Wednesday, August 29, 2012

The News (Mexico City): Mexico's International Reserves Reach $162.2 billion, A Record High

http://www.thenews.com.mx/index.php/mexico/M06-27127.html



BY PATRICK FERGUSON
The News
MEXICO CITY – Mexico’s international reserves increased by $1.41 billion in the week ending on Aug. 24, reaching a record-setting $161.2 billion, reported the country’s central bank (Banxico) on Tuesday.
During that period, Pemex, Mexico’s state-owned oil company, sold $1 billion to Banxico, the federal government bought $65 million from Banxico, and Mexico’s international assets increased in value by $473 million, sending the reserves from $159.796 to $161.204 billion.
The bank’s monetary base shrank 13.9 million pesos during that period. Since the beginning of the year, the bank’s monetary holdings have diminished by 30.9 million pesos.
In its report, Banxico said that the demand for the peso is consistent with seasonal cycles and the federal elections, which took place on July 1.
The report stated that during the week, the government made transactions worth 42.95 billion pesos with private banks, after Banxico deposited 70.03 million pesos in the Federal Treasury.
Mexico’s reserves have increased 13 percent, or $18.73 billion, this year. In the past, the reserves have helped Mexico control inflation. In June, the peso weakened to more than 14 pesos to the dollar. Although Mexico’s annualized inflation rate is currently at 4.45 percent, over Banxico’s target rate of 3 to 4 percent, Banxico is not expected to act. Banxico Governor Augstin Carstens has said that the recent increase in inflation is only temporary, and will die down after the bird flu dissipates.

Tuesday, August 28, 2012

EVENTS: US Mexico Congressional Border Issues Conference

The United States-Mexico Chamber of Commerce, Congressman Silvestre Reyes, and the Congressional Border Caucus will be holding  the 16th Annual Border Issues Conference in Washington, DC.  The dates of this event are September 19 and 20.

Members of congress, business leader, and representatives from both nations will be leading the discussions.  For more information, see the following website:


From Bloomberg: Mexico to Boost Auto Output 38% within Three Years

http://www.bloomberg.com/news/2012-08-28/mexico-to-boost-auto-output-38-within-three-years-agency-says.html


Mexico To Boost Auto Output 38% Within Three Years, Agency Says

Mexico will boost annual auto output by 1 million vehicles within three years, a 38 percent jump from last year, as foreign manufacturers use the country as an export base, said Carlos Guzman, head of the nation’s investment promotion agency.
Investments already announced by carmakers will allow Mexico, the world’s fourth-largest auto exporter, to increase annual production from last year’s 2.6 million units, Guzman, president ofProMexico, said in an interview yesterday at Bloomberg’s Mexico City office. Surging car and aerospace sales will help Mexican exports climb by about 15 percent this year to a record of around $400 billion, he said, surpassing a $350 billion high reached last year.
Mexico’s economy is proving resilient as its auto industry booms, with both vehicle production and exports reaching their highest levels in the first seven months of the year for any January to July period, the nation’s Automobile Industry Association, or AMIA, said on Aug. 6. New plants announced by companies such as Mazda Motor Corp. (7261)Nissan Motor Co. (7201) andAudi AG (NSU) will help the nation close the gap with Korea, the biggest exporter after Germany and Japan, Guzman said.
“Other companies are exploring the possibility of opening facilities in Mexico,” Guzman said. “We expect a very good period of five to seven years in Mexico in terms of growing exports” for cars, he said.

