Mexico’s next president can reset relations with the United States

Mexicans elected Andrés Manuel López Obrador president in 2018 for sound reasons: his diagnosis that inequality, insecurity and a corrupt political class were damaging Mexico was convincing. But apart from poverty-reducing minimum-wage increases, Mr López Obrador’s “Fourth Transformation” has taken Mexico backwards. A statist, bent on tearing down the works of his predecessors, he is leaving the health-care and education systems in tatters. His reversal of pro-competition energy-market reforms has made Mexico’s electricity dirty and costly. Water is scarce. His hands-off security policy has let criminal groups strengthen their grip. He has attacked independent institutions, from the electoral body to the Supreme Court. In part because of his animus towards the private sector, the economic growth rate has been on average 2-3% per year in the non-pandemic years of his presidency—a mediocre figure given the huge opportunity facing Mexico—and momentum has slowed in the past six months.

Mexicans will decide who inherits this mess when they elect a new president on June 2nd. They are likely to choose Mr López Obrador’s protégée, Claudia Sheinbaum, who belongs to Morena, the ruling party. Her rival, Xóchitl Gálvez, who represents a coalition of older parties, is polling about 20 points behind. How the winner governs will matter not just for Mexicans suffering from violence and inequality, but also for the rest of the world. Mexico has become a crucial actor in the shifting global order. The number of migrants travelling through Mexico to the United States has surged, and illegal migration may currently be the biggest political issue in the world’s most powerful country. The West looks to Mexico to help it decouple from China, especially for manufacturing vital electronics and green technologies. Mexico’s next president will have great influence on both counts.

Start with migration, and its role in the United States’ politics. In 2023 the US Customs and Border Protection agency encountered 2.5m people crossing the border from Mexico, up from 1.7m in 2021. Mr López Obrador has co-operated in efforts to slow things down. In May he pledged to keep crossings below 4,000 per day. The next president is likely to follow his lead; Mexico’s influence over north-bound migration is a powerful tool. Mexicans comprise a smaller share of crossings than they used to, and migration is now a domestic concern too, says Christopher Landau, the United States ambassador to Mexico from 2019 to 2021: “Mexico does not want to be the doormat to the US.”

Security is related to migration because criminal groups facilitate much of the northward movement of people through Mexico. But it has its own role in the relationship with the United States. Mexico’s gangs are the primary manufacturers of the fentanyl which, along with other synthetic opioids, kills some 75,000 people north of the border every year. Many countries, not just the United States, would like Mexico to do better at curbing the gangs’ production and distribution, lest its scourge spread to their shores.

Both presidential candidates have made security central to their campaigns. Ms Sheinbaum says she will copy her playbook from her time as mayor of Mexico City, focusing on improved information sharing between police and the rest of the justice system. Whether she will seek improved security co-operation with the United States is unclear; Mr López Obrador has made things frosty. “The United States wants to help, and Mexico should take advantage of that,” says a Mexican official. “But we should think about what we want, not just doing their bidding on capturing targets of importance to them.”

The next president has an opportunity to cash in on geopolitical shifts. Western firms and governments want to exclude China from critical supply chains, particularly those underpinning electronics and green technology, and see operations in Mexico as one way to do it. Mexico’s performance has been mediocre so far, thanks largely to dirty, expensive and insufficient energy supplies, and its fragile rule of law. Foreign direct investment inflows reached $36bn in 2023 but most of it came from already-present multinationals ploughing profits back into the country. Mexico does less well at attracting new investors.

That would require removing the incentives that push against the installation of clean-energy sources in Mexico. Ms Sheinbaum, a climate scientist, has signalled that she will promote a green transition, and invest almost $14bn to do so. She is unlikely to be as hostile to the private sector as Mr López Obrador. Yet her stated plan is to put Pemex, a state-owned oil company that is indebted to the tune of $100bn, in charge of the process. Its involvement, along with that of CFE, the state-owned electricity monopoly, is likely to scupper any transition. Across the border in Texas, one of the freest power markets on Earth, solar panels are being installed at one of the fastest rates on the planet, an expansion driven by cold economic logic.

Mexico overtook China to become the United States’ biggest trading partner in 2023. It was aided by the free-trade deal between the US, Mexico and Canada, known as USMCA. Its future is not assured, especially if Donald Trump returns to the White House in January 2025. In 2026 the three governments will discuss usmca’s extension beyond 2036, when it is due to expire. China looms large. Officials in Washington worry that Chinese firms are using Mexico as a back-door into the United States, bypassing tariffs. Several Chinese EV-makers have set up shop in Mexico, where officials have been slow to tackle this. If they don’t, it “could be the end of the free-trade deal”, says Mr Landau.

Mexico could regain some of its clout abroad. The country’s role as a leader of climate-change negotiations was neglected under Mr López Obrador; it could be usefully revived. As an emerging economy that isn’t in the BRICS, which includes China, Mexico could spend more time on the world stage. Mr López Obrador has shown little interest. He has travelled less than any Mexican president in modern times.

In public, Ms Sheinbaum hews closely to the ideas of the president, her mentor. That may well be how she rules if she wins. But many hope she will be more pragmatic than he is, and not just because she is more technocratic. Two reasons offer hope. First, lacking Mr López Obrador’s charisma, she will have to rely more on getting results. Second, her government will lack money, which may force her to seek much more private-sector investment. If she charts a sensible path, it will benefit Mexicans—and their northern neighbours. ■

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