Enterprise Singapore Logo
16 Apr 2018 Updated 13 Dec 2018

Mexico looks beyond Trump-led America

The Straits Times Nirmal Ghosh

With President Donald Trump in the White House, Mexicans are once again fond of quoting an aphorism coined by their late writer Porfirio Diaz : "Poor Mexico, so far from God, so close to the United States."

Mexico City's Zocalo or main square is one of the most historic places on the planet, with ancient Spanish churches built on even more ancient Aztec ruins; the colonisers forced the locals to destroy their pyramidal temples and build churches out of the stone.

With 21 million people, Mexico City is the most populated metropolitan area in the world. By 2050, Mexico will be the seventh-largest economy in the world, but for decades past and in the future, its fate has been and will be linked to the American economy.

However, the American President has called Mexicans drug dealers and rapists; is bent on building a great wall on the Mexican-American border; withdrew the US from the 12-nation Trans-Pacific Partnership (TPP) which included Mexico; and has forced renegotiation of the North American Free Trade Agreement (Nafta) which groups Mexico, the US and Canada.

The last conversation he had with Mexico's President Enrique Pena Nieto, in February, lasted almost an hour and they were both so annoyed that Mr Pena Nieto cancelled plans for a White House visit.

In his 1984 book, Distant Neighbours, author Alan Riding notes that "Mexico must depend - but cannot rely - on its neighbour".

It is an old worry. Mr Antonio Villegas, president of Swiber Offshore Mexico - and a former ambassador to Singapore - remembers that talk of diversification in the 1970s.

"But Mexico was not ready, we were a very protected economy," he told The Straits Times over lunch at the elegant Club de Industriales, a regular stop on the campaign trail of presidential candidates as they try and persuade an often sceptical Mexican business community of their qualifications.

In the age of Trump, theory has become real. "The relationship with the United States is always going to be all-important because we are neighbours," Mr Villegas said. "But the US sometimes demands more than Mexico can give."

Nafta negotiations are ongoing, but the talks could well be hostage to politics. A swift resolution is desirable if all three countries can show they made a good deal; if not, then those that are getting a bad deal may stall for time until after elections. Mexico faces a presidential election on July 1; the US faces mid-term congressional elections in November; and Canada holds elections in Quebec and Ontario in June. All these make the outcome of the Nafta negotiations politically loaded.

One clear option for Mexico is its own pivot to Asia, signalled in 2013 when President Pena Nieto, in an article on the eve of his first visit to Asia, wrote : "We have a great opportunity to capitalise on the strategic importance of the Asia-Pacific region, encourage multilateral trade and further cooperation within the Pacific Rim.

"Never have the two shores of the Pacific been closer than they are now; it is a chance we'd better not miss," he wrote.

The convenience and familiarity of the vast - and still growing - American market means Mexico neglected Asia, Mr Villegas said.

Because of a history of conflict and the economic imbalance, the relationship between Mexico and the US is politically loaded, economically imbalanced, and as prickly as a cactus in Mexico's Sonoran desert.

In the Mexican-American war of 1846-1848, Mexico lost roughly one-third of its territory to the US - much of California, Utah, Nevada, Arizona and New Mexico. Today Mexico accounts for 1.54 per cent of the global economy and the US tallies 24.32 per cent.

Some 70 per cent to 80 per cent of Mexico's exports go to the US. The US bought US$74 billion (S$97 billion) worth of vehicles from Mexico in 2016. Many were pickup trucks; last year, online journal Trucks reported that roughly 51 per cent of parts in the Chevrolet Silverado and GMC Sierra are made in Mexico, as are 29 per cent of parts in Ram full-size trucks and 15 per cent of parts in the Ford F-Series.

Millions of Americans also bought made-in-Mexico flat-screen TVs, monitors and electrical equipment - and in 2016 imported US$4.8 billion worth of fruit and vegetables, including oranges and avocadoes.

But, indirectly because of Mr Trump, the idea of Asia has found its time now. "We cannot forget our geopolitical situation, we are neighbour to the most important economy in the world," Mr Andres Carral, another former Mexican ambassador to Singapore, told The Straits Times. "But the role of Asia in the 21st century is going to be huge, we need to be part of it."

A key vehicle for closer trade and investment ties with Asia is the Pacific Alliance, formed in 2011 by Chile, Colombia, Mexico and Peru - all countries with Pacific coastlines.

In 2014, Singapore became the first Asean country to be given "observer" status in the alliance, and the Republic is now negotiating a free trade agreement with it.

Singapore has for some years been keen on enhancing business ties with Mexico and Latin America; in 2016, then President Tony Tan Keng Yam was the first Singapore head of state to visit Mexico, on the 40th anniversary of bilateral diplomatic relations.

On March 8 in Peru, Mexico signed up to the 11-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership - essentially the original TPP minus the US. "The US will always be the most important for Mexico," said Mr Francisco Rios, Enterprise Singapore's regional director for Mexico, based in Mexico City.

"But in the last couple of years, Mexico is starting to find new friends around the world, and those friends are starting to become a little bit more relevant," he told The Straits Times. "Now that the US has left the TPP, Mexico has a bunch of new partners that don't necessarily need to be aligned with US interests, and they are mostly in the Asia-Pacific. Singapore is one of them."

Enterprise Singapore identifies special economic zones, urban infrastructure and services, and technology among the sectors that offer Singaporean firms scope in Mexico. Singapore, in turn, offers an entry point to China's Belt and Road Initiative.

Back in Washington, Dr Duncan Wood, director of the Mexico Institute at the Wilson Centre, told The Straits Times that Mexico was keen now on trade diversification. "It's about working around the United States," he said.

Source: The Straits Times© Singapore Press Holdings Limited. Reproduced with permission.