The Conundrum of Mexico’s Foreign Policy vs. the Trump Administration

A couple of colleagues have asked me to give an English version of some of my thoughts regarding the course of action Mexican foreign policy should take vis-a-vis the Donald Trump administration. The stakes could not be greater for Mexico: the North American Free Trade Agreement on which million of Mexican (and I should add American and Canadian) livelihoods depend; the security of a border that Trump simplistically reduced in his campaign to the building of a wall, with the ridiculous suggestion that Mexicans will pay for it; the prospect that thousands of undocumented Mexican migrants could suddenly be dumped by US Immigration and Customs Enforcement (ICE) agency officials (whom, it is worth mentioning, were the one group of organized labor to endorse candidate Trump); the use of the Presidential bully pulpit to block investment flows from vulnerable US companies to Mexico (as has already happened with Carrier and perhaps Toyota and Ford); and in general, the possibility that Mexico becomes the easy scapegoat for anything that goes wrong in the first few months of his administration.

Sherlock Holmes and Moriarty in the Deadly Combat (1980)

The simple idea I wanted to express in my post on Medium, written in Spanish, was that if we apply some of the insights of Thomas Schelling’s analysis of international relations using game theory, we must conclude that the recent change in the leadership of its foreign ministry is not what Mexico needs at this time. The basic idea that I articulated is that Luis Videgaray was chosen because of his proximity to Trump. But this attribute is precisely what makes him the least likely emissary of credible threats that may improve Mexico’s bargaining position vis-a-vis the incoming Trump administration. Drawing from cooperative bargaining games, as well as non-cooperative games, where off the equilibrium path moves determine outcomes, I argue that Mexico right now needs to create a credible commitment that it is willing to fall into the abyss, making the Trump administration fall with it, if the new US administration does not concede favorable terms in negotiations that are likely to be opened over trade, migration, security, and all the topics of common interest to both nations (as well as the hemisphere, I may add).

After writing my note I have received some insightful comments from friends and colleagues. One reminded me of a time when, in the midst of the debt crisis in the 1980s, President de la Madrid was given the advise to leverage the nationalist leftist opposition at home as a way to gain more leverage and concessions from the US and the consortia of banks holding an international debt that was impossible to pay. Despite disbelief at the time of something like this being possible, Mexico skillfully emerged with a debt restructuring menu, where banks were willing to discount debt to its market value of a only a few cents for the dollar, or offer new fresh loans, or concede a rescheduling of obligations under more favorable financial terms for Mexico. Despite its structural weakness, Mexico’s debt renegotiation was, all things considered, a success.

I was also reminded of another historical instance, this time quite distant, in which Moctezuma welcomed Cortez, a far more powerful enemy, with appeasement and presents. As we all know, that story did not end well. However, I must say that an important part of the story is often not mentioned: despite the catastrophic effects of the Conquest, the Indian nobility fared relatively well (at least until the 1570s, when the epidemics finally decimated its ranks). The daughters of Moctezuma and other Aztec nobles married into the encomendero class; ruthless caciques throughout the new colony asserted their rule and continued collecting tribute under the Pax Hispanica for decades, without fearing the Mexica war machine; and the Tlaxcaltecas became critical partners of the colonizing endeavor of the Spaniards, founding new cities in the booming mining towns to the North, and conquering the coveted lands of Guatemala. This only reminds us that even when a country suffers losses for the majority of its citizens, some elites may stand to gain advantages from such catastrophes.

To make my position clear, I believe the Mexican foreign service is one of the most professional and competent bureaucracies in the the government of Mexico (and in fact, in the developing world), capable of achieving national goals if given the correct guidance and goals. Mexico has never been a failed state, but a state with enormous capacity and real soft power in international relations. I also believe that Secretary Videgaray (together with Jose Antonio Meade who should play a prominent role in this process) has the necessary skills and intelligence to conduct the tough negotiations that lay ahead.

But I also think that the Mexican foreign minister has a major liability in his proximity to Trump, and that he would be empowered by a healthy dose of nationalism, Realpolitik and bargaining toughness. In my view President elect Trump has demonstrated beyond any doubt that he is a bully. That is the way he has run his businesses, his TV show and his campaign. And all that we know from strategic analysis in the social sciences tells me that the only way to deal with a bully, when one is weak, is to create a credible commitment to behave like a bully too. It is not necessary to become North Korea. but to create enough uncertainty in this games of imperfect information so that the Trump administration has to think twice before enacting policies that harm millions of Mexicans, simply to pander to organized special interests, business partners, or any small vocal constituency in the US.

The conundrum of Mexican foreign policy is to determine whether to offer an olive branch or to show a good dose of hawkish instincts. Andrew Seele and I wrote a piece some years ago where we argue that a feature of the asymmetry in the US Mexico relations that is often no appreciated enough is that Mexico has a great deal of agenda setting power, because while US foreign policy has interests fragmented throughout the globe, including pressing issues to be addressed elsewhere, Mexico has no other relationship that is more important than the US. With craft and foresight, the new Mexican foreign minister can deploy the vast resources and capacity of the Mexican state at his disposal, as well as the virtually universal rejection of Donald Trump by most Mexican citizens, to emerge with a good deal. If he does, he would seriously become the most viable contender for the Mexican presidency in 2018. Otherwise, I cannot help but say it, he will be fired.



Mexicano orgulloso, migrante renuente. Economista ITAM y Politólogo Duke. Senior Fellow en CDDRL y Director Centro Estudios Latinoamericanos Stanford University

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Alberto Diaz-Cayeros

Mexicano orgulloso, migrante renuente. Economista ITAM y Politólogo Duke. Senior Fellow en CDDRL y Director Centro Estudios Latinoamericanos Stanford University