Auto Growth

Manufacturers are opening new plants in Latin America’s second-largest economy as wages in China rise and higher oil prices increase costs for Asian companies looking to tap consumers in the U.S., the world’s largest economy.
Car companies announced $5.3 billion in new investments from January through April and $2.8 billion last year, according to the Economy Ministry. Pirelli & C. (PC) SpA and Nippon Steel Corp. (5401) have said they plan to open new parts plants focused on the auto industry.
Mexico’s gross domestic product beat economists’ forecasts for growth in the second quarter, expanding 0.9 percent from the first three months of 2012, an annualized rate of 3.5 percent, as exports increased 5.8 percent from a year earlier. Growth has topped Brazil’s for the past year with the economy in the U.S., the buyer of 80 percent of Mexico’s exports, projected to expand 2.15 percent this year, faster than 1.8 percent in 2011, according to the median estimate of economists surveyed by Bloomberg.
Mexico will attract foreign direct investment of as much as $20 billion this year and $20 billion to $25 billion annually in coming years, Guzman said.
Foreign investment fell 9.2 percent in the first half of the year to $9.62 billion from preliminary figures for the same period in 2011, Mexico’s Economy Ministry said on Aug. 23. The nation received $20.4 billion in investments last year.
Guzman said that aerospace exports are also expanding and probably will rise to as much as $5.2 billion this year from $4.5 billion in 2011, citing estimates from the Mexican Aerospace Industry Association.
“In 15 to 20 years, we will be talking about aerospace manufacturing in Mexico like we are talking about automotive manufacturing” today, he said.
To contact the reporters on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net; Brendan Case in Mexico City at bcase4@bloomberg.net
To contact the editor responsible for this story: Joshua Goodman atjgoodman19@bloomberg.net

Thursday, August 23, 2012

From Journal of Commerce: Shippers Report Tightening Truck Capacity in Mexico




Shippers Report Tightening Truck Capacity in Mexico

The Journal of Commerce Online - News Story
Peak season could mean fewer available trailers for U.S.-bound freight, logistics operator warns
U.S. shippers importing goods from Mexico say they are looking for new transportation options as truckload capacity along the border gets tighter.
"We’ve had to diversify to get sustainable capacity,” said Sonney Jones, division director of transportation in Dallas for flooring manufacturer Dal-Tile.
“That’s meant using more rail boxcars in some shorter lanes," such as Monterrey, Mexico to Dallas, "as a replacement for intermodal or truck capacity,” Jones said.
The peak shipping season could further squeeze available truck capacity, said Troy Ryley, director of transportation and distribution at Transplace Mexico.
As more goods are shipped directly from China to Mexico, fewer shipments are routed through U.S. ports, which means fewer trucks heading south to Mexico.
“That dynamic creates a significant issue for shippers,” Ryley said, “especially as there’s going to be a real push soon in retail as the peak shipping season hits.
The value of goods shipped by truck across the U.S.-Mexican border hit an all-time high in May, increasing 17.1 percent year-over-year to $29.1 billion.
Contact William B. Cassidy at wcassidy@joc.com. Follow him on Twitter at @wbcassidy_joc.

