En tu idioma / In your own language

Eduardo del Buey
Foto: Cristina Rodríguez
La Jornada Maya

Miércoles 5 de octubre, 2016

"I will build a wall. It will be a beautiful wall. And Mexico will pay for it”.

This has been Donald Trump’s mantra since he announced his candidacy in 2015. And he continues to espouse it despite much criticism at home and abroad.

On April 5th of this year, [i]The Guardian[/i] reported that “The key to the wall’s financing —Trump wrote in a two-page memo to the Washington Post— is threatening to halt money transfers from Mexican immigrants in the US to family back home. These remittances amount to nearly $25bn each year, roughly 2 percent of the Mexican gross domestic product, according to the World Bank. Cutting off these money transfers could doom the Mexican economy to recession and severely damage diplomatic relations.

“It’s an easy decision for Mexico,” Trump wrote in the memo, written on campaign stationary emblazoned with his Make America Great Again! motto. “Make a one-time payment of $5-$10bn to ensure that $24bn continues to flow into their country year after year.”

Trump’s memo to [i]The Washington Post[/i] cites additional examples of diplomatic arm-twisting, including an increase in tariffs on Mexican imports, putting a halt to legal immigration and increasing fees for visas and green cards. “Immigration is a privilege, not a right,” Trump wrote. “Mexico is totally dependent on the United States as a release valve for its own poverty.”

I am not sure (that) a physical wall will be built even if Trump wins on November 8th. People can climb walls, dig tunnels under them, and bore (through) them.

But there are ways Trump can “tax” Mexico to cover the costs of controlling the border.

On September 28th, I was a guest on Manuel Triay’s television program “Con Todo Respeto” along with my friend and fellow [i]La Jornada Maya[/i] columnist Pablo Cicero Alonso. Triay noted that (the) two-way trade between Mexico and the United States has reached the level of one million dollars per minute thanks to NAFTA.

Should Trump decide to abrogate or radically renegotiate NAFTA, the immediate effects on Mexico could be devastating. I noted that the position of the Mexican peso relative to the US dollar seems to have become the standard by which financial markets gauge the strength of Trump’s presidential campaign. Pablo Cicero reported that prior to the debate the peso had risen to 20.2 to the US dollar. This was due in large part to Clinton’s health issues as well as Trump’s increase in the polls. During the debate, when it became apparent that Trump was losing, the peso strengthened to 19.3 to the US dollar.

Such is the sensitivity of the Mexican currency that it responds within literally minutes to developments in the US presidential campaign.

Triay opined that a potential Trump wall need not be bricks and mortar – it could well be a virtual wall comprised of technological characteristics to monitor and tax the flow of people and goods across the border accompanied by economic and financial components that could well see Mexico “pay for the wall”.

Trump has noted that Mexico assesses a 16 percent value added tax (IVA by its Spanish initials) on all products sold in Mexico, including products imported from the United States. The US has no such tax, giving Mexico a 16 percent benefit.

Should a Trump administration place a 35 percent tax on all Mexican imports to the United States, this would effectively be a tax that would have Mexico “pay for the wall” and throw the Mexican economy into a tailspin, since 80 percent of its exports go to the United States. In addition, The United States could use modern technology to reduce the flow of drugs and illegal immigrants into the US (although probably never fully prevent them) and the reverse flow of funds and weapons into Mexico (although probably never eliminate it) in order to meet his objectives.

Since Trump has vowed to renegotiate NAFTA, the idea of taxing Mexican exports to the United States would undoubtedly be a major component of the renegotiation.

The perspective from inside the White House is very different from that of the campaign trail, as Trump will soon find out if he wins on November 8th. US industry, that benefits from cross-border value chains, will undoubtedly bring strong pressure to bear on a potential Trump White House to tone down the rhetoric and not mess with business flows that clearly benefit the United States as well as Mexico. Congress would also have a major role to play.

The main questions remain.

Will Trump win and, if so, will Trump listen to the experts.

That is the great unknown.

In the meanwhile, the Mexican peso may well continue to rise and fall in value, according to the day to day evolution of the US presidential campaign.