Joe Biden’s Victory is an Opportunity to Strengthen U.S.-Mexico Trade Relations

With Joe Biden’s new administration, Mexico has an opportunity to join the U.S. as an ally and strengthen the trade relationship between our nations. However, several entrepreneurs believe that Mexico will have to bring back the agenda for clean energy, labor rights, and the environment and boost its exports to the United States. 

According to Enrique Perret, Director of the U.S.-Mexico Foundation, in the context of the unofficial trade war between China and the United States, the Mexican federal administration can strengthen its trade relationship with the United States and make productive chains, as Americans know they cannot establish all their productive chains in the U.S. so they have to seek out allies, presenting an opportunity for Mexico. 

Moisés Kalach, President of Grupo Kaltex, considered it an opportunity for Mexico that has not been seen for the last 25 years, and it can also work to strengthen trade relations with other countries. 

In spite of this, he explained that the Mexican government must strengthen its internal policy and promote certainty for investment, both public and private. Therefore, he indicated that long-term financial instruments must be created, such as accords and trade agreements that promote investment in Mexico independent of political governance. 

Kenneth Smith, Partner in Argon, said that Mexico can become the United States’ ally in order to present reforms to the World Trade Organization (WTO), which would serve to strengthen their bilateral trade relationship as trade agreements work as an accelerator to boost the knowledge economy, industrial revolution, the Internet of things, and information technology, as the manufacturing industry can be linked to high-value services.

Moreover, Cesáreo Gámez, an economist from the Autonomous University of Nuevo León (Universidad Autónoma de Nuevo León, UANL), believes that the announcement of Joe Biden’s victory triggered an immediate positive effect on the main stock markets around the world, reflecting the increase in investor confidence under the new circumstances. 

Additionally, Gámez believes that Joe Biden’s victory reflects an improvement in the confidence of agents and economic indicators in the short term. 

In recent months, private consumption grew at a monthly rate of 1.8% in August 2020, but recorded a 13.1% decrease compared to August 2019. In addition, gross fixed investment grew at a monthly rate of 5.7% in the same month, but still had a negative annual rate of 16.6%. 

Industrial production stagnated and decreased at an annual rate of 7.6% in August 2020, while construction, considered one of the key sectors of industrial activity, fell at a monthly rate of 5.6% during August and 17.2% compared to August 2019.

This behavior was also reflected in the confidence of economic agents. The Consumer Confidence Index (CCI) grew at a monthly rate of 1-4% in October, but fell by 6.2% compared to October 2019. 

A similar result can be seen in the Business Confidence Index (BCI). In October, entrepreneur confidence saw a marginal increase of 0.8%, 0.4% and 0.8% for entrepreneurs in the manufacturing industry, the commercial sector and construction, respectively. However, BCI decreased by 8.0%, 8.2% and 6.3% respectively, compared to October 2019 for the aforementioned sectors. 

Obstacles to economic growth

According to a survey by the Bank of Mexico of leading private analyst companies in Mexico and abroad, the weakness of the domestic market and the uncertainty of the economic situation are the main factors that could hinder Mexico’s economic growth in the medium term. 

As for the immediate future, 29% of analysts interviewed believe that the economic situation will improve in the next six months, while 74% consider it to be a bad time to make investments.

Oradel Industrial Center seeks to drive growth in Mexico’s economy by providing industrial spaces to companies in the manufacturing industry that need to have foreign trade operations with the United States.