As we undergo the start of 2024, the relationship between the United States and Mexico stands at a crossroads. The crucial binational relationship is marked by collaboration and conflict, especially on the U.S.-Mexico border. Despite the pressing issues and mistrust, the interdependence of the two nations remains undeniable. There exist significant economic opportunities for Mexico, especially with the U.S.’s pivot away from Asia. This holds the potential to further intertwine the economies of the two nations. The 2024 Mexico Outlook aims to support private sector companies map their risks and priorities for the coming year.
U.S.-Mexico Bilateral Relations
- 2024 will likely not see significant changes in the US-Mexico relationship. Instead, it will continue at a level of cooperation that neither propels it forward nor causes more conflict. However, the 2024 elections in both countries will be a pivotal point for their bilateral relations.
- Two main issues will dominate the US-Mexico border conflict in 2024: mass migration and drug trade.
Mexican Political Outlook
- Mexico’s current political direction could redirect during its June 2nd elections. The election pits a successor to the current regime against a pro-business opposition. Polarization will continue.
- Political uncertainty after the elections in Mexico is highly likely. Experts expect democratic backsliding beyond 2024, which could raise doubts about Mexico’s status as a free market democracy.
- Regarding legislative issues, the reform to shorten the workweek from 48 to 40 hours is likely to pass. Congress has been very receptive to expanding workers’ rights.
Source: Baker Institute Mexico Office
The Mexican Economy 2024
- Economic opportunities lie in the US’s industrial policies pivoting away from Asia. This could further couple Mexico’s economy with that of the United States through nearshoring. Investor will look to take advantage of the nearshoring decree approved in 2023. It brings tax benefits for companies that invest in Mexico, so this could further encourage relocation to Mexico.
- The Mexican peso will continue to fluctuate in 2024 but estimated to slightly depreciate relative to 2023. Expect inflation rates to decrease with slightly looser monetary policy from the Central Bank. However, the bank could tighten its policy further if international conflicts or labor shortages cause new disruptions to supply chains.
- Mexico’s GDP will grow. However, economic uncertainty (which has characterized López Obrador’s presidency) will intensify due to elections. As a result, investments could postpone, affecting economic performance.
Investment & Trade Outlook
- Foreign direct investment in Mexico will probably not reach its full potential because of an uncertain regulatory environment, violence, insecurity and lack of infrastructure.
- Regarding trade, Mexico’s energy privatization will continue to loom over conversations about the USMCA. Mexico’s ban of genetically modified corn imports from the U.S. could receive a verdict from the USMCA panel as soon as March 2024. Car manufacturers continue pending of a USMCA panel ruling over the interpretation of certain rules of origin; discussions continue into 2024. Other issues include labor rights, Mexican tomato imports and lithium mining.
- Current government infrastructure initiatives (i.e. Tren Maya, Dos Bocas Refinery) will be dependent on political outcomes. Short-term pressure to obtain results will persist.
Source: The Economist Intelligence Unit
Read more about Mexico’s Industrial Corridors.
As we look ahead to 2024, Mexico’s economic and political trajectory presents both challenges and opportunities for private sector corporations. While the US-Mexico relationship remains complex, the reshaping of industrial policies and the potential of nearshoring offers compelling investment prospects. Companies must closely monitor political events, particularly the elections. They must factor in the potential for currency fluctuations and ongoing energy privatization debates. By staying informed and adaptable, private sector corporations can navigate these complexities and capitalize on the opportunities that Mexico presents in 2024.
The Mexico Outlook 2024 is a highlight of the Executive Advisory practice by Prodensa, serving companies in Mexico with their institutional relations strategy.
This analysis draws on research from the Baker Institute, providing an insightful outlook of what to expect in the binational relationship in 2024.