From Reuters: Mexico faces test of commitment to opening oil industry





Analysis: Mexico faces test of commitment to opening oil industry

Photo
Wed, Aug 22 2012
By David Alire Garcia
MEXICO CITY (Reuters) - Mexico's commitment to opening up its oil industry to private investment faces a key test with the next round of contracts to be offered by state-run monopoly Pemex.
Mexico is the world's No. 7 oil producer but production has fallen sharply in recent years. In a bid to shake up an industry under state control since 1938, the government has allowed private companies to operate -- but not own -- seven oil fields scattered around the country.
The experiment stumbled when Pemex PEMX.UL failed to award two offshore oil fields to private operators in June auctions, rejecting all bids for one field as too expensive and receiving no bids at all for another.
Those failures have cast a shadow over the upcoming third round of private service contracts set for next month, designed to lure much-needed private investment and spur production in the massive Chicontepec basin, home to Mexico's largest certified hydrocarbon reserve.
Proven reserves at Chicontepec totaled 650 million barrels as of the beginning of this year, according to Pemex data.
"A lot of Pemex's future depends on this type of incentivized contract," said Luis Labardini, partner with Mexico City-based energy consultancy Marcos and Associates. "If Pemex proves that these contracts are successful, it can prove that it can be the only operator in Mexico."
Foreign interest in Mexico's oil patch, long seen as a mature region with limited potential, has expanded in the past two years as drillers reckon that it could become the next player in the shale energy boom, with untapped reserves along its U.S. border.
Mexico's incoming president, Enrique Pena Nieto, has ambitious plans to open the energy sector even further to private investment, but the problems with the recent auctions have led analysts to question Pemex's commitment to private-public partnerships, let alone their expansion.
Under the private contracting scheme, launched last August after reforms passed by Mexico's Congress in 2008, companies win the right to extract oil from mature fields and are paid a set fee per barrel as an incentive, but the crude belongs to Pemex.
The scheme was designed to lure both domestic and foreign private investment.
Mexico's overall production remains stuck at 2.5 million barrels per day (bpd) and if Pemex cannot find new discoveries to replace a 25 percent drop in production since 2004, it risks becoming a net importer of crude within a decade.
At the June 19 auction, Pemex said it was prepared to pay a maximum $7.25 per barrel for oil from the Arenque oil field, in shallow waters off the northern state of Tamaulipas and including 100 million barrels of proven, probable and possible (3P) reserves. Pemex's trademark Maya crude sells for $100 or more per barrel.
But it found no bidders at or even near that price of $7.25 per barrel and the auction was declared null. At the same time, the smaller Atun field, off the coast of Veracruz, attracted no bidders at all.
"I really don't know what Pemex was thinking," said Luis Puig, commercial director for Saipem, one of the oil service firms that bid on Arenque.
PRICE TAG QUERIED
Puig and others noted the maximum bid price set for Arenque was about 20 percent lower than the prices set for four onshore blocks that were successfully auctioned at the same time.
"Offshore fields require a lot more investment" and should have triggered a higher bid ceiling from Pemex, Puig said.
The scheme is designed to increase production at a set of mostly aging onshore and offshore oil fields, where many if not most of the wells Pemex drilled in the past are no longer functioning.
At Arenque, for example, 51 wells have been drilled, but only 17 are currently operating and they produce just 5,600 barrels per day (bpd). The block's other wells are either shut-in, or plugged and abandoned.
Pemex has said it will directly award the Arenque block later this month, adjusting both its size and price tag, but no further details have been announced.
Pemex brushed off the recent wobbles, saying companies were turned off by the risk associated with the two offshore blocks as well as questions over the size and profitability of the fields, although it acknowledged bidders saw the contract for Arenque as under-priced.
In July, Pemex CEO Juan Jose Suarez Coppel said the company is tweaking the process to make the contracts more attractive. "We are working to clarify the risks," he said.
Carlos Morales, Pemex's director of exploration and production, told Reuters the company faces a delicate balance when it calculates the prices it is willing to pay firms to develop oil fields as part of the contracting scheme.
"We can't leave money on the table," he said. "We also can't set very low prices... because we may be left without any offers, just like what happened with Arenque."
Morales adds that developing deposits offshore is not always more costly than onshore, depending on the type of crude, the permeability of the rock, and amount of reserves.
Still, Pemex can count on added scrutiny over its upcoming third round of contracts. Morales says the oil fields up for grabs will be tendered sometime in September. Pemex's June auction, however, was originally planned several months earlier.
Morales says the third round of contracts will cover six blocks, each around 200 square km in size, within the onshore Chicontepec basin, home to 40 percent of Mexico's crude reserves.
The specific design of the blocks in the geologically complicated basin, the amount of investment needed, and the corresponding bid prices have not yet been set.
Miriam Grunstein, an energy researcher with Mexico's CIDE institute, says the failure to auction off Arenque calls into question Pemex's very commitment to expanded private sector involvement.
"The next government may want an opening," said Grunstein, "but Pemex loves being a monopoly."
Whether or not broader energy reform is achieved by Pena Nieto, the existing private contracting model represents a limited tool reserved for low-risk fields that already tout significant output, according to John Padilla, oil analyst with energy consulting firm IPD Latin America.
"Anything that's more complicated than plain vanilla mature fields is going to be very difficult under the current version of the model," he said.
He adds that applying the contracting model to Chicontepec or even riskier deep water deposits in the Gulf of Mexico is out of reach for lack of sufficient existing production to offset the large infrastructure investment needed to tap more crude.
The entire Chicontepec basin currently produces on average about 70,000 bpd and is struggling to boost output to the 100,000 bpd Pemex is aiming for by the end of this year. Company executives have said production could reach 300,000 bpd by 2018, aided by additional investment and technological expertise from private contractors.
But the contractors' ability to significantly boost output at Chicontepec will depend on the incentives Pemex offers.
"Anything that is going to require a lot of up-front capital expenditures that then have to be recovered over time, as will be the case with deepwater and other more complicated assets, just isn't going to fly at the maximum fee per barrel levels Pemex has included in the two bid rounds to date," said Padilla.
Constitutional reforms supported by Pena Nieto - among others, allowing partial foreign ownership of reserves - would entice additional private investment to develop energy riches, but would also upset many who view Pemex as a near-sacred symbol of Mexican independence.
At present, the private service contracts represent the only ongoing option capable of significantly boosting investment.
But lately, the model seems better at generating criticism from analysts like CIDE's Grunstein.
"If the model is not functional for mature fields (like Arenque), forget Chicontepec or deep waters," she said.
(Reporting by David Alire Garcia; Editing by Kieran Murray and Sofina Mirza-Reid)

