THE "NEW NAFTA"
Mexico State Oil Company Files $22 Billion Debt Swap amid IMF Threats and
White House Visit
Mexico's economy is put in the crosshairs by the IMF as the "new NAFTA"
takes effect and AMLO is forced to make concessions to avoid an even deeper
recession.
by Raul Diego
July 10th, 2020
By Raul Diego
Mexico's president, Andres Manuel Lopez Obrador, known colloquially as AMLO,
arrived back in his nation's capital yesterday aboard an American Airlines
flight after his first state visit to the United States since taking office
in a historic, landslide victory in 2018. The commercial flight included a
stopover at Miami International Airport as coronavirus-induced protocols
have resulted in the suspension of direct flights in and out of the North
American country.
AMLO's choice of traveling commercial instead of flying on the official
presidential airplane is part of a carefully-crafted everyman image he has
been cultivating for years since he left the ranks of the once immovable
conservative ruling party, the PRI, and joined the left-leaning PRD in the
late 1980s. In 2014, Obrador formed a new party called MORENA after having
served as Mexico City's mayor for four years and later losing his first bid
to become president in 2006.
The Trump White House hosted AMLO on Wednesday, one day after Pemex - the
embattled Mexican state-owned petroleum company - announced a $22.4 billion
debt swap to mitigate its massive financial liabilities. The swap will be
the largest of the recent refinancing operations carried out by the once
state-owned company; and while the filing with the U.S. SEC did not specify
when the bonds would be issued, the action was intended to alleviate
pressure mounting on the oil giant, which Obrador had planned to use as a
"pillar" in his strategy to turn the Mexican economy around. Falling oil
prices, however, have severely hampered the execution of that idea.
In addition, the coronavirus-induced economic crisis is being evoked by
entities like the International Monetary Fund (IMF) to predict a veritable
collapse of the Mexican economy. In their June World Economic Outlook Update
titled "A Crisis Like No Other, An Uncertain Recovery," the Atlanticist
organization forecasts a devastating 10.5 percent contraction for Mexico
this year, nearly four percent lower than its April forecast.
The IMF threatens Mexico
The IMF's dire estimate comes on the heels of the official start of the
USMCA, which went into effect on July 1 and comprised a significant portion
of the state visit's agenda. The revamped NATFA agreement has mostly modest
improvements over its predecessor and has served mostly as a political tool
by all three heads of state.
The one sector that did get a complete overhaul in the new trilateral
agreement was the U.S. tech sector, which secured important concessions from
both Canada and Mexico, such as the fact that they cannot be sued for "the
content appearing on their platforms" or forced to store their data on
in-country servers. Intellectual property protections heavily skewed in
favor of American companies were also expanded.
Related to these provisions are ones surrounding biotechnology that could
have critical implications for the agricultural sector provisions in the
trade deal. The original NAFTA made Mexico a net corn importer through
unfair rules allowing the U.S. to subsidize its own corn industry while
prohibiting the same of the country that gave birth to corn, itself. New
biotech rules are sure to exacerbate these problems for the Mexican
agricultural sector and a multitude of groups have come out in opposition.
The USMCA's "new normal"
In a letter signed by more than 80 agricultural associations in Mexico
petitioned the government to prohibit the introduction of GMO seeds into the
country. The coalition, which calls itself "Group in Defense of Agricultural
Diversity and Mexican Food Against Genetically Modified Organisms" warns of
the "grave danger" posed by the lack of defined rules against the
introduction of GMOs throughout the national territory. In addition, the
group condemns the provisions in the USMCA, which forces Mexican farmers to
adhere to the UPOV 91 protocol that makes seed hoarding and trading illegal.
Casting a shadow over the implementation of the USMCA is compliance to the
extraneous COVID-19 "new normal" policies, which are forcing a "rethinking
about global supply chains" and are sure to affect exactly how the new trade
deal is ultimately enforced.
AMLO's trip to D.C. may have been a signal to the Atlanticist power bloc
that he is ready to give in to their demands, recently outlined in an
article authored by a CFR senior fellow, where the Mexican president is
called on to "save his presidency" by embracing globalization lest the
country slip into a more severe recession. Presciently, the author
recommends that AMLO "welcome foreign money and expertise into the energy
sector," foreshadowing the debt swap announcement a day prior to Obrador's
official White House visit.
"Adherence to market-based rules" are also endorsed by the perennial
Atlanticist mouthpiece as a way to carve a "path out of the permanent
poverty of subsistence farming" by enabling the "specialization in more
profitable fruits, vegetables, coffees and other products," a strategy first
implemented by NAFTA and which has resulted in the precise opposite effect.