Mexico and U.S. potentially heading into trade war (Jan. 26, 2017)

Mexico and the U.S. are in an escalating diplomatic war that threatens to become an all out trade war. The country's two presidents traded threats over this past week -- largely via Twitter -- over who would pay for a U.S. driven wall separating the two countries, leading Mexican President Enrique Peña Nieto to cancel his upcoming trip to Washington yesterday. 

U.S. President Donald Trump retaliated that the decision was mutual and appeared to support a proposal to slap a 20 percent tax on imports, and use the proceeds to pay for the much vaunted border barrier. He also accused Mexico of burdening the United States with illegal immigrants, criminals and a trade deficit.

Though tensions had built up over the course of the U.S. campaign, in which Trump infamously called Mexicans rapists and criminals, Peña Nieto had emphasized an approach focused on dialogue and diplomacy. But he came under intense pressure from across the Mexican political spectrum this week when Trump unilaterally signed an executive order to start construction on the wall, and promised Mexico would pay for it. To add insult to injury, the announcement came as high level Mexican officials were in Washington to lay groundwork for trade negotiations between the two countries.  (See yesterday's and Tuesday's posts.)

The perceived heavy-handed U.S. approach has rekindled historic resentments in Mexico, which the political leadership has played down in recent years, instead favoring cooperation, reports the Washington Post.

Already Peña Nieto has been perceived as insufficiently strong in the face of Trump's bluster, notes the New York Times. With approval ratings in single digits, Peña Nieto proved unable to resist calls to stand up to the neighbor to the north, despite cabinet members urging him to maintain the meeting, according to a separate New York Times piece. Though the diplomatic spat could have potentially broad ranging disastrous consequences for Mexico's economy, it does seem to have united Mexicans around their president yesterday.

It's the first significant diplomatic rift between the two countries in decades, according to the Wall Street Journal.

A planned meeting between Mexican Foreign Minister Luis Videgaray and U.S. Homeland Security Secretary John Kelly was cancelled at the last minute yesterday amid the increasing diplomatic tensions.

While White House officials yesterday portrayed the potential import tax as a way of making Mexico pay for the wall, the ultimate costs would be borne by American consumers, note analysts across the board, see this Reuters piece for example.

Yesterday Videgaray -- speaking from Washington -- reiterated that asking Mexico to pay for the wall is unacceptable, noting that a an import tariff would make the American consumer the ultimate patron of the wall's construction, reports Animal Político.

A New York Times editorial refers to Trump's "tariff tantrum. ... "It’s hard to tell whether the animus Mr. Trump has conveyed toward immigrants, particularly Mexicans, is deeply felt, or if he simply came to recognize how powerfully it would appeal to voters disaffected by an uneven economic recovery and the nation’s demographic changes. But allowing this view to drive trade and foreign policy toward Mexico could have disastrous consequences for workers and consumers in both countries ..."

News Briefs

• Nafta-inspired foreign capital turned Monterrey into Mexico's free-trade capital, reports the Wall Street Journal. Now everybody from workers to industry owners are scrambling to figure out what would happen if the free trade agreement is scrapped.

• Mexico's border cities are already overwhelmed with migrants from other Latin American countries trying to enter the U.S. -- now some advocates and officials worry Trump's actions to tighten access will be a potential nightmare for Mexico, reports the New York Times.

• Trump's anti-migrant rhetoric is increasingly echoed in the region, reports InSight Crime. In Argentina Security Minister Patricia Bullrich announced plans to tighten immigration regulations, accusing Paraguayan, Peruvian and Bolivian citizens of participating in the drug trafficking chain. Earlier this week Reuters reported that a wave of immigration from Haiti and Venezuela has pushed anti-immigration sentiments into Chile's presidential election. Both leading candidates have called for a more selective entry policy. InSight emphasizes Venezuelan President Nicolás Maduro's blaming of Colombian "fascists" and "paramilitaries" for everything from drug trafficking to social protests and has accused them of plotting political assassinations. 

• A series of reports are pointing to a wave of migration out of Venezuela, spurred by crime and insecurity, reports InSight Crime. This in addition to the thousands leaving due to the economic crisis.

• Yesterday the Inter-American Commission on Human Rights (IACHR) voiced concern about information indicating that many Venezuelans have been forced to migrate to other countries in the region as a means of survival, due to the humanitarian situation—particularly the effects of shortages of food, medicine, and medical treatment. In particular the organization called on member states to refrain from adopting measures that restrict or violate the human rights of migrants and asylum seekers from Venezuela, mentioning specifically attempted deportations from Brazil.

• CELS joined a group of 150 organizations denouncing the proposed changes to Argentina's migration law, noting that the current law provides the tools that would allow for limiting the residence of a person who committed this type of crime. "It is true that the incidence of foreigners in drug offenses is greater than in other offenses, although it is much lower than what the minister said. But this is a phenomenon that is seen in nearly all of the world’s countries, since drug trafficking often has a cross-border component."

• Colombian Attorney General Néstor Humberto Martínez warned that one of the country's biggest crime groups, the Urabeños, appears to be recruiting dissidents of the demobilizing FARC guerrilla group, reports InSight Crime. Throughout the peace negotiations analysts emphasized the potential for criminal organizations to fill the power vacuum that would be created in FARC controlled areas. Now this information points to the financial incentives offered to former fighters, which, added to concerns that the government won't follow through fully with social and economic rehabilitation programs planned by the peace agreement, could lead to more desertions, according to InSight.

• "The murder in Mexico of indigenous activist and human rights defender Isidro Baldenegro López highlights the inevitablity of deadly collisions between environmental activists and organized crime across Latin America," according to InSight Crime. (See Jan. 19's post.)

• An investigation into money laundering allegations against Haitian president-elect Jovenel Moïse, just weeks before he takes office, threaten the country's tenuous political stability, reports InSight Crime. National legislators have asked the judiciary to wrap up the investigation before the Feb. 7 swearing in, while an international petition is asking to delay the assumption. (See yesterday's briefs.)

• Brazilian police declared former billionaire businessman Eike Batista a fugitive from the law yesterday, after a failed attempt to arrest him in relation to allegations that he paid $16.5 million in bribes to the former governor of Rio de Janeiro state, reports the Wall Street Journal. Police raided Batista's Rio de Janeiro home yesterday, but he was out of the country. The case is related to the ongoing investigation into corruption at state-owned oil company Petrobras, reports the New York Times.

• The Petrobas corruption investigation has already ensnared a significant number of elite politicians, is threatening President Michel Temer's administration, and has unconvered corruption in other countries around the region. Yet recent developments could double the size of the case, according to the lead prosecutor in the case, reports the Associated Press.

• Profits from customs fraud and contraband in Guatemala equalled about 3.5 percent of the country's GDP in 2015, according to a new report by ASIES. The numbers "offer a glimpse of the astonishing levels to which commercial crime and corruption have penetrated the Guatemalan economy," according to InSight Crime.

• The former governor of Mexico's Nuevo León state Rodrigo Medina was arrested yesterday to prevent him from fleeing charges of embezzlement and crimes against state property, reports Reuters.

• Argentine President Mauricio Macri represents could represent a turning point in Argentine politics: an alternative to the two traditional mainstream parties. In his first year of government he has successfully implemented a raft of policies aimed at opening up the country's economy, but which threaten his administration's political continuity, writes María Victoria Murillo in a New York Times Español op-ed. While the electorate granted his center-right Propuesta Republicana a broad mandate in the 2015 elections, he has failed to use the opportunity to strengthen his political movement and coalitions, she notes.