Wednesday, August 22, 2012

BHI Staff News: Eric Miranda obtains professional designation of "Certified Transportation Broker"

Congratulations to Mr. Eric Miranda on passing the rigorous "Certified Transportation Broker" (CTB) exam and obtaining this important certification.

For the past few months, Mr. Miranda has spent many evening and weekend hours preparing for the CTB exam.  The course of study covered brokerage, ethic, contracts, pricing, legal and regulatory requirements,  along with business and transportation management.  

The program and exam are administered by the Transportation Intermediaries Association (TIA).  Mr. Miranda took this exam on July 21.

Eric is not only a CTB, but he is the first member of the Bill Hay International family to obtain this  certification.  That distinction has given him a new goal:  Eric plans on mentoring his coworkers so they too can have this specialized training and develop more tools to succeed in our industry, better assist our clients, and help BHI grow.  With a role model like Eric,  look to see more CTBs at BHI!

For information on the TIA  and the CTB certification, click here:  http://www.tianet.org/  

Well done Eric, we are all very proud of you!





Tuesday, August 21, 2012

From The Packer: U.S. growers, shippers hope for good report on Mexican trucks

U.S. growers, shippers hope for good report on Mexican trucks


Transportation officials anticipate an audit report on the trucking pilot program with Mexico within a month, and U.S. produce professionals are a bit anxious, fearing a negative report could lead to another round of retaliatory tariffs.
Mark Powers, vice president of international trade and transportation for the Northwest Horticultural Council, Yakima, Wash., said the apple, pear and cherry industry in the Northwest paid tens of millions of dollars during the three years that Mexico imposed 20% tariffs.
“We want to see the pilot program be successful,” Powers said. “We also hope if Mexican (trucking) firms show they are not really interested … that their government will take that into consideration when looking at potential tariffs.”
The North American Free Trade Act requires the U.S. to allow cross-border trucking, but opposition by U.S. trucking unions and trade organizations kept the Mexican trucks out for more than a decade after the act went into effect in 1994. The opponents cited safety concerns with Mexican trucking equipment and drivers.
Despite lobbying efforts and some congressional roadblocks, the pilot program finally gained approval from President Obama and his Mexican counterpart Felipe Calderon in July 2011. The first Mexican truck came into the U.S. in October 2011.
However, as of Aug. 17, only six Mexican carriers — each with one truck approved for the program — are participating in the pilot program.
Four other carriers are nearing approval, having passed DOT inspections. Another 10 Mexican carriers have applications pending with the DOT.
One requirement built into the pilot program is that the DOT be able to document the safety of the Mexican trucks and drivers with “statistically valid” data. Powers said that could be a difficult task because of the low participation numbers.
Officials on the DOT’s Inspector General’s staff do not have a specific release date for the audit report, but spokesman David Wonnenberg said the original late summer deadline announced in October 2011 is still the target.

