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Texas Keeps Close Eye on Mexico's Presidential Race

Texas economists and politicians are closely watching what this summer's presidential contest in Mexico means for the peso and, in turn, the state's symbiotic business ties to our neighbor to the south.

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Texas economists are confident that the financial upheavals long associated with Mexican elections are a thing of the past. Still, they are closely watching what this summer's presidential contest means for the peso and, in turn, Texas' symbiotic business ties to Mexico.

Texas politicians are paying close attention, too — to whether the trade, security and energy policies of President Felipe Calderón’s successor will affect illegal immigration or the state’s robust trade relationship with Mexico.

Three Texas customs districts, Laredo, El Paso and Houston, rank among Mexico’s top four trading partners. Collectively, they accounted for roughly $235 billion in trade between Texas and Mexico from January to September 2011, according to United States Census data analyzed by WorldCity, which tracks global trade patterns. The figures show an increase over 2010 despite the American recession and unprecedented violence in Mexico because of warring drug cartels.

Gerardo Schwebel, the executive vice president of International Bank of Commerce’s international division in Laredo, said the future of this booming trade relationship partly depends on what investors anticipate for the peso. Though Schwebel and other analysts speculate that Mexico will not see a major devaluation similar to what it experienced three presidential elections ago — when political, social and economic factors plunged the country into a financial crisis — he warned that its currency is still volatile.

“The reason behind that is, the uncertainty of Europe and the U.S. economy have added pressures to the Mexican peso,” Schwebel said. He added that the Mexican customer must constantly measure whether he can make payments in dollars, or whether he decides to wait and see if the peso gets weaker or stronger, depending on what he’s doing, importing or exporting.

Major reforms carried out in Mexico since 1994, the last year the Institutional Revolutionary Party, or PRI, won the presidency, have prevented the peso from plummeting as it did that year.

“Today it’s a completely different scenario in the sense that Mexico’s central bank has very deep national reserves,” said Roberto Coronado, an economist at the El Paso branch of the Federal Reserve Bank of Dallas. Coronado said that as of December, Mexico had $140 billion in foreign exchange reserves, plus a line of credit with the International Monetary Fund worth $72 billion.

“You’re talking about access to more than $200 billion under their disposal in case they have to react to something,” Coronado said.

That something could be the ongoing European debt crisis, a deepening recession in the United States — or even a shift in which a new political party takes the helm.

The PRI’s Enrique Peña Nieto, the former governor of the state of Mexico, is the presumed front-runner. The leftist Party of the Democratic Revolution, or PRD, will field Andrés Manuel López Obrador of Tabasco, who in 2006 lost the presidential election to Calderón. Calderon’s own National Action Party, or PAN, is choosing between Santiago Creel, a Mexican senator and former minister of the interior; Josefina Vázquez Mota, a former member of Mexico’s Chamber of Deputies; and Ernesto Cordero, the country’s former finance minister. Vázquez Mota, a former campaign manager for Calderón who is vying to be the country’s first female president, will most likely be named the party’s nominee in February.

Schwebel said it is important to Texas businesses that the winner maintain Calderón’s economic policies and a consistent plan to combat organized crime, which has contributed to more than 50,000 homicides in Mexico in under six years.

“The North American economy is 25 percent of the global economy, and we want that to grow,” he said. “The PRI and the PAN and even the PRD do not want to disrupt that as they try to set up their strategy in combating the wave of violence.”

Eric Olson, a senior associate at the Mexico Institute of the Woodrow Wilson International Center for Scholars in Washington, D.C., said that all of the candidates have vowed, in varying ways, to rein in the military’s role in the drug war and to instead rely on civilian police forces.

But it is unclear how quickly that can happen, Olson said. The relatively small ranks of the federal police force and the inherent weaknesses of the local and state police forces — and the government's limited ability to bolster them with honest officers — could delay the shift.

“I think there’s just bound to be a transition period, and the question is how soon that takes place,” Olson said. “My hunch is that it will be a slow process.”

Immigration rates, both legal and illegal, will depend on more than just violence in Mexico, experts said.

Demetrios Papademetriou, the president and co-founder of the Migration Policy Institute, based in Washington, D.C., said that if the economic policy of a new administration dramatically improved the quality of life for Mexicans — by taking on tough monopolies, for example, or providing energy incentives — more Mexicans might be inspired to stay.

“That will make the middle class in Mexico perhaps a bit better off; therefore, they spend less money on basic services,” he said. “Then, presumably, over four or five or seven years, the pressure for immigration from Mexico will subside further.”

He said that this is especially likely if Mexico’s economy continues to grow at a faster rate than the United States’, which he said is only “sputtering forward.”

Papademetriou does not think changes in American immigration policy will hinge significantly on who becomes the next Mexican president. He said the party that wins would most likely pursue the existing strategy of trying to protect the economic ties between the United States and Mexico from immigration trends.

“They will want to protect the interest of the Mexicans living in the United States,” he said. “Just like the PAN or any other party in Mexico, the PRI will be trying to make sure that they inoculate the broader economic relationship from being impacted too much by the migration situation.”

While Texas business and policy experts keep their eyes on Mexico’s presidential contest, some Mexico City election officials are looking back at Texas, working overtime to try to increase turnout among Mexican expatriates living in the United States.

This presidential election is only the second in Mexican history in which expatriates can cast a ballot from abroad. The Instituto Federal Electoral, or IFE, estimates that the population of native-born Mexicans living in the United States reached 11.4 million in 2010. Those who are at least 18 are eligible to vote in the country’s elections.

In 2006, the first year Mexico collected ballots from abroad, IFE received about 53,000 applications for placement on the foreign voters list and accepted about 41,000; 33,111 cast ballots.

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