- Brazil and Mexico eye new trade relationship amid friendshoring pressures and an uncertain Mercosur - 12 March, 2025
- Xi Jinping’s Visit Highlights Brazil’s Cautious Balancing Act - 7 March, 2025
- Brazil’s historic G-20 tax proposal could mark a turning point for the global taxation scenario - 13 November, 2024
New trade horizons for Mexico—Brazil relationship
As the new Mexican president, AMLO-successor Claudia Sheinbaum, took office on 1 October 2024, a litany of Latin American leaders made themselves present. Among them was Brazil’s Lula, who traveled to Mexico accompanied by a wide delegation of policymakers and influential figures from his government, including his Foreign Affairs Minister, Mauro Vieira, and soon-to-be Central Bank Chairman, Gabriel Galípolo. While media coverage largely focused on technical issues with Lula’s presidential plane, the Brazilian leader used the trip to engage in significant trade discussions and participate in the Brazil-Mexico Business Forum.
While both Lula and Sheinbaum predecessor Andrés Manuel López Obrador could be described as being of a similar political background, Mexican trade with Brazil operated under limited agreements, which covered a small set of products. The expansion of trade with Mexico has been sought by the Brazilian business class for a long time, and recent AMLO policies covering the reduction of import fees on certain commodities has allowed Brazilian agribusiness an entry into the Mexican market. This growing trade cooperation has been described as a win-win scenario, since it allowed for a reduction of inflation in Mexico and strengthened Brazilian exports.
Furthermore, the Mexican market provides a valuable shift in dynamics for Brazilian trade. Normally dominated by the export of commodities to the United States, Europe and Asia, Brazilian trade encounters in Mexico a rare market for its manufactured products. From Mexico’s point of view, negotiating with Brazil can offer a useful alternative to trade with the United States. Despite the recent surge in trade with the Americans, which in the last years made Mexico the no.1 commercial partner to the U.S., expanding trade agreements with Brazil can offer Mexico a way to reduce pressures from its now largest trade partner: by showing it can effectively deal with Brasilia, Mexico City can possibly avoid a message of overreliance on U.S. trade.
Global trade trends challenge Latin America as Brazil and Mexico seek to enjoy window of opportunity
Against this potential trade development between Brasilia and Mexico City stands the background of radical reorganization of trade trends in Latin America. Formerly the region’s promising trade bloc, the Mercosur has been recently undermined by leaders who at times seemed more interested in bilateral negotiations and individual orientation. With Brazil’s Jair Bolsonaro before and Argentina’s Javier Milei now, a faltering Mercosur does not seem to inspire confidence in its project as it did once before, despite the recent ingress of Bolivia and the massive trade deal signed with the European Union. The expectation of returning isolationist governments in the region casts a shadow over Mercosur’s long term reliability.
As Mercosur can be undermined by its own member states, stakeholders in the region and in Latin America as a whole may feel like their best option lies in bilateral agreements and direct trade negotiations with other partners. Large geopolitical macro movements can also cast a long shadow over the region. Amid renewed rounds of sanctions and friendshoring pressures, U.S. and Western trade as a whole have been wary of China. The proposition of decoupling from China can offer lucrative spaces in supply chains for many stakeholders in Asia and abroad, and characterizes itself as perhaps the most relevant trade development of the post-globalization period.
In this context, companies are scrambling to reorganize their supply chains due to sanctions and pressures for Washington. As a result, several countries have emerged as trade winners. Vietnam and India, for example, have been the newfound home of many high-profile U.S. companies, including Apple. Mexico, as aforementioned, has been championed as the receptor of many of these returning production chains.
While the effectiveness and success of these developments are still uncertain, this vector pulls Mexico towards the north, