Latin America

Mexico Feels Mortgaged to Nafta. Time to Refinance.

It's not just trade. Suddenly the nation is realizing how much of its identity became wrapped up in its neighbor's power.

Next year's campaign to succeed President Enrique Pena Nieto is likely to reveal populist sentiment.

Photographer: Mauricio Palos/Bloomberg

Secession was the talk of Mexico's biggest business summit this week.

Not the latest news from Catalonia, but the idea that Mexico lost its independence and ought to do something about it. An entire national model has been based on catering to the North American Free Trade Agreement, the 23-year-old accord that links commerce between Mexico, the U.S. and Canada. There's regret that not much thought was given to what could go wrong. 

No executive or official present in San Luis Potosi said they wanted Mexico to pull out, as Donald Trump has threatened the U.S. will do. There is a sense that the country has been blindsided by America's waning interest in free trade and by the disdain that's emerged on the other side of the Rio Grande.

It's not just economic and commercial models that have been geared almost entirely to Nafta. Foreign policy as well has been largely farmed out. One telling anecdote: Mexico's top diplomats want to work in one of the 50 consulates the country has in the U.S. In the foreign service of most countries, being sent to a consulate, rather an embassy, prompts the question: "What did I do wrong?" In Mexico, that's how you get ahead.

So how can Mexico respond to the shifting circumstances? Save Nafta first. Mexico's top executives are jolting from their torpor. It was a mistake to just sign, go away and assume that everything would be okay, Moises Kalach, the trade head for the national business chamber CCE, told a panel at the Mexico Business Summit in San Luis Potosi. "We didn't think, being the preferred girlfriend, about having an office in D.C.," Kalach said. Now CCE has a war room aimed at making decision makers in many U.S. congressional districts aware that dissing Nafta and Mexico has a cost.

A second, related, theme of the conference was regret. Regret that, by assuming that with Nafta everything would take of itself, Mexico had made itself an easy target. Few American politicians pay a price for going after their southern neighbor. "There is a very low cost for bad-mouthing Mexico," Shannon K. O'Neil of the Council on Foreign Relations told an audience. "You have to up the ante and make there be a cost." If it's not too late.

A subtext to this was the sense that few in the U.S. realize there is a presidential election in Mexico next year. Populist themes look sure to get a hearing, not least from Andres Manuel Lopez Obrador, who is making another tilt for the top job. (President Enrique Pena Nieto is limited under law to a single term.) All this Mexico-bashing in the U.S. could cause a backlash among Mexican voters.

China is the second-largest trading partner of Mexico after the U.S., but you would never know it. While a lot of the global commentariat was focused on China's weeklong Communist Party congress, few of Mexico's elite mentioned it. President Xi Jinping's assertion that China offered a new model for economic development largely passed the conference by. 

It's all about Nafta, even it's not about trade and economics. One discussion of foreign policy, part of a panel I moderated, mentioned diversification. Not of business lines and product mix -- of foreign policy.

There is a world out there beyond the U.S., tough though that is for Mexico, given it's next door to its biggest trading partner that happens also be the world's largest economy and only real military superpower. There was nodding recognition that, sure, diversification might be a good thing. Next panel: Update on Nafta. 

Mexico hopes it's not too late to save the accord. It's about way more than trade and jobs. A big part of national identity has been outsourced.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Daniel Moss at dmoss@bloomberg.net

    To contact the editor responsible for this story:
    Philip Gray at philipgray@bloomberg.net

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