Tue | Dec 12, 2017

David Jessop | Mexico appears set to deepen regional relations

Published:Sunday | September 3, 2017 | 12:00 AM
This file photo shows a section of the Petrojam oil refinery in Kingston. There are unconfirmed reports that Mexico is considering setting up an oil facility for the Caribbean similar to the Venezuelan programme, PetroCaribe.

As the year progresses, Mexico, the world's thirteenth largest economy, is expected to rebalance its international trade relationships.

It is likely to do so irrespective of the outcome of meetings under way with Canada and the United States on the future of the North American Free Trade Agreement (NAFTA), or Donald Trump's threats about future US participation.

For many months, Mexico has been exploring new trade initiatives with China, which is a major trade partner, as well as with other nations across the Pacific, and with southern neighbours in the Americas.

Next week Mexican President Enrique Pena Nieto will travel to China to meet President Xi Jinping, and will participate in the BRICS Summit in Xiamen that may involve nations from beyond the association's original membership of Brazil, Russia, India, China and South Africa.

The meeting follows others involving Mexico that aim to resuscitate the Trans-Pacific Partnership, from which the US withdrew in January in a first demonstration of President Trump's 'America First' trade policy.

All of this affords a background to recent media reports that Mexico is considering playing a greater role in the Caribbean and Central America by developing a new concessionary oil arrangement for the region, similar to that offered by Venezuela.

According to the news agency, Reuters, Mexico's government is studying the development of a mechanism that could provide an alternative supply of crude oil and oil products to PetroCaribe members in the Caribbean and Central America. The report, quoting two unnamed Mexican officials, said the concept was being jointly developed by the country's finance ministry, foreign ministry and energy ministry.

 

DENIED PLAN

 

Although the Mexican foreign ministry denied any such plan exists, it is probable that the idea stems from Mexico's desire to play a more significant role in the Latin American and the Caribbean region at a time when Venezuela's role may be in decline, and in order to enhance Mexico's NAFTA negotiating position with the US.

If this is what is intended, to succeed Mexico would rapidly have to become an alternative source of supply for at least a part of Venezuela's present PetroCaribe arrangement, which sees shipments of about 95,000 barrels of crude per day and refined products go to about 18 Central American and Caribbean nations, including Cuba.

Whether such an offer might be taken up by Cuba, which has a special preferential oil, services and investment arrangement with Venezuela, is however questionable. Although the Mexican government has a positive relationship with Havana, and Cuba is now receiving oil from sources other than Venezuela, the Cuban government has made clear that its relationship with Caracas remains one of 'unwavering solidarity', suggesting an indivisible long-term relationship. Notwithstanding, some Mexican media reports suggest that the issue was raised when Mexican Foreign Minister Luis Videgaray visited Havana on August 17 for bilateral talks with the Cuban government.

Much less clear in all of this is how serious Mexico is in wishing to become more actively engaged with the Caribbean and expanding its political influence, or what the broader implications might be.

In recent years, the Mexican Government has only engaged with the Caribbean in a limited and pragmatic way; principally through trade relations with Belize, a neighbour, and the larger regional markets of the Dominican Republic, Cuba, Jamaica, and Trinidad & Tobago.

While it has institutional mechanisms for exchanges with Caricom and in some cases for bilateral dialogue, there is no Mexican trade agreement with the region, with only Belize actively exploring the possibility of a partial scope trade arrangement and other linkages.

UN COMTRADE figures show that Mexico's predominant markets in the region are the Dominican Republic, from which it imported US$148 million of goods and exported US$908 million in 2016, followed by Belize, Trinidad, Cuba and Jamaica.

More generally, the balance of trade is very much in Mexico's favour. However, Jamaica, for example, has been able to develop an export market, is close to finalising a multi-destination tourism arrangement, and has several significant Mexican private sector investments - as have Cuba and the Dominican Republic.

 

BROADER RELATIONSHIP

 

This apart, Mexico is a member of the Caribbean Development Bank and other hemispheric multilateral institutions that contribute to regional development. It is also engaged in or has financed development programmes in the region involving infrastructure, education, Spanish language teaching, health care and humanitarian assistance.

All of which suggests that there is substantial room for a much broader relationship, if that is its intention.

Speaking last year to the Mexican digital publication, the news.mx, during a visit to Mexico City, Jamaica's Foreign Minister, Kamina Johnson-Smith, recognised this.

"The government of Jamaica is firmly of the view that the time is ripe to maximise the potential of the north and northwest Caribbean to constitute a geopolitical and economic pole that can become a catalyst for the further integration" that can "serve as an engine of growth for the entire Caribbean Basin," Johnson-Smith said.

While her comments came against a background of the rapprochement then under way between Cuba and the US, they do suggest that for some Caribbean nations, a closer relationship with Mexico may have strategic value.

That said, the idea of two quite separate oil facilities existing side by side in the Caribbean suggests an ideological divide and the possibility of geopolitical tension, even if the US is not involved.

Any such initiative would undoubtedly protect Caribbean nations such as Haiti and others that are heavily dependent on the PetroCaribe arrangement, especially if the US ratchets up sanctions in ways that effect Venezuela's PetroCaribe debtors.

However, it would also aggravate growing political divisions in the region which now seeing nations, away from the public gaze, beginning to take sides over what is now happening within Venezuela.

Elements of this may well be a game of high stakes poker in Mexico's complex relationship with the US. Nonetheless, the fact that such matters are being considered, suggests that the US President's desire to change the way his country interacts with its neighbours is changing thinking about future hemispheric and international relations.

Mexico, as befits a major economy, is quite understandably seeking to diversify its relationships in the face of US hostility. How this might play out in the Caribbean is uncertain and likely to require caution.

- David Jessop is a consultant to the Caribbean Council. david.jessop@caribbean-council.org