Mexico's new president, Claudia Sheinbaum, faces major challenges. In the US election campaign, her country risks being caught between rivals Trump and Harris.
If Republican presidential candidate Donald Trump gets his way, companies producing in Mexico for the U.S. market will have to immediately relocate to the United States.
If Chinese manufacturers wanted to sell their cars in the US, they would also have to produce them in the US. Otherwise, Trump threatened at his Republican nominating convention, he would make vehicles so expensive through tariffs that they would become unaffordable. The German auto industry, which produces part of its products in Mexico, is also a target of this threat.
The debate shows that, once again, Mexico is in danger of becoming a pawn in the domestic politics of the United States.
The mystery of November 5th
Claudia Sheinbaum (62) will be, as of Tuesday, October 1, 2024, the first woman to assume the presidency in Mexico. And, among many other challenges, her term will also be marked by the US elections on November 5. Only then will it be clear who won in the United States and will therefore act as its interlocutor in Washington for the next four years.
Whether Kamala Harris or Donald Trump are in charge of the White House will also be crucial for the climate in the neighborhood. Sheinbaum inherits from her predecessor, mentor and fellow member Andrés Manuel López Obrador, an economy that faces some uncertainties.
Economic growth and judicial reform
According to the World Bank, the Mexican economy grew by 3.2 percent last year. This means that Mexico achieved economic growth of more than three percent for the second consecutive year. According to official information, the poverty rate fell from 43.9 percent (2020) to 36.3 percent (2022): around 8.8 million Mexicans would have thus managed to escape poverty.
A judicial reform has caused a stir in recent weeks. It was approved by the institutions in record time, despite numerous protests, and has raised concerns among the United States and Canada's trading partners.
The reform stipulates that in future all federal judges will be directly elected. Critics fear that organised crime will thus gain more influence over the judiciary.
US Ambassador Ken Salazar said a few weeks ago that this reform threatens the relationships forged, "which depend on the confidence of investors in the Mexican legal framework." However, in the last days of his mandate, López Obrador approved the reform, which he calls a "democratization of the legal system."
Rule of law and investments
Human rights organisations and the Church warn that elections in Mexico are already infiltrated by organised crime. The high number of candidates killed during election campaigns is a clear indication of this.
At least 22 local politicians have been murdered in Mexico since September 2023, according to official government figures from May this year. Some non-governmental organisations such as Data Cívica report even higher figures. And there are fears that this type of political violence could also extend to electoral campaigns in the judiciary.
"For companies, the rule of law is an important criterion for doing business abroad, building and operating plants. And for the rule of law, independent judges are a basic requirement," Hartmut Rank, head of the rule of law program for Latin America at the Konrad Adenauer Foundation (KAS), which is close to the German Christian Democratic Party, told DW.
"If the reform is implemented as planned, courts in Mexico will be less independent, which could encourage entrepreneurs to look for alternative locations," predicts Rank, from his headquarters in Bogotá.
There is also skepticism in the financial markets: after the elections, the Mexican currency lost 13 percent of its value against the US dollar.
The future Sheinbaum government is responding to the concerns of foreign companies with an optimistic forecast: according to the El Economista website, the Executive expects an increase in foreign direct investment of three to four billion dollars a year. By the end of the six-year term in 2030, this would mean an inflow of foreign investment of up to 24 billion dollars.
German companies are waiting
Judicial reform is also a topic of discussion among German companies, which have a large presence in Mexico. "But we will have to wait and see how the reform is implemented in practice; everything else is speculation," Johannes Hauser, director general of the Chamber of Foreign Trade (AHK) in Mexico, told DW.
"Our partner firms are currently analysing the scenarios. It is clear that judicial reform could limit the independence of the courts. Since judges are expected to be eligible for re-election, it will likely become more difficult to assert individual interests over group interests – this probably applies to both individuals and companies," says Hauser.
Hauser alludes to the fear that in the future judges may think like politicians, and make their judgments taking into account the impact it has on their chances of re-election.
What if Trump wins the election? According to the German Association of the Automotive Industry (VDA), Mexico is the most important production site in America for German car manufacturers after the United States and ahead of Brazil and Argentina. That is why the company headquarters took careful note of Donald Trump's recent statements regarding production sites.
Asked by DW, a VDA spokesperson referred to the current legal situation: "The United States has agreed to the USMCA trade agreement with Mexico and Canada. The imposition of higher tariffs on vehicle imports from Mexico would be a violation of this agreement, which would be particularly detrimental to American companies, which are the ones that enjoy many advantages thanks to this North American production network."
