CEO’s Executive Summary
As the dog days of summer come to an end, we are pleased to take this opportunity to bring you up to speed on the latest key events in the U.S.-Mexico relationship. Regrettably, we begin with expressing our sadness and outrage regarding the recent mass shooting in El Paso, Texas, a border community we know well and love. While much has already been written about it, we want simply to add our voice to the chorus of Mexicans and Americans who are deeply concerned by what the shooting in El Paso represents: the targeting of Latinos, of whatever nationality, simply because of who they are. The shootings unequivocally represent the nadir of what has been a slow but steady degradation of our shared values and our shared commitment to one another as neighbors, friends, family, and allies, spurred by grotesque and hateful rhetoric coming out of the highest levels of the U.S. government in Washington. Monarch condemns the violence, the rhetoric and the complicity that arises when leaders who know better fail to speak out and take action to arrest this troubling trend, which goes well beyond issues of gun violence and gun rights. We join the people of El Paso and the entire border community in their mourning but also in their determination to keep fighting for a better and stronger future that is shared by our hermanos y hermanas on both sides of the border and that is committed to a peaceful and prosperous partnership between neighbors.
The events in El Paso did not eclipse other important developments in the bilateral relationship, which we now turn to. The USMCA negotiations between the U.S. Trade Representative’s office and a working group of congressional Democrats established by House Speaker Nancy Pelosi are on-going, now coupled with district-level lobbying efforts by the Trump administration and the U.S. Chamber of Commerce to pressure vulnerable Democrats. When, or if, the agreement will be ratified, however, depends heavily on Speaker Pelosi’s willingness to bring it up for a vote.
Mexican implementation of the migration agreement reached in June has been quite successful, significantly reducing the flow of Central American migrants through Mexico on route to the United States, reducing tensions on this front for now. At the same time, the El Paso shooting, in which eight Mexican nationals lost their lives, opened a new front in the cross-border security challenge. With the USMCA, migration, and security issues continuing to complicate the bilateral relationship, it is good news that the United States once again has an ambassador in Mexico City, Christopher Landau, who has been well-received during his short time in Mexico.
On the economic front, the Mexican economy is fully stagnant, growing just 0.04% over the last five quarters, marking the first time in 25 years the U.S. and Mexican economies have been so far out of sync. This result reflects low investment driven by weak investor confidence reinforced by tight fiscal and monetary policies. Our sector reporting in this newsletter focuses on healthcare, the Mexico City airport, and cannabis, in addition to energy, where a new business plan for Mexico’s national oil company fell flat. It failed to convince market-watchers that Pemex will be able to reverse a continuing slide in production, raising the likelihood that its debt will be downgraded to junk in the fall. A new plan for the national electricity system put clean energy production on the back-burner, and a gas pipeline dispute further undercut investor confidence in President López Obrador’s willingness to respect contracts and property rights.
Despite the economic weakness in Mexico, AMLO’s approval rating continues to be high, at 66%, even as trends behind this headline number indicate some softening of support. This increases pressure on AMLO and the Morena-led legislature to deliver the goods in the months ahead. At the same time, state legislatures approved controversial measures—including a law making most protests illegal in Tabasco and another that would extend the term of the incoming governor in Baja California—that further reinforce concerns about weakening rule of law and democracy in Mexico.
Finally, two corruption scandals have dominated headlines of late. The federal government issued an arrest warrant for the former Pemex director and placed the former Secretary for Social Development in jail on corruption charges associated with the so-called “Master Scam” in which US$300 million in public funds were misused or stolen. And while the murder rate continues to climb in Mexico, drug lord Joaquín “El Chapo” Guzmán, was sentenced to life plus 30 years in prison in U.S. court and ordered to forfeit $12.6 billion.
Full Newsletter: Monarch News – July/August 2019
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