, and Banxico is expected to hold interest rates at 11.25% through the end of this year. Finally, on October 11, the Lopez Obrador administration proposed a series of tax breaks to attract more nearshoring, in particular for semiconductors, electric batteries, and medical supply operations.
The cycle of trade disputes continues to spark tensions. In September, Texas governor Greg Abbott announced cargo truck inspections as part of his “Operation Lone Star”. By early October, trucking companies estimated that more 19,000 trucks with roughly $1.9 billion in merchandise were queued as inspections in Texas clogged cargo traffic. President Lopez Obrador reported that he would send a diplomatic letter decrying these delays to the Biden Administration. The US and Mexico agreed to intensify monitoring of steel and aluminum imports over concerns that third country metals are moving through Mexico to avoid US tariffs. Additionally, Mexico continues to double down on curbing US genetically modified corn.
Finally, the Biden administration is taking an ever more enforcement-laden approach to immigration. In September, the U.S. reported apprehending more than 210,000 migrants at the US southern border, bringing the 12-month total to more than 2 million. In response, the Biden administration announced the resumption of border wall construction along a 20-mile stretch in Texas and a restart of deportations to Venezuela after more than 50,000 Venezuelans irregularly crossed last month. The first of those deportation flights departed on October 18.
Here at White & Case in Mexico City we’ll continue to closely monitor the political and regulatory environment in order to provide our clients with the very best insights and service. I am particularly proud to be able to extend my congratulations to Francisco de Rosenzweig and the whole White & Case LatAm team for being recognized as the Latin American infrastructure law firm of the year by LatAm Finance.
And lastly, I’d also like to welcome the head of our firm’s Latin American practice, Chris Hansen, back to Mexico City after a number of years in Miami. Those of you that know Chris appreciate him not only for his love of the region, but also for being amongst the very best attorneys working on Latin America.