Overview

With the second-largest economy in Latin America and the Caribbean (LAC), institutional stability, and a proven commitment to multilateralism, Mexico is a partner the European Union should pay close attention to. The country’s most important relationship continues to be with the United States, underpinned by the historic 1994 north American free trade agreement (NAFTA). But this does not necessarily translate into geopolitical alignment. Mexico – like many LAC nations – instead tends to adopt a policy of non-interventionism and strategic non-alignment in global affairs. This has heightened under President López Obrador, who has pursued a largely insular foreign policy, focused more on domestic priorities with some intermittent interest in Peru and Venezuela.

Mexico’s slight retreat from the international arena should not dissuade the European Union. The country’s presidential election in 2024 may alter its foreign policy given Obrador cannot run again. Furthermore, according to interlocutors, Mexico remains an “anchor of stability” in LAC, a quality they argued sets it apart within the region and continues to make it an attractive ally for the EU. Should the Republican party win the 2024 elections in the US, Mexico may also seek to diversify its political relationships, opening space for the EU to become a more important partner, particularly in trade, climate, and development.

On trade, NAFTA helped turn Mexico into a modern manufacturing powerhouse. Today, it is the most open economy of the LAC region, boasting 14 trade agreements with 50 countries around the world and a manufacturing sector firmly embedded in the global value chain. This has enabled it to benefit from nearshoring efforts, overtaking China in 2023 to become the United States’ leading trade partner. It could similarly help the EU reduce its reliance on China and boost its strategic interdependence by exporting machinery, mineral products, and appliances to the EU. This could be facilitated by the ratification of the delayed EU-Mexico trade agreement. Here, the EU should seek to support Mexico in its reindustrialisation and in moving the country up global value chains, which is a key priority of the Mexican government.

Historically a champion of climate multilateralism, today, Mexico’s climate track-record is less positive. The country’s heavy reliance on fossil fuels has increased in recent years, as the Mexican government has prioritised economic development to reduce poverty over climate commitments. Reconciling Mexico’s significant trade openness with climate goals may be tricky. Going forward, the EU could help Mexico pursue a decarbonisation path by framing it as an economic opportunity given it will future-proof the country’s exports against climate-orientated trade instruments and enable it to compete in the green economy.

In leveraging its prominent trade profile, manufacturing know-how, and significant renewables potential, Mexico has the potential to spearhead a green transition at home and overseas. This has not gone unnoticed by Beijing, with three of China’s largest electric vehicle producers reported to be preparing to build factories just south of the US border. US officials have expressed concerns that these companies will use Mexico as a “back door” to access the US-Mexico-Canada free trade agreement (UMSCA). Mexico, cautious of upsetting the US, will likely tread carefully. As a more attractive alternative, the EU should not miss this opportunity to invest in electric vehicle production, among other manufacturing opportunities, allowing it to not only compete with China but also benefit from the United States’ inflation reduction act tax credits while accessing USMCA.

On development cooperation, Mexico has a unique position as a bridge between the global north and global south, bolstered by the credibility it enjoys in the latter. Europe and Mexico have already conducted triangular cooperation between the EU countries and Mexico, central America, and the Caribbean, which they can build on. Europeans may also benefit from Mexico facilitating engagement with central America and the Caribbean on development matters.

However, when attempting to boost cooperation on development at the multilateral level, the EU should also pay heed to Mexico’s domestic development agenda. Interlocutors argued that the EU must avoid imposing its own priorities on Mexico and recognise that the country’s key priority is currently to improve social welfare. Indeed, Mexico’s open and export-fuelled economy has not proved powerful enough to overcome structural deficiencies and inequalities, leaving many behind. This prompted the present Mexican government to focus on championing “a new paradigm of cooperation, with the aim of improving people’s welfare and development”. The EU should be mindful of this priority, not only aligning itself with Mexico in championing development at the multilateral level but simultaneously catering towards Mexico’s development needs in its bilateral outreach. In doing so, it will help lay the foundations for cooperation with Mexico on an array of global challenges and support its return to the international stage.