From STRATFOR: Mexico's Strategy


 http://www.stratfor.com/weekly/mexicos-strategy


By George Friedman
A few years ago, I wrote about Mexico possibly becoming a failed state because of the effect of the cartels on the country. Mexico may have come close to that, but it stabilized itself and took a different course instead -- one of impressive economic growth in the face of instability. 

Mexican Economics

Discussion of national strategy normally begins with the question of national security. But a discussion of Mexico's strategy must begin with economics. This is because Mexico's neighbor is the United States, whose military power in North America denies Mexico military options that other nations might have. But proximity to the United States does not deny Mexico economic options. Indeed, while the United States overwhelms Mexico from a national security standpoint, it offers possibilities for economic growth.
Mexico is now the world's 14th-largest economy, just above South Korea and just below Australia. Its gross domestic product was $1.16 trillion in 2011. It grew by 3.8 percent in 2011 and 5.5 percent in 2010. Before a major contraction of 6.9 percent in 2009 following the 2008 crisis, Mexico's GDP grew by an average of 3.3 percent in the five years between 2004 and 2008. When looked at in terms of purchasing power parity, a measure of GDP in terms of actual purchasing power, Mexico is the 11th-largest economy in the world, just behind France and Italy. It is also forecast to grow at just below 4 percent again this year, despite slowing global economic trends, thanks in part to rising U.S. consumption.
Total economic size and growth is extremely important to total national power. But Mexico has a single profound economic problem: According to the Organization for Economic Co-operation and Development, Mexico has the second-highest level of inequality among member nations. More than 50 percent of Mexico's population lives in poverty, and some 14.9 percent of its people live in intense poverty, meaning they have difficulty securing the necessities of life. At the same time, Mexico is home to the richest man in the world, telecommunications mogul Carlos Slim.
Mexico ranked only 62nd in per capita GDP in 2011; China, on the other hand, ranked 91st. No one would dispute that China is a significant national power. Few would dispute that China suffers from social instability. This means that in terms of evaluating Mexico's role in the international system, we must look at the aggregate numbers. Given those numbers, Mexico has entered the ranks of the leading economic powers and is growing more quickly than nations ahead of it. When we look at the distribution of wealth, the internal reality is that, like China, Mexico has deep weaknesses.
The primary strategic problem for Mexico is the potential for internal instability driven by inequality. Northern and central Mexico have the highest human development index, nearly on the European level, while the mountainous, southernmost states are well below that level. Mexican inequality is geographically defined, though even the wealthiest regions have significant pockets of inequality. We must remember that this is not Western-style gradient inequality, but cliff inequality where the poor live utterly different lives from even the middle class.
Mexico is using classic tools for managing this problem. Since poverty imposes limits to domestic consumption, Mexico is an exporter. It exported $349.6 billion in 2011, which means it derives just under 30 percent of its GDP from exports. This is just above the Chinese level and creates a serious vulnerability in Mexico's economy, since it becomes dependent on other countries' appetite for Mexican goods.
This is compounded by the fact that 78.5 percent of Mexico's exports go to the United States. That means that 23.8 percent of Mexico's export revenue depends on the appetite of the American markets. On the flip side, 48.8 percent of its imports come from the United States, making it an asymmetric relationship. Although both sides need the exports, Mexico must have them. The United States benefits from them but not on the same order.

