Business is booming.

The U.S. Touts Big Investments for Mexico, Testing Its Nationalist Policies

MEXICO CITY – Biden administration officials Monday praised the benefits that a coming wave of investment in U.S. manufacturing could bring to Mexico, saying new factories making semiconductors, clean cars and other products in the United States are moving to Mexico could look for raw materials and assembly.

During meetings with President Andrés Manuel López Obrador and other high-ranking Mexican officials on economic relations, Foreign Minister Antony J. Blinken and Commerce Secretary Gina Raimondo discussed how the countries can benefit together from recently passed legislation that will add tens of billions of dollars in new investments. in US facilities in the semiconductor and green technology industries in the coming years.

Economists say Mexico is missing out on billions of dollars in potential foreign investment as companies look to diversify their operations outside of China and East Asia amid supply chain problems caused by the pandemic.

But Mexico’s nationalist policies have deterred investors, economists say, and levels of foreign investment have yet to return to prepandemic levels at a time when foreign companies — particularly American ones — are looking for near-shoring opportunities like Mexico. to bring their factories closer to home.

US officials pointed to the deep integration of the countries’ auto industries as a platform for the production of clean cars. Ms. Raimondo said that, with semiconductors, the opportunity for Mexico would be in testing, packaging and assembly, which she said was a $60 billion industry in China and Taiwan, but only $3 billion in North America.

“This is a big doorway for Mexico, for the Mexican economy,” Marcelo Ebrard, Mexico’s foreign minister, said in translated remarks.

But even as leaders of both countries expressed optimism about their future partnership, an ongoing trade dispute over the Mexican government’s interventions in the energy market continues to cast doubt on Mexico’s credibility as a destination for foreign investment.

Mr. López Obrador has sought to cement the dominance of Mexican state energy companies in what he describes as a pursuit of energy sovereignty. But some US energy companies have complained about the less favorable treatment they face on issues such as pricing, emissions standards and contract terms.

The United States has challenged Mexico on their behalf and taken the first steps to bring a trade dispute under the countries’ free trade agreement. The move could eventually lead to the United States imposing tariffs on Mexico if the problem is not solved by other means.

Officials from both sides said Monday the dispute was being handled under that formal process. But Tatiana Clouthier, Mexico’s economy minister, said at a news conference that the topic was discussed Monday afternoon as part of a two-hour conversation between the Mexican president and his American visitors.

Ms Raimondo said the two sides have not discussed the energy conflict “at length”, but added: “What companies are looking for is predictability, fairness and transparency. And I think that applies to any company, anywhere in the world.”

The comments followed a day of high-level meetings at the National Palace and the Ministry of Economy in Mexico City, which also discussed cybersecurity, regional competitiveness, efforts to tackle climate change and supply chain resilience in areas such as pharmaceuticals. , among other things.

But the excitement of the meeting centered around the opportunities that will arise as Biden officials spend billions of dollars in the coming months trying to revive U.S. manufacturing.

The CHIPS Act, which spends $50 billion on semiconductor manufacturing and research, and the Inflation Reduction Act, which provides $369 billion in incentives to mitigate climate change, aim to boost US domestic investment.

But both have provisions that could benefit Mexico, including funding for the United States to work with partner countries to make semiconductor supply chains safer, and incentives for consumers to buy clean cars with parts made in countries that United States have a trade agreement. agreement, such as Mexico.

While Democrats and Republicans have protested that American jobs are being sent to Mexico, many economists have argued that the country’s economy is complementary to that of the United States, given the large pool of lower-wage workers who can do more labor-intensive jobs that It’s frugal in the higher-wage United States.

One argument for closer cooperation between the US and Mexico is that it would allow North America to produce better quality and cheaper products that would compete better in the international market with products made in China.

The United States and Mexico have a brisk trade in the raw materials and inputs used in a variety of products, and many companies have designed their supply chains to move back and forth between countries, using natural resources, employee skills, or favorable government policy.

Yet the economic partnership between the two countries has not always gone as smoothly as some had hoped. At the start of the pandemic, American automakers protested the closure of its auto parts plants in Mexico. Mexican cartels have also expanded their reach, targeting legal transactions for limes and avocados.

The energy dispute has increased tensions and some companies have found it easier to continue importing products and parts from Asia despite the greater distance.

Officials have not provided a timeline for when the energy dispute could be resolved. In July, the Biden administration said it believed Mexico’s actions violated the terms of the United States-Mexico-Canada agreement, which came into effect two years ago and prohibits its members from trading each other’s businesses. discriminate. Canada then joined the United States in saying Mexico’s actions violated the agreement.

If the dispute is not resolved by early October, the trade agreement will allow the United States to request a panel of trade and legal experts to investigate the matter. And if the panel rules in favor of the United States, US officials say they can impose tariffs on Mexico, though their goal is to resolve the dispute before that point.

In comments made in recent weeks, Mr López Obrador has shown more willingness to resolve the issue, proverb the United States had adopted a more respectful attitude and a “different tone” than before.

Maria Abi Habib reporting contributed.