In Mexico’s NAFTA capital, ‘absolute uncertainty’ reigns
MONTERREY, Mexico — Along the winding, craggy roads of the industrial park in this city, workers walk from their bright colonias to the gray, concrete slabs of manufacturing plants, many of them American, where they work.
Later in the day, plant managers retire to their gated homes — a community of people who were lifted into wealth through the city’s industrial growth aided in part by American exports.
All eyes today, from the workers to the owners, the local vendors selling cups of elote on the street to the venture capitalists in their high-rise firms, are watching each tweet, comment, and executive order signed by President Donald Trump.
Monterrey is known as the NAFTA capital, and many of the 4.5 million people here wonder how a country so familiar to them — just three hours away by car — could take them for such an unexpected ride.
Trump’s proposals to eliminate or renegotiate the North American Free Trade Agreement, assign a 20 percent or higher “border adjustment tax” on Mexican imports, and construct a border wall have left many Mexican companies struggling with the uncertainties of the future ahead. As the leading industrial hub of the country, Monterrey is on its way to becoming a flash point in the binational debate.
“We talk to companies every day and it’s a changing story, but there is a lot of concern especially in Mexico right now,” said Joseph Chapa, vice-president of the United States-Mexico Chamber of Commerce.
Already, the social anxiety and mistrust has struck a nerve with many Monterrey businesses. Some members of the Mexican Entrepreneur Association in Monterrey said community business leaders feared retribution if they spoke with a reporter on the issue.
Nationwide, the people of Mexico are taking preventative measures to protect against potentially aggressive U.S. policies. Mexican President Enrique Peña Nieto has scheduled a 90-day conference period with the country’s senate and private sector to discuss a plan for NAFTA. He also re-launched the “Hecho en Mexico” initiative to encourage the purchase of Mexican-made products, and everyday people have been boycotting American companies like Walmart in favor of homegrown grocery stores like Soriana.
Weighing heavily on Mexicans is the plunge of the value of the peso, which has mirrored the downward spiral of U.S.-Mexico relations since Trump’s election on Nov. 8. Trump’s border restrictions leave some visa-holders worried about their freedom to travel in and out of the United States. Another concern is a fear that Trump-like populism could gain traction in next year’s presidential election.
Politics for now seems to be pitting the neighbors against each other. Last week, Peña Nieto canceled a trip to meet with Trump, after Trump tweeted about making Mexico pay for a wall. Trump reportedly told Peña Nieto in a call last weekend that he’d send U.S. troops to knock out the “bad hombres” in Mexico, though some say the remarks were in jest.
For South Texas cities like San Antonio, whose roots are intricately intertwined with that of Mexico and, in particular, its sister city Monterrey, the political tension contrasts with their deep-seated cultural and commercial ties.
“It’s an awkward situation,” said Ruben Linder, president of the Mexican Entrepreneur Association San Antonio.
San Antonio and Monterrey used to be connected by a passenger train and while that is no longer, they remain connected through a similar cultural history. Linder moved to San Antonio from Monterrey six years ago to establish another base for his company OpCom Media Group because he knew the transition would be a “soft landing.”
He said the social ramifications of some of Trump’s policies are affecting the country’s economics, and vice versa.
“It’s sending a message—it’s not the wall, the bricks, it’s about the message,” Linder said. “It’s ‘I don’t trust you.’ It’s ‘We are neighbors but I don’t want you to look at my home.’ And because of that, things are already happening with the whole economic ecosystem.”
A painting of George Washington kneeling by a horse in prayer hangs on the wall of Felix Cardenas’ office. The venture capitalist has been an ardent fan of the United States and its first president for years, having obtained much of his education there.
“We’ve been friends for so many years, good neighbors. In 1994, when NAFTA was finally executed, it wasn’t just to be good neighbors, but Canada and Mexico were pulling our destiny together. We were forming an economic block,” Cardenas said. “So that’s what we encourage our American friends and business associates to do — see us as partners. A symbiotic, mutual relationship.”
And those kinds of relationships—and the jobs they fostered—are what’s at stake, he said.
When NAFTA began and tariffs were essentially eliminated between Canada, Mexico and the U.S., small businesses shuttered doors in Mexico, unable to keep up with the larger companies — many American — that moved in and made products for less cost. Thousands of jobs were lost, but thousands more were created in manufacturing plants, to the point where it was largely regarded as a net gain.
While Cardenas might see the United States as a friend, he said he’s concerned the feeling isn’t mutual.
“Mexico has taken advantage of the U.S. for long enough. Massive trade deficits & little help on the very weak border must change, NOW!” tweeted Trump on Jan. 28.
Trump calls NAFTA “the worst trade deal maybe ever signed anywhere.” U.S. imports today outweigh exports to Mexico, contributing to a deficit of $58.8 billion in 2016. It’s not the highest it’s been — in 2007 the deficit reached $74.8 billion — and experts say it wasn’t the movement of companies but technological advancements that caused a lot of manufacturing jobs to close.
As North American trade swelled after NAFTA, so did business ties between Texas and the Mexican border state of Nuevo León and its capital city of Monterrey. Now, produce and automobile parts are exported to the U.S. while Texas-based companies like H-E-B have expanded to Nuevo León.
Mexico is the United States’ second-largest export market and in 2015 Texas imported more than $84 billion worth of goods from Mexico, making up 33 percent of the U.S.’s total imports from Mexico. About 80 percent of Mexico’s exports are U.S.-bound.
The possibility of gutting that expansive, intricate trade relationship has shaken business leaders on both sides of the border.
“The biggest issue is that there’s an absolute uncertainty about what will happen. I think this is the most dangerous,” said Zita Horvath, an associate professor at the EGADE business school and corporate lawyer for private equity and wealth companies. She said investors have approached her “very concerned” over the United States’ new protectionist direction.
Trump has been adamant about companies staying domestic. Carrier, an American air conditioning company, and Ford Motor Co. both reversed plans after Trump derided their intents to move to Mexico.
One businessman who’s in charge of international exports for a company that sells the majority of its products to the United States said he’s halted all exports until he gets more clarity of the future of U.S and Mexico trade relations. He did not want to publish his name for fear of retribution from U.S. officials.
“Officially, we’ve stopped everything. It’s like when you’re in a recession — everybody’s stopped their decision until things clarify,” he said. “We’re on standby.”
He wanted to put their first office in San Antonio. But once Trump was elected and then inaugurated, he decided it would be too risky to deal with the United States. He said he picked Texas because he used to think that it had a lot in common with Nuevo León.
“Until a couple months ago I thought we had very similar cultures. Our culture here looks more like Texas than California or any other state in the United States,” he said. But now, he questions if they’re as similar as he once thought.
Earlier this year, the export director drove to Austin to attend a business conference. For the first time, even with his SENTRI expedited pass for low-risk travelers, he was held up at the border. He said he’s had multiple friends tell the same kind of story in recent weeks. And he said a friend’s visa was revoked because he made negative comments about Trump.
These kinds of stories lead to national paranoia.
“Culturally they’re changing the rules to everyone. On this side, we’re just waiting to see how the rules are going to change and hoping they change the quickest possible,” the businessman said. “But really, it’s shocking.”
To balance things out, he said his company is now switching gears to look at Central and South America for potential buyers. Cardenas and Horvath also mentioned that maybe it was time for Mexico to start looking for other treaties, other solutions, should it get shut out of U.S. commerce. But maybe it’s still too soon — they couldn’t say for sure.
“We can’t plan out from here to two or three years ahead, like we did before, well now we can’t. We’re planning no more than 6 months ahead, and most of the time, not even that far,” said Alberto Leal, who works at the Vivati finance firm.
Historically, the United States has been known as a global leader in free trade. For Monterrey, the free trade capital of Mexico, talks of restrictive trade measures are a stunning role reversal.
“It’s such an irony that because of the United States and the push it had in that era — it opened up countries and the market. It’s incredible that today it’s heading in the reverse. It’s shocking,” said Pedro David Martinez, the founder of Regius Capital in Monterrey.
“We have a person who wants to reverse more than 50 years of global integration in one week,” said Martinez. “This is the problem.”
‘Stronger this way’
Out in the northern colonias of Monterrey, a group of men shook their heads in conversation, white corn residue on their hands like chalk. Eduardo Lopez sat on a pail and scraped kernels from a corn husk. His brother, Margarito Lopez Marin, stood nearby watching as Lucas Cristobal, a local vendor, stuffed corn into a produce bag.
Businessmen of a different stock than the venture capitalists and finance men from downtown, they too were talking about Trump, and what their futures will look like if his promises continue to unravel into reality.
Will the value of the peso, which has been declining since Trump’s election, continue its downward trajectory? Will the inflation of gasoline prices — caused in part by the weakening of Mexican currency — bring up the cost of other consumer goods too? And can Lopez still count on being able to visit his family members who live in Dallas?
“Why does he have to treat us like this?” Lopez said.
These are the questions that plague them. A conversation of sentences ending in question marks brought on by the quickly changing politics of the United States.
“I don’t know what thoughts he has, or where this is going,” said Cristobal, shrugging. “But we are Mexicans and we should all be like brothers. We don’t like it that another person and country comes here to hurt us.”
“He’s not thinking of others like us. He’s thinking of himself and what he wants to do,” said Lopez.
The workers have seen the news—they know that Mexico relations became a cornerstone of Trump’s presidential campaign. They remember what he said in 2015: “They’re bringing drugs. They’re bringing crime. They’re rapists. And some, I assume, are good people.”
And so they, like many Mexicans across the country and across economic divides, have decided to come together in the face of a common opponent.
“We’re united because we don’t want to let him to dominate us here. We have our country and we’re going to defend our country and countrymen. And if he messes with them over there, he’s messing with us, too,” said Lopez Marin. “A lot of us have family there and we don’t want them to get hurt there either.”
Later in the day, Cristobal will sell his corn as elote, with cheese, chili and lime in a cup. And the Lopez brothers will drop off the rest with a distributor, who will take some of that corn up to cities and towns across the United States. Cristobal said his friends on Facebook have been sharing Mexican flags in solidarity for their country.
“We just want to work and take care of our family. But unfortunately they think we’re thieves,” said Lopez Marin.
Miles away, women in a manufacturing plant toil away to create protective gear that would get shipped across Mexico. Working inside, Olivia Guerrero Gonzalez performs the same task over and over again—smoothing out perfectly round shapes of dark glass with an old piece of machinery.
Just thinking about her country fighting for itself makes her smile.
“We’re uniting more and we are stronger this way. We’re united against the problems and for our values,” she said.
But then her face tightens.
She recalled Trump’s book, “The Art of the Deal,” when he spoke about crushing the adversaries who are weak, and negotiating with those who are strong.
“This is what he’s doing — he’s crushing Mexico,” Gonzalez said. “He thinks we’re weak. He thinks we’re weak because he doesn’t know us.”
“I want this man to study the history of Mexico. So that he can see everything we’ve done. So he can value us as people.”