Relations With the United States

This leads to Mexico's second strategic problem: its relationship with the United States. When we look back to the early 19th century, it was not clear that the United States would be the dominant power in North America. The United States was a small, poorly integrated country hugging the East Coast. Mexico was much more developed, with a more substantial military and economy. At first glance, Mexico ought to have been the dominant power in North America.
But Mexico had two problems. The first was internal instability caused by the social factors that remain in place, namely Mexico's massive, regionally focused inequality. The second was that the lands north of the Rio Grande line (referred to as Rio Bravo del Norte by the Mexicans) were sparsely settled and difficult to defend. The terrain between the Mexican heartland and the northern territories from Texas to California were difficult to reach from the south. The cost of maintaining a military force able to protect this area was prohibitive.
From the American point of view, Mexico -- and particularly the Mexican presence in Texas -- represented a strategic threat to American interests. The development of the Louisiana Purchase into the breadbasket of the United States depended on the Ohio-Mississippi-Missouri river system, which was navigable and the primary mode of export. Mexico, with its border on the Sabine River separating it from Louisiana, was positioned to cut the Mississippi. The strategic need to secure sea approaches through the Caribbean to the vulnerable Mexican east coast put Mexico in direct conflict with U.S. interests.
The decision by U.S. President Andrew Jackson to send Sam Houston on a covert mission into Texas to foment a rising of American settlers there was based in part on his obsession with New Orleans and the Mississippi River, which Jackson had fought for in 1815. The Texas rising was countered by a Mexican army moving north into Texas. Its problem was that the Mexican army, drawn to a great extent from the poorest elements of Mexican society in that country's south, had to pass through the desert and mountains of the region and suffered from extremely cold and snowy weather. The Mexican soldiers arrived at San Antonio exhausted, and while they defeated the garrison there, they were not able to defeat the force at San Jacinto (near present-day Houston) and were themselves defeated.
The region that separated the heart of Texas from the heart of Mexico was a barrier for military movement that undermined Mexico's ability to hold its northern territory. The geographic weakness of Mexico -- this hostile region coupled with long and difficult-to-defend coastlines and no navy -- extended west to the Pacific. It created a borderland that had two characteristics. It was of little economic value, and it was inherently difficult to police due to the terrain. It separated the two countries, but it became a low-level friction point throughout history, with smuggling and banditry on both sides at various times. It was a perfect border in the sense that it created a buffer, but it was an ongoing problem because it could not be easily controlled.
The defeat in Texas and during the Mexican-American War cost Mexico its northern territories. It created a permanent political issue between the two countries, one that Mexico could not effectively remedy. The defeat in the wars continued to destabilize Mexico. Although the northern territories were not central to Mexico's national interest, their loss created a crisis of confidence in successive regimes that further irritated the core social problem of massive inequality. For the past century and a half, Mexico has lived with an ongoing inferiority complex toward and resentment of the United States.
The war created another reality between the two countries: a borderland that was a unique entity, part of both countries and part of neither country. The borderland's geography had defeated the Mexican army. It now became a frontier that neither side could control. During the ongoing unrest surrounding the Mexican Revolution, it became a refuge for figures such as Pancho Villa, pursued by U.S. Gen. John J. Pershing after Villa raided American towns. It would not be fair to call it a no-man's-land. It was an every-man's-land, with its own rules, frequently violent, never suppressed.
The drug trade has replaced the cattle rustling of the 19th century, but the essential principle remains the same. Cocaine, marijuana and a number of other drugs are being shipped to the United States. All are imported or produced in Mexico at a low cost and then re-exported or exported into the United States. The price in the United States, where the products are illegal and in great demand, is substantially higher than in Mexico. That means that the price differential between drugs in Mexico and drugs in the United States creates an attractive market. This typically happens when one country prohibits a widely desired product readily available in a neighboring country.
