Geopolitical tensions continue to rage. We are now six months into the Israel-Palestine conflict, and though the ceasefire talks between Israel and Hamas are welcome news, Iran’s drone attack against Israel is yet another sign of the increasing regionalization of the Middle Eastern hostilities. This is no doubt a delicate moment both for the conflict and diplomacy at large.

In Ukraine, the situation appears to be reaching a critical juncture with U.S. officials noting Russia’s growing number of troops together with Ukraine’s dwindling supply of weapons, although Congress is expected to move forward shortly with a Ukraine aid deal. Meanwhile, the U.S. continues to manage tensions with China, though Taiwan and the South China Sea remain pressure points.

On a personal note: Yesterday, I attended the George W. Bush Presidential Center’s Forum on Leadership, “Call to Freedom” on the Southern Methodist University campus in Dallas, Texas. The program highlighted the challenges of people living in Ukraine, North Korea and Afghanistan; their desire for freedom and democracy, and a timely reminder of the critical role the United States plays in advancing free societies around the world. You can watch portions of the program here. Now to Mexico and the region.

In Latin America, regional tensions, largely the product of rhetorical excess, have nonetheless strained relations. A good example is Argentinian president Milei’s recent social media attacks where he referred to Colombian president Petro as a ‘terrorist murderer’ and Mexican president Lopez Obrador as ‘ignorant’. That said, a more serious diplomatic blunder came to a head on April 5, when Ecuadorian authorities raided the Mexican embassy in Quito and ultimately detained former Ecuadorian vice president Jorge Glas who was seeking refuge. Mexico has subsequently broken diplomatic ties with the South American nation.

In Mexico, the top story – at least through June – will continue to be the presidential election, which we are monitoring closely here at White & Case Mexico. With fewer than 2 months before Mexicans head to the polls, presidential hopefuls held their first debate on April 7. All three candidates prioritized personal attacks over proposals, with jabs focusing on public corruption and negligence. Ultimately, viewers concluded that Morena candidate Claudia Sheinbaum won the debate; Sheinbaum also continues to hold a commanding double-digit lead in the polls. If you missed the excitement of the first debate, you can tune in to the second one on April 28.

Regardless of who wins the election in June, they will be dealing with several economic hurdles. Foremost amongst them is Mexico’s growing fiscal debt which is expected to reach 5.9 percent in 2024, driven primarily by president Lopez Obrador’s recent bolstering of welfare programs ahead of the elections. Mexico’s Central Bank cut interests rates a quarter point in March 2024 to 11 percent, the first rate cut since 2021. However, inflation remains stubborn in both Mexico and the United States, suggesting a hold on further rate cuts. Overall, the economy is expected to grow more slowly than in 2023.

The peso continues to be one of the strongest major currencies. In April, the peso reached its strongest rate against the dollar since 2015, although in recent days there has been some softening in the currency’s value. Overall, Mexico’s upcoming presidential elections seem not to be having any adverse impact on the peso, though the U.S. elections may pressure the currency’s strength later in 2024.

In 2023, Mexico became the United States’ number one trading partner. This shift comes as Chinese goods are also flowing into Mexico at unprecedented rates, likely reflecting a tariff avoidance strategy on the part of China, rather than a growing demand from Mexican consumers for Chinese goods. This is in part a byproduct of the USMCA allowing certain goods produced in North America – including cars and technology – to avoid U.S. import tariffs, regardless of the materials’ origins.

The USMCA also came under scrutiny for weak investors’ rights, in particular indirect expropriation challenges by both U.S. and Canadian companies operating in Mexico. Despite these hurdles, Mexico recently reemerged on Kearney’s 2024 FDI confidence index, placing 21^st in investor confidence.

On immigration, the United States encountered roughly 137,000 migrants in March, down 45 percent from December 2023. Despite this decrease, immigration remains one of the most salient issues both for voters and political candidates in the United States. A recent Bloomberg poll found that immigration is second only to the economy, with voters on both sides voicing frustration at the United States’ outdated immigration policies.

After the failure of bipartisan legislation on immigration in Congress earlier this year, president Biden is now reportedly exploring whether his administration has the authority to shut down the border without Congressional approval. Meanwhile, governors from Texas to Iowa are implementing their own border enforcement style legislation ahead of this year’s elections.

In the United States, the Republican nominee continues to be bogged down in a series of criminal and civil trials. And while the American electorate is undoubtedly polarized, an analysis of recent polling data suggests that younger voters are increasingly leaning towards Trump and elderly voters moving toward Biden. If these trends continue, it would reflect a shift away from U.S. voting patterns established over the last several decades.

Lastly, I want to congratulate my colleagues all across the globe for being named part of the Global Elite in the Global Data Review 100. As always, I hope you’ll feel free to contact me here White & Case in Mexico City, and I encourage you to reach out via Facebook, Twitter, or LinkedIn. 

Sincerely, 

Antonio Garza