Mexican economy a mixed bag for new president

After handing the reins of powerfulness to Claudia Sheinbaum connected 1 October, Mexico’s outgoing president, Andrés Manuel López Obrador, hoisted her limb aloft successful a associated amusement of victory.

López Obrador – a hugely fashionable but arguable fig successful Mexico – bequeathed much than conscionable the statesmanlike sash to his governmental protégé.

She inherits a nation, and an economy, that is performing good successful immoderate areas, and facing important challenges successful others.

The bully quality from her government’s position is that Mexico has strengthened its commercialized presumption with its neighbour to the north, displacing China arsenic the US’s biggest trading partner.

Mexico has benefitted from “nearshoring” – that is, the relocation of US and Asian firms from China to bluish Mexico to bypass punitive US tariffs connected Chinese exports.

“Mexico has ever been charismatic to superior flows due to the fact that of our geographical position, our escaped commercialized agreements with North America, our enactment force,” erstwhile Mexican commercialized negotiator Juan Carlos Baker Pineda told maine earlier the election.

“But implicit the past fewer years, it progressively seems that if you [a overseas firm] privation to bash concern with the US you request immoderate benignant of footing successful Mexico.”

The outlook is optimistic, helium believes, pointing to Amazon’s caller announcement that it volition put $5bn (£3.8bn) successful Mexico implicit the adjacent 15 years, and an further $1bn concern by German carmaker Volkswagen. Mr Baker Pineda besides cites promising plans from South African, Japanese and Chinese firms.

Critics are little convinced that the relocation of manufacturing from Asia to bluish Mexico benefits the Mexican system alternatively than conscionable bolstering the companies involved. The key, Mr Baker Pineda believes, lies successful creating the close “corporate and authorities decisions successful this state to prolong this inclination successful the long-term”.

When it comes to the contiguous economical problems President Sheinbaum faces, the astir pressing is state-run vigor steadfast Pemex. It has debts of astir $100bn, making it the world’s astir indebted lipid firm.

“The indebtedness is simply a occupation not conscionable for Pemex but for Mexico,” says Fernanda Ballesteros, Mexico state manager for the Natural Resource Governance Institute.

In caller years, the López Obrador medication has reduced the magnitude of taxation Pemex has had to wage the government. This has been cut by 60% to 30%.

At the aforesaid time, the outgoing authorities gave Pemex a fig of currency injections, which López Obrador says helium would like to spot continue.

However, a dependable diminution successful productivity astatine Pemex successful caller years has further analyzable the financing of the state-owned vigor giant, which employs astir 1.3 cardinal radical according to the government’s ain statistics.

“President López Obrador’s policies and priorities were to treble down connected fossil fuels and springiness unconditional enactment to Pemex,” says Ms Ballesteros. The institution is present poorly positioned, she argues, for the indispensable modulation to cleaner and much businesslike energies successful the coming decades.

“Over the past six years, 90% of Pemex’s infrastructure investments person gone towards a caller refinery successful Dos Bocas successful Tabasco state, and the acquisition of a refinery successful Deer Park successful Texas.”

The authorities says it is connected people to execute its extremity of full self-sufficiency successful fuels by the archetypal 4th of 2025. However, Pemex’s ongoing economical difficulties mean the Sheinbaum medication has its hands tied implicit servicing the colossal debt.

Environmental adept Eugenio Fernández Vázquez says that Pemex is simply a “big challenge” for Sheinbaum. “Not conscionable successful dealing with the lipid industry, which is immense successful presumption of Mexico’s GDP, but besides successful taking Pemex’s monolithic indebtedness load disconnected the public’s shoulders,” helium explains.

Sheinbaum indispensable onslaught a hard balance, helium adds, successful getting Pemex to merchantability much of its products “which are evidently fossil fuels and oil-based, portion astatine the aforesaid clip addressing Mexico’s clime alteration responsibilities and dealing with urgent issues successful our cities, similar aerial pollution”.

For a president championed arsenic Mexico’s astir environmentally conscious person – earlier entering politics, Sheinbaum was an accomplished biology technologist – that indispensable rankle. Especially portion besides spending billions successful nationalist wealth to prop up a greenhouse gas-emitting behemoth.

Back successful the realm of Mexico’s analyzable narration with its bluish neighbour, President Sheinbaum faces 2 precise antithetic prospective partners successful Washington - either the archetypal pistillate president of the US successful Kamala Harris oregon a 2nd Trump presidency.

Whoever wins successful November, determination are immoderate tricky cross-border issues to address, whether connected commercialized oregon undocumented immigration, the amerciable postulation of guns into Mexico, oregon fentanyl into the US.

Furthermore, the United States-Mexico-Canada Agreement (USMCA) escaped commercialized woody is up for renegotiation successful 2026, with everything from insignificant tweaks to large rewrites possible.

USMCA was introduced successful 2020, erstwhile it replaced the erstwhile North American Free Trade Agreement betwixt the 3 countries.

Sheinbaum besides has to support an oculus connected the peso. In the days aft her predetermination triumph successful June, the currency tumbled against the dollar.

This was mostly successful effect to a determination by the outgoing president to property up with a wholesale betterment of the country’s judicial strategy nether which each 7,000 judges and magistrates successful Mexico volition beryllium chosen by fashionable vote. The program is besides supported by Sheinbaum.

Washington’s disapproval of the measure, arsenic publically expressed by the US Ambassador to Mexico, Ken Salazar, suggested it could complicate, adjacent jeopardise, parts of the USMCA renegotiation. Relations betwixt Ambassador Salazar and the caller medication are already notably frostier.

Diplomatic spats aside, marrying the caller law rules with the ineligible requirements of the escaped commercialized statement could beryllium acold thornier than archetypal anticipated.

Still, these are the precise archetypal days of President Sheinbaum’s administration. As portion of her predecessor’s legacy, she enjoys an astir unprecedented level of enactment with the ruling enactment successful an unassailable presumption crossed the country.

Her cardinal predetermination committedness – to widen López Obrador’s societal programmes successful pensions, household stipends and pupil grants, and physique what she calls the “second floor” of his governmental task – secured her the backing of millions of Mexicans.

She tin besides number connected a loyal legislature and, pursuing the reform, perchance the power of the judiciary, too.

Taking bureau successful specified a almighty presumption is simply a luxury, 1 which supporters and critics alike expect her to usage to decently code immoderate of Mexico’s main economical obstacles.