Mexico has a proverb: “Too far from God, too close to the United States.” In reverse, Mexico’s policies directly affect the United States, especially California, which has a large immigrant population from Mexico and other Latin American countries.
On June 2nd, Claudia Sheinbaum was elected as the President of Mexico. While the news focused on Sheinbaum being the first female president in Mexico’s history and the country’s first Jewish president, the real importance lies in her policies. We not only have to wait for her inauguration on October 1st but also for the results of the U.S. presidential election on November 5th to observe how the United States, particularly California, will be impacted.
Considering possible scenarios, let’s discuss Sheinbaum’s economic policies. Sheinbaum is a member of the left-wing party Morena (National Regeneration Movement), the political apprentice of the outgoing President Andrés Manuel López Obrador. In the 2018 elections, Morena formed the “Together We Will Make History” alliance with other left-wing parties.
López Obrador, commonly known as AMLO, was elected president in 2018, advocating for increased government control over the economy, although his policies later moderated. However, according to David A. Gantz from the Baker Institute, AMLO disrupted Mexico’s already limited favorable investment environment.
He wrote, “López Obrador strengthened control over Mexico’s oil company and national electricity company, sacrificing public interests in the process. Private developers could have stabilized Mexico’s oil production and reduced reliance on polluted fuel power generation.”
“However, in my view, the biggest tragedy brought by the López Obrador government to Mexico is squandering a golden opportunity to encourage multinational companies to invest in Mexico, as these companies have decided to reduce reliance on China and shift business to Mexico instead of countries like Vietnam, India, or the United States.”
“Despite the unfavorable economic environment, foreign investments in Mexico continue. However, most American investments, along with increasing Chinese investments, are similar to traditional export businesses in border states, mainly engaged in low-skilled production such as toys and furniture.”
Previous Mexican government’s excessive intervention measures, including massive expenditures, led to the 1994 peso crisis, also known as the “Tequila Crisis.”
According to Investopedia, on December 20, 1994, the Bank of Mexico devalued the peso by 15%, raising interest rates to 25% to curb capital flight, threatening economic stability.
“Two days later, the Mexican government allowed the peso to float freely again, but instead of stabilizing, the peso suffered another blow, depreciating by nearly half in the following months.”
Mexico’s inflation rate reached 52% that year. In comparison, the United States had an inflation rate close to 20% in the past three years.
Despite receiving $50 billion in aid from the U.S., “Mexico went through severe economic recession and hyperinflation in the years following the crisis, remaining extremely impoverished throughout the rest of the 90s,” as reported by Investopedia.
The “Tequila Crisis” led to a significant increase in the number of people migrating from Mexico to the United States. In 2005, a study by the Pew Hispanic Center titled “Upsurge, Peak, and Decline: U.S. Immigration Trends 1992-2004” found that immigration numbers increased from 325,000 in 1993 to 450,000 in 1995 as the crisis deepened.
After a calm period in 1996-1997, immigration surged again in 1998-2000 to over half a million. It was only after the burst of the dot-com bubble in 2001 that immigration numbers began to decline. During this time, immigration from other Latin American regions, Asia, and Europe was lower and less fluctuating.
One of the major concerns is the U.S. presidential election. According to the Epoch Times, “President Joe Biden announced an executive order on June 4 that asylum applications at the southern border will be closed once the daily average reception exceeds 2,500 people…Signaling the latest move by the government to curb the immigration crisis, which many voters consider a key issue for the November election.”
Regardless of the consequences of President Biden’s new policies, the Trump administration’s stringent border closure and deportations of illegal immigrants are likely to intensify.
In terms of the home country, a study by the Pew Research Center in November 2023 titled “Understanding the Lives of Illegal Immigrants in the United States” found that there were 10.5 million illegal immigrants in the U.S. in 2021.
The report stated, “From 2017 to 2021, the number of illegal immigrants from Mexico decreased by 900,000, dropping to 4.1 million.”
Consequently, in 2021, 39% of illegal immigrants in the U.S. were from Mexico, while 61% were from other countries.
If former President Donald Trump returns to office and terminates illegal immigration, it would mean not only Mexican illegal immigrants staying in the country or being repatriated but also those from other nations. The unspecified number of people may end up staying in Mexico, forcing Sheinbaum to address this issue.
If her economic policies harm Mexico’s economy, this crisis may multiply due to Mexico’s “border crisis,” leaving all aspiring immigrants stuck south of the U.S. border.
In January this year, the Epoch Times published an article titled “California Offers Free Health Insurance for Illegal Immigrants: Costing Billions Annually.” According to recent estimates by California and federal legislators, taxpayers may have to spend an additional $3 billion to $6 billion annually with the implementation of the new law to care for the health of illegal immigrants.
In March 2023, a study by the Federation for American Immigration Reform found that U.S. taxpayers spend a staggering $150.7 billion annually on illegal immigrants. For California taxpayers, this expense amounts to $30.9 billion.
If Ms. Sheinbaum’s policies lead to an influx of more illegal immigrants to California, these costs will increase. However, if Trump is elected and fulfills his promise to halt illegal immigration or even deport illegal immigrants, these costs would likely decrease.
Just like in Mexico, elections in the United States also have consequences.