This creates a substantial inflow of wealth into Mexico, though the precise size of this inflow is difficult to gauge. The precise amount of cross-border trade is uncertain, but one number frequently used is $40 billion a year. This would mean narcotic sales represent an 11.4 percent addition to total exports. But this underestimates the importance of narcotics, because profit margins would tend to be much higher on drugs than on industrial products. Assuming that the profit margin on legal exports is 10 percent (a very high estimate), legal exports would generate about $35 billion a year in profits. Assuming the margin on drugs is 80 percent, then the profit on them is $32 billion a year, almost matching profits on legal exports.
These numbers are all guesses, of course. The amount of money returned to Mexico as opposed to kept in U.S. or other banks is unknown. The precise amount of the trade is uncertain and profit margins are difficult to calculate. What can be known is that the trade is likely an off-the-books stimulant to the Mexican economy, generated by the price differential created by drug prohibition.
The advantage to Mexico also creates a strategic problem for Mexico. Given the money at stake and that the legal system is unable to suppress or regulate the trade, the borderland has again become -- perhaps now more than ever -- a region of ongoing warfare between groups competing to control the movement of narcotics into the United States. To a great extent, the Mexicans have lost control of this borderland.
From the Mexican point of view, this is a manageable situation. The borderland is distinct from the Mexican heartland. So long as the violence does not overwhelm the heartland, it is tolerable. The inflow of money does not offend the Mexican government. More precisely, the Mexican government has limited resources to suppress the trade and violence, and there are financial benefits to its existence. The Mexican strategy is to try to block the spread of lawlessness into Mexico proper but to accept the lawlessness in a region that historically has been lawless.
The American position is to demand that the Mexicans deploy forces to suppress the trade. But neither side has sufficient force to control the border, and the demand is more one of gestures than significant actions or threats. The Mexicans have already weakened their military by trying to come to grips with the problem, but they are not going to break their military by trying to control a region that broke them in the past. The United States is not going to provide a force sufficient to control the border, since the cost would be staggering. Each will thus live with the violence. The Mexicans argue the problem is that the United States can't suppress demand and is unwilling to destroy incentives by lowering prices through legalization. The Americans say the Mexicans must root out the corruption among Mexican officials and law enforcement. Both have interesting arguments, but neither argument has anything to do with reality. Controlling that terrain is impossible with reasonable effort, and no one is prepared to make an unreasonable effort.
Another aspect is the movement of migrants. For Mexicans, the movement of migrants has been part of their social policy: It shifts the poor out of Mexico and generates remittances. For the United States, this has provided a consistent source of low-cost labor. The borderland has been the uncontrollable venue through which the migrants pass. The Mexicans don't want to stop it, and neither, in the end, do the Americans.
Dueling rhetoric between the United States and Mexico hides the underlying facts. Mexico is now one of the largest economies in the world and a major economic partner with the United States. The inequality in the relationship comes from military inequality. The U.S. military dominates North America, and the Mexicans are in no position to challenge this. The borderland poses problems and some benefits for each, but neither is in a position to control the region regardless of rhetoric.
Mexico still has to deal with its core issue, which is maintaining its internal social stability. It is, however, beginning to develop foreign policy issues beyond the United States. In particular, it is developing an interest in managing Central America, possibly in collaboration with Colombia. Its purpose, ironically, is the control of illegal immigrants and drug smuggling. These are not trivial moves. Were it not for the United States, Mexico would be a great regional power. Given the United States, it must manage that relationship before any other.
Given Mexico's dramatic economic growth and given time, this equation will change. Over time, we expect there will be two significant powers in North America. But in the short run, the traditional strategic problems of Mexico remain: how to deal with the United States, how to contain the northern borderland and how to maintain national unity in the face of potential social unrest.



Read more: Mexico's Strategy | Stratfor