Dispatches from Mexico
March 22, 2017 (San Diego) The call for bids to build the border wall from the Donald Trump administration came on March 20. We expect to see many US companies bid for at least a contract, and the reaction in the United States has been interesting. For starters, two San Francisco Board of Supervisors members seeks to punish companies that bid on the wall. San Francisco is a sanctuary city, so perhaps this was not surprising.
This is what the San Francisco Chronicle has on this:
“Two supervisors will introduce legislation Tuesday that would bar San Francisco from contracting with companies that seek a deal to work on the wall during the bidding period, regardless of whether the companies win a contract.
“It is time to move beyond symbolism and use the power we have as a city to fight for the values we hold most dear,” said Supervisor Hillary Ronen, who is introducing the legislation with Supervisor Aaron Peskin.
Given how other controversial projects are losing funding from liberal cities on the West Coast, such as the North Dakota Access Pipeline, this is hardly surprising. So what is happening in Mexico? While the American president insists that this will wall will be built in the US by US companies alone and it will be paid by Mexico, Mexican companies have been rumored to want to participate. The Mexican government, so far, has not put in any legal barriers. They prefer to use loyalty to the motherland, and not to the bottom line.
Among those companies are Cementos Mexicanos, (CEMEX) and Cementos de Chihuahua. According to MSN Money (in Spanish,), CEMEX is willing to provide raw material to the effort. If any of their clients want material, they need to give them an estimate. Likewise for Cementos Chihuahua, which sells on both sides of the border and cannot afford to be selective.
So there is pressure building to prevent any Mexican company from participating in any form of the construction of this wall. Mexican Economy Secretary Ildefonso Guajardo told the Cámara Nacional de la Industria del Hierro y el Acero that “I hope that the chamber, with full liberty, will take the right decision.” He reminded them that while the government would not stop then, their reputation among Mexicans would suffer. This is according to La Jornada.
He added, “we are not going to make the same mistakes as others. We do not have a centralized economy like the Soviet Union of the 1970s. We are not going to pass laws that will generate restrictions, but I believe that the reputation of your trademarks would align with your interest not to participate in the construction of such a wall. It will not be any law, or sanction that will be levied, but Mexicans and their future consumption will determine whether your trademarks are loyal to Mexico.”
This statement needs some contextualization.
Before NAFTA Mexico had a closed economy, that while not centrally managed, did protect its interior market and economy from foreign investment. Companies had to perform in a single national market, and not compete internationally. It also had rates of growth that were far superior to what Mexico has achieved in recent years, with a growth of over 6 percent per year.
In those years, though, the economic policies were populist and relied heavily on growing the internal market, and did not care much about developing external markets. During those years the Mexican government would have passed laws preventing the bids from any Mexican company for the wall, whether direct or not it would not matter. So instead, Mexican officials are taking a neoliberal approach. The market will punish those disloyal to the motherland.
However, this is coming on the heels of boycotts of American companies. as we have reported in the past.
Mexican citizens are in the process of abandoning Starbucks and other companies. State governments have canceled contracts, such as the state of San Luis with Ford. Also, there is an informal boycott called soon after Trump was sworn in.
We are also in the midst of a trade war, even if the US has yet to acknowledge it.
The latest sign of this is sugar. Mexico has had issues “suspend” permits was to comply with accords with the United States because Mexico had already reached its export limit for the six months up to Mar. 31.” This was first reported by Reuters.
So time to look at the big picture. Mexico is getting ready for a trade war, and it is also getting ready for the end of NAFTA, and a rise of anti-American sentiment in Mexico. This has a long history, and it had subsided over the last generation or two. How it will affect relations in the future is a good question.
We suspect this will only continue to build.