A longer-term perspective on Mexico. It’s easy for investors to be captivated by headlines; in the case of Mexico, these can be mystifying. It’s hard to understand Mexico’s motivation for continuing to allow the migrant flows that have caused concern in the U.S. and angered the U.S. administration. In a longer historical context, though, the drug cartels and other criminals who cause such trouble in Mexico’s north are just the most recent manifestation of a problem Mexico has had since before the Mexican state even existed – and indeed, since before the European colonial powers arrived in Mexico at all. With the country’s center of power hemmed in by desert to the north, mountains to east and west, and jungle to the south, and lacking any network of navigable rivers, Mexico’s authorities – whoever they have been – have always struggled to project power and to maintain order. The migrants coming from the Northern Triangle – Honduras, Guatemala, and El Salvador – are fleeing lawless regimes in search of stability and opportunity, and Mexico is ill-equipped to keep its own borders closed. We think the U.S. administration knows this – and that U.S. demands that may seem intransigent are backed by a realistic assessment of Mexico’s capacity and its dysfunction. U.S. negotiators will be satisfied with a reasonable level of compliance – so don’t fear a trade war between the U.S. and Mexico.
