Mexico: Strategic Beneficiary Amid China's Economic Slowdown

#### Decline of Chinese Supremacy as Strategic Partner The world economy is at a turning point. China's slowdown, once considered the unstoppable engine of global growth, is generating significant repercussions worldwide. For many nations, especially developing economies, the decline in Chinese growth has brought with it a painful hangover. However, amid this grim panorama, Mexico emerges as one of the key beneficiaries of this shift in global economic dynamics. ##### Emerging Economies' Dependence on China During the last two decades, many developing economies, such as Venezuela, Pakistan, and Laos, bet heavily on economic relations with China. Investments and loans from Beijing seemed to offer a fast track to development, with infrastructure projects and an apparently insatiable market for raw material exports. However, China's economic slowdown has exposed the risks of excessive dependence. Countries that once saw China as an economic savior now face financial difficulties, debt crises, and structural problems that threaten to lead them to collapse. The fall in Chinese demand has negatively impacted their trading partners as [logistics operators](https://controlterrestre.com/glosario/operador-logistico/), many of whom now find themselves struggling to stay afloat. ##### Mexico: A Viable Alternative in the Era of [Nearshoring](https://controlterrestre.com/glosario/nearshoring/) Unlike emerging economies suffering from China's slowdown effects, Mexico has managed to position itself as a viable alternative for foreign investment and manufacturing production. With nearshoring as a growing trend, Mexico has become an attractive destination for companies seeking to diversify their supply chains and reduce their dependence on China. Geographic proximity to the United States, its main trading partner, and free trade treaties, such as USMCA, have been key factors in this process. Global companies are redirecting their investments toward Mexico, establishing production centers closer to final consumption markets. This not only strengthens the Mexican economy but also makes it less vulnerable to fluctuations in Chinese demand. ##### Innovation and Logistics: Keys to Mexican Success Nearshoring and [logistics 4.0](https://controlterrestre.com/glosario/logistica-4-0/) have driven significant transformation in Mexican logistics and infrastructure. To maximize this change, Mexico has had to innovate in its logistics sector, improving connectivity and efficiency in goods transport. Investment in data centers, transport infrastructure, and advanced technology has been crucial for maintaining the country's competitiveness on the global stage. Additionally, market diversification has allowed Mexico to remain resilient against global economic fluctuations. The Mexican economy, although not exempt from challenges, has proven adaptable and capable of taking advantage of opportunities arising in a constantly changing global economic environment. ##### Challenges for 2025-2026: China's Role in Mexico Despite the benefits Mexico has obtained amid China's slowdown, the 2025-2026 period appears as a complex challenge. Larry Rubin, president of the American Society of Mexico (ASM), has pointed out that the commercial and economic relationship between China and Mexico will be one of the central issues to resolve. According to Rubin, it might be necessary to include a clause limiting Chinese trade and investments in the country, to ensure the United States remains Mexico's main trading partner. Rubin warned that Chinese investments in Mexico generate concern in the United States, where they seek to maintain their dominant position in the region. Additionally, he suggested that the relationship between China and Mexico could be a determining factor in USMCA renegotiation, as it could "derail" trade between Mexico and the United States if not handled properly. The growing Chinese presence in Latin America, including Mexico, has been viewed with suspicion by Washington, which fears China will use its economic influence to displace the United States as the main trading partner in the region. In response, the United States is likely to seek to limit Chinese commercial actions both in its territory and in Mexico, regardless of who wins the 2024 US presidential elections. ##### Mexico-United States Relationship: China, the Third Party in Discord The relationship between Mexico and the United States has been in constant tension, and China's presence adds a new layer of complexity. According to Lila Abed, director of the Mexico Institute at the Wilson Center in Washington D.C., judicial reform and energy policies of President Andrés Manuel López Obrador (AMLO) are causing alarm in Washington due to the risk they represent for US investments in Mexico. Additionally, the elimination of autonomous agencies also generates concern. However, the main problem could be Mexico's lack of clarity about its relationship with China. Abed warns that the relationship between Mexico and the United States will continue, regardless of who wins the 2024 US presidential elections, but the tone of that relationship could change. While Kamala Harris adopts a more conciliatory stance, Donald Trump could intensify tensions, particularly on trade and migration issues. A key challenge will be how Mexico manages its relationship with China. If Mexico doesn't establish clear limits in this relationship, it could generate distrust in Washington. Both Democrats and Republicans agree on the need to stop China's expansion and influence, especially in Mexico. The lack of clarity in the Mexico-China relationship could further complicate USMCA negotiations, affecting crucial areas like trade, migration, and security. ##### Trade and Nearshoring: Strengthening the Mexico-United States Relationship Nearshoring growth has strengthened the commercial relationship between Mexico and the United States. After the COVID-19 pandemic, the trend to relocate production closer to consumption markets has benefited North America, particularly Mexico. USMCA has provided a regulatory framework that has facilitated deeper integration in the region, providing certainty and stability to commercial relations. Lila Abed highlights that the next USMCA review will not be a complete renegotiation, but an opportunity to improve the existing agreement. However, China's influence will be a crucial issue in these discussions, as the United States seeks to limit Chinese presence in the region. ##### Security and Migration: Key Issues in Bilateral Relations Regarding security, the United States is focused on stopping illicit drug trafficking, particularly fentanyl, which has caused a public health crisis in the country. Mexico, for its part, must ensure that chemical precursors, many of which come from China, do not reach its territory. The migration issue will also continue to be central in negotiations between both countries. Lila Abed suggests that the solution involves addressing the root causes of migration, as insecurity in Mexico affects both the economy and investors' perception of the security of their operations in the country. ###### Communication and Cooperation, Keys to the Future The relationship between Mexico and the United States is complex and multifaceted. Although both countries may have divergent interests, cooperation and communication are essential to resolve any conflict. Mexico must be clear in its relationship with China to maintain US confidence and ensure that issues like trade, migration, and security are handled effectively. As US elections approach, the future of the relationship between both countries will depend largely on how these challenges are handled. However, regardless of leadership changes, the relationship between Mexico and the United States is fundamental and will continue to be a cornerstone in the region's geopolitics.