After three attempts, Mexico has now decisively given Andres Manuel Lopez Obrador (AMLO) a chance to install his brand of populist nationalism and take on Donald Trump in what may be the highest stakes yet, at least in this century, in the relationship between our two countries. AMLO comes into office as President with a significant mandate for sweeping change and the most immediate question is whether or not he can manage expectations, which are sky high among his support base. This is a major transformation of Mexican politics. The once dominant PRI is now a minor party; the center-right PAN is the largest opposition party, but has been severely weakened. His major campaign commitments are to end corruption, use subsidies to help the poor, reduce the power of what he characterizes as the establishment’s “mafia of power”, and assign the state to a larger role in the economy. Whether he can deliver without damaging the considerable economic progress that Mexico has achieved over the past few decades by returning to a type of the PRI-dominated state-managed economy of the days before NAFTA and the transition to a more open and market-based economy will very much be an open question. Indications are that he has softened his rhetoric since his first two campaigns, particularly as it pertains to his receptivity to foreign investment in energy and other market-based reforms, which Mexico still desperately needs to be competitive technologically and for access to the necessary capital for growth. To a large extent, the financial and currency markets will not be kind to reversals of this kind, and the prior energy policy reforms were written into the Mexican constitution, but watch for a lot of “noise” from him on this point, with posturing as an economic nationalist to appease his base.
Aside from the obvious hot button items of immigration, border control, and “the wall”, a very big key to the direction of U. S.–Mexico relations, of course, is the future of NAFTA, and it would be beneficial to have an early resolution of this issue for a variety of reasons beneficial to all three parties to the pact. And nowhere is the resolution of NAFTA negotiations more important than in Texas, which exports almost $100 billion in goods and services annually to Mexico. But President Trump has now put “pause” to these discussions until after the November U. S. elections and the inauguration of AMLO as President. Who knows, maybe a cooling period will provide more thoughtful outcomes without the tweeting and the madness of the daily 24-hour news cycle and the market volatility on this issue, particularly after the people have spoken at the ballot box. And in the final analysis, considering Trump’s rhetoric on trade protectionism, we could do a whole lot worse than to maintain the status quo.