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Mexican president-elect makes overture to Trump

On July 12, Mexican President-Elect Andres Manuel Lopez Obrador (commonly known as AMLO), sent a letter to President Donald Trump outlining the objectives of his incoming administration, which will take office Dec. 1. In this cordial letter, which avoided confronting Trump on controversial issues, AMLO mixed specific with general objectives. Much of what he touted in his campaign is contained in the communiqué.

AMLO starts the letter hoping that his proposals will start a “new stage in the U.S.-Mexico relationship, based on mutual respect and the identification of understanding and common interests.” He also emphasizes that while the U.S. is home to the most Mexicans living outside Mexico, his country is the home of most Americans living outside the U.S. Based on this fact, he says a respectful and dignified understanding should be forged between the two nations.

AMLO then proposes to Trump the areas he sees most crucial to their respective nations: commerce, immigration, development and security. In regard to commerce, he proposes to Trump the rapid conclusion of the North American Free Trade Agreement renegotiations, saying that a prolonged uncertainty over NAFTA could put a stop to new investments in the medium to long term. This would directly affect AMLO’s ability to create jobs and improve the living conditions of the Mexican people.

As per immigration, AMLO says the most important purpose of his administration is making sure that “Mexicans no longer have to emigrate because of poverty and violence.” He wants to make sure that emigration is “optional, not necessary,” by making sure that Mexicans find work and welfare in the places of origin where their families live. To achieve this goal, AMLO says, his new government will launch the biggest effort in the nation’s history, which will consist of banishing corruption, abolishing impunity, acting with austerity and directing all monies that are saved to finance the development of the country.

AMLO intends to launch a seed capital program to bolster private investment and to direct significant funding to production, the creation of jobs, the reactivation of the agriculture and energy sectors, education, culture and health. He specifically wants to focus on the funding of programs that will allow Mexicans to work in their own country.

He will focus on the environment by planting 1 million hectares of fruit and lumber trees in the southeast of Mexico. This not only will help in ecological restoration, but create 400,000 jobs. It also will strengthen tourism in Mexico’s Caribbean region. In this region, he also proposes creating an Atlantic-Gulf of Mexico commercial corridor, connecting the two bodies of water at the Isthmus of Tehuantepec, by building a 185-mile rail line that could accommodate container shipments. Along with the rail, he wants to invest money in roads and infrastructure in the region to attract manufacturing operations. Local landowners will be invited to participate as shareholders of projects.

In both this southern zone and along Mexico’s border with the U.S., AMLO proposes creating free-trade zones to attract investment, increase development and technology and to create new jobs. He mentions that this will be a major part of his platform to keep Mexican workers at home. Within the southern free-trade zone, he will reduce personal income tax to 20 percent and the value-added tax to 8 percent. In northern border cities, he will impose the same tax rate as on the U.S. side of the border. He also will reduce taxes to make Mexican gas, diesel, and electricity taxes and prices the same as those in the U.S. Along with this, the minimum wage will be raised in Mexico’s northern free-trade zone. AMLO emphasizes that because energy prices will go down, wages can be raised without creating inflation, and more money will be available for infrastructure investment in the north.

Finally, AMLO asks Trump to consider addressing the immigration issue by focusing on ways to spur development in Central America, where millions of people do not have employment opportunities and are threatened by violence. He offers to cooperate on this issue and present a plan to the Mexican Congress to contribute resources to this effort. AMLO concludes his communiqué by harking back to his populist roots. He emphasizes the shared history of the two countries, and that despite periods of adversity, they have enjoyed an outstanding relationship. He hopes that the two leaders can put the constituents first and “displace the establishment or predominant regime. Everything is in place to initiate a new era of relationships between the two countries.”

AMLO’s letter reveals an ambitious economic and social program and the extension of a cooperative olive branch to Trump on the major issues facing the two countries going forward. Historically, Mexico has struggled with a fine line between the focus on social policy and fiscal/monetary policy. Putting his programs into practice, AMLO will face this same walk on the tightrope. However, one has to be impressed with his initial approach.

Jerry Pacheco is the executive director of the International Business Accelerator, a nonprofit trade counseling program of the New Mexico Small Business Development Centers Network. He can be reached at 575-589-2200 or at jerry@nmiba.com.

 

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