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Secret Agent Man

Blog

Secret Agent Man

Mexico is considering a proposal to amend its National Security Law that could have major implications for the U.S.-Mexico bilateral relationship. Ricardo Monreal, majority leader of Mexican President Andres Manuel Lopez Obrador’s (AMLO) MORENA party, submitted a bill to the Mexican Senate on Friday and subsequently published a 10-point summary of the bill’s key points on his personal website. The bill aims to change the legal status of foreign agents present in Mexico. Among other things, the bill would strip foreign agents of immunity for violating Mexican laws, limit the activities of foreign agents to “liaison activities for the exchange of information,” and require foreign agents to share all information they gather with Mexican authorities.

This development is the latest in a series of complications in the U.S.-Mexico bilateral relationship ever since the revamped version of NAFTA went into effect in July.

In recent months, U.S. lawmakers have put pressure on the U.S. government to do more to protect U.S. energy companies, who are rightfully scared about investments and market access in the wake of AMLO’s threat to seek energy reforms early next year. Protesters in Chihuahua seized a dam and threatened to refuse to allow future water transfers to the U.S., and though the U.S. and Mexican governments were able to come to an agreement on the water issue in October, going forward, water shortages in the border regions promise to become an even more contentious political issue. On other important issues, like vaccines (along with Argentina, Mexico intends to manufacture the AstraZeneca vaccine for Latin America rather than rely on U.S. companies), or 5G infrastructure build-outs (Mexico has not banned Huawei from its networks), Mexico and the U.S. are not on the same wavelength (no pun intended).

The impetus for changes in the National Security Law, however, has an even more specific origin: the U.S. arrest of Mexico’s former Secretary of National Defense, General Salvador Cienfuegos Zepeda, in Los Angeles on drug and money laundering charges roughly 6 weeks ago.

AMLO has fashioned himself a major anti-corruption figure in Mexico, but even though Cienfuegos is accused of using his political position to profit from turning a blind eye to the activities of Mexican drug cartels, AMLO was perturbed that the U.S. arrested Cienfuegos without informing Mexico ahead of time. AMLO is a populist, and at least rhetorically a left-leaning one – but his brand of populism, like more right-leaning brands in the U.S. and Brazil, emphasizes nationalism and sovereignty as primary political issues. Cienfuegos’ arrest, from Mexico’s perspective, was a slap in the face, and it is important for AMLO to demonstrate that he can stand up to Mexico’s northern neighbor, especially ahead of important legislative elections next July.

AMLO’s anger eventually led to the U.S. dismissing the charges for fear of doing permanent damage to the U.S.-Mexico relationship. The changes to the National Security Law raise the uncomfortable question of whether or not the damage has already been done. Mexico’s ongoing battle with drug and cartel-related violence is tied up in its relationship with the United States, especially since the 2007 Mérida Initiative. Back in 2007, then-Mexican President Felipe Calderon requested an increase in U.S. assistance to fight Mexican criminal organizations and the drug cartel, and ever since, the U.S. has allocated billions of dollars to provide Mexican military and security forces with equipment and training to fight the cartels, in addition to providing “foreign agents” to assist Mexico’s security forces.

The fight has been a losing one. The names of the cartels have changed over time, and the overall environment now sees smaller cartel off-shoots competing for territory across the country rather than a few larger cartels competing at the national level – but violence continues to increase. 2019 was one of the most violent years in recent Mexican history despite AMLO’s promises for a new approach to the drug wars. COVID-19 has not slowed the violence at all: preliminary government data suggests Mexico may see a new annual high in murders in 2020 despite (perhaps, because of?) the disruption caused by the global pandemic. In July, the Jalisco New Generation Cartel even attempted to assassinate Mexico City’s chief of police, a significant escalation in a country where the capital city is considered tantamount to neutral ground.

Much ink has been spilled in the press about the deteriorating U.S.-China relationship, and with good reason: when the first and second largest economic powers in the world square off in a mutually destructive trade war, the ramifications are global. But from the U.S. perspective, its economic and security relationship with Mexico is actually more important. Overall trade between the U.S. and Mexico was greater than the trade between U.S. and China in 2019, and the economic relationship is even more important to the U.S. going forward as it seeks to decouple from its dependence on China as much as possible. Latin America is just beginning to feel the effects, both positive and negative, of being caught up in the U.S.-China rivalry, and the Biden administration will likely make revamping U.S. foreign policy in the region a key priority moving forward with an eye towards deepening U.S presence and primacy.

U.S. national security concerns over China are real and legitimate but play out thousands of miles away in the seascapes of the Indo-Pacific. U.S.-Mexico national security concerns play out in U.S. border states like Texas and Arizona, or Mexican border states like Sonora and Tamaulipas. In part due to the surprisingly cozy relationship between AMLO and U.S. President Donald Trump, many of the bumps in the bilateral relationship in recent years have been smoothed over. With Trump on his way out, and with AMLO considering his political future, Mexico City appears to be attempting to reset its relationship with Washington and to prevent what Monreal described as “a history of actions that violate the sovereignty of [Mexico] by foreign agencies” from continuing in the future.

By our measure, this is one of the biggest geopolitical stories in a year already chock-full of them – and one with potentially massive implications for companies with exposure to U.S.-Mexico geopolitical risks.

We’ve published some previous content on U.S.-Mexico relations for those interested in a high-level overview of recent events:

  • A podcast with Mexican political analyst Stephanie Henaro on the future of the bilateral relationship
  • A brief geopolitical profile of AMLO as a leader
  • Two brief summaries of developments related to Cienfuegos and his arrest

If you find yourself with specific questions on how these developments might affect your investments or your business operations, you can reply to this e-mail or drop us a note at info@perchperspectives.com to set up a time to discuss how Perch can help.

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