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The United States and Mexico: The Path Forward

Barack Obama, Enrique Pena Nieto

SOURCE: AP/Jacquelyn Martin

President Barack Obama listens as Mexican President-Elect Enrique Peña Nieto speaks prior to their meeting in the Oval Office of the White House in Washington, Tuesday, November 27, 2012.

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Mexico inaugurates a new president on Saturday—Enrique Peña Nieto of the Institutional Revolutionary Party. Given the early lead he enjoyed during the campaign and the public fatigue with the ruling National Action Party, Peña Nieto, the former governor of the state of Mexico, ran on generalities and never clearly defined his political philosophy or presidential agenda. Much of what he campaigned on could be boiled down to two statements: “I’m not the National Action Party, and I’m not the old Institutional Revolutionary Party.”

Good enough, as far as the election result goes: Peña Nieto was elected with close to 40 percent of the vote, a plurality but not a majority—in part because many voters retain a strong distrust of the Institutional Revolutionary Party and its autocratic past. It is now up to the president-elect to fill in the blanks as to what kind of president he will be. If all goes well, he could be transformational. But obstacles loom and initial expectations must be held in check.

The country has solid standing. Economic growth is strong and projections show continued expansion, surpassing even Latin American darling Brazil. The middle class is growing, with greater access to goods and services and the ability to purchase them. Manufacturing is moving back to Mexico from China, with Mexico becoming a platform both for production in North America and also in Latin America. The country has also become a leading voice in global trade, as well as economic and environmental initiatives. Mexico is becoming economically what it has always been geographically: the crucial link between North and South America.

The outgoing government has effectively used its final days in office to promote a reform agenda consistent with Peña Nieto’s stated views. Mexico has one of the longest transition periods of any democracy—five months. While outgoing governments have traditionally done little during this period, this particular transition period has proven different, particularly with regard to the charged issue of strong protections for labor that have been loosened through new legislation in recent weeks.

Working together, the National Action Party executive and the Institutional Revolutionary Party-controlled legislature have joined to give the incoming Peña Nieto government a strong tailwind toward economic opening and greater competition, without having to pay the political cost that labor reform might otherwise have entailed. At the same time, north of the border, President Barack Obama has spoken clearly of his desire for meaningful immigration reform this year, which would provide another significant political and economic boost to the new Mexican president.

With labor reform out of the way, attention turns to the three policy fields that Peña Nieto has promised to address, perhaps all at once: energy reform, tax reform, and Social Security reform. Should he succeed in addressing these issues effectively, he will have restructured a significant part of Mexico’s economy, preparing Mexico for an economic takeoff that could rival Asian economies.

This effort brings risk as well as promise, since failing with these fundamental reforms could throw Peña Nieto’s presidency into turmoil at its inception. Each of these reforms individually would be enough to occupy the Presidential Palace Los Pinos for months and to soak up the political capital of any president. Doing all of them together would be a political project more involved than any other since the Institutional Revolutionary Party first restructured Mexico’s economy in the 1930s. Clearly, the political stakes are huge.

A major obstacle to reform could be the Institutional Revolutionary Party itself. Party discipline will largely ensure a supportive if not compliant congressional delegation, but party bosses, governors, and individual congressional representatives, among others, will likely seek to ensure that their political equities are protected in any reform process. Peña Nieto’s challenge will be to keep them in line, using traditional tools of political coalition building without stepping over the line into corruption. A number of younger, newly elected members of the Mexican Congress in the leftist Party of the Democratic Revolution have indicated that the deepening of democratic reform is their main priority and that there might be room for cooperation with President-Elect Peña Nieto should he push this agenda.

The fate of the reform agenda will arguably be the new president’s greatest and most immediate test. He faces a Mexican public that no longer tolerates the old ways of doing politics in Mexico and is skeptical that the Institutional Revolutionary Party has truly changed. But equally importantly, the party has been out of power for 12 years and its leaders now want and expect to receive the rewards that national power bestows. It will be a delicate balancing act for Peña Nieto. But his inauguration also has implications for U.S.-Mexico relations, which will play out on both sides of the border.

The path forward

Given this backdrop, the new Mexican president needs major political and policy successes in 2013 to consolidate power within his own party and secure congressional majorities for an ongoing economic reform process. Here, the United States has an important role to play: The two countries are intertwined in a unique way and thus the political success of Enrique Peña Nieto will, at least in part, be impacted by what happens north of the border. And the to-do list for the United States is extensive, but it is largely focused on economic policy and immigration reform.

Immigration reform is increasingly likely to dominate the domestic debate once the fiscal cliff is resolved. President-Elect Peña Nieto made a strong endorsement of immigration reform at his Washington press conference with President Obama this week, stating that he fully supports President Obama’s proposal. Even though a strong majority of Americans support a pathway to citizenship for the 11 million undocumented immigrants living in the country, it will remain a difficult legislative battle. And while aligning with a popular U.S. president who will be viewed as fighting to legalize Mexican nationals makes obvious sense, there is some risk that a failed legislative effort will trigger collateral damage to Peña Nieto’s image in Mexico.

On the economic front, the success of the new Mexican administration’s economic reform and growth agenda is a core interest of the United States. A number of policy fields will be crucial to create a successful North American growth model and will elevate the transactional partnership with Mexico to a strategic relationship much like the United States enjoys with Canada. To achieve this goal, both countries must address a number of issues simultaneously.

  • The creation of jobs will play a central role in domestic politics in both countries. U.S-Mexican trade needs to be encouraged in the border region and beyond. To achieve this, the U.S.-Mexican border needs to be more permeable and allow more crossings at lower cost.
  • To secure energy independence, both countries need to prioritize research and development investments to ensure that technologies that facilitate access to shale gas—such as horizontal drilling combined with hydraulic fracking—do not adversely affect the environment. This is a necessary step to move forward with the development of massive North American shale gas resources—a potential strategic game-changer.
  • Mexican states along the U.S. border are official observers in the Western Climate Initiative, joining California and four Canadian provinces. The federal governments in both the United States and Mexico should take aggressive steps to make it more feasible for these Mexican states to become full partners in the initiative to achieve meaningful reductions in carbon pollution and move toward greater U.S.-Mexican cooperation on future North American pollution cuts.
  • Both countries need to expand their economic relations with Asia and Europe. President-Elect Peña Nieto sees China as an important future partner for economic growth. Both Mexico and Canada were invited in June to join the negotiations toward the Trans-Pacific Partnership—an important if belated step. Both should also be included at the very beginning of discussions with Europe—should they occur as has been rumored—toward the creation of a free trade zone in the Atlantic. Such trade negotiations would provide an added means for the three North American economies to build cooperation.
  • The war against cartels and gangs involved in the illegal drugs trade continues to rage on both sides of the border, although indications of progress include a reduction in violence, cleaned-up cities, and increasing professionalization of the Mexican security forces. Achieving a reduction of violence will be a key challenge for President-Elect Peña Nieto, with street protests demanding as much. Judicial reform is moving forward, albeit slowly, but Mexican authorities still rely too greatly on confession by apprehended suspects and have deficits in the acquisition and use of intelligence. This fight needs to be framed as a joint challenge, emphasizing the co-responsibility of the United States, as Secretary of State Hillary Clinton has expressed several times.
  • The re-launch of a U.S.-Mexican bilateral commission would be an important vehicle to institutionalize cabinet-level discussions across the broad range of issues that affect our countries and maybe trilateralize along with Canada from time to time. Tone and perception count a lot in the bilateral relationship. In addition, both sides should establish permanent working groups to help change the image and perception of Mexico in the United States and vice versa. Such an engagement in public diplomacy could include messaging and outreach to counter the often-distorted perception of Mexican society in the United States.

The election of Enrique Peña Nieto and the re-election of President Obama mean that the U.S.-Mexican relationship has a unique opportunity to grow closer and bring numerous benefits to both sides of the border. To fully appreciate this unique opportunity, both sides must invest political capital and be prepared to engage domestic public opinion when it comes to explaining why our countries are united by much more than a fence.

Eric Farnsworth is vice president of the Council of the Americas and Americas Society, heading their Washington, D.C., office since 2003. His areas of expertise include the role of Asia in the Americas, trade, energy, U.S. policy in the region, and national security affairs. Michael Werz is a Senior Fellow at the Center for American Progress, where his work as a member of the National Security team focuses on the nexus of climate change, migration, and security, as well as on emerging democratic powers in Turkey, Mexico, Brazil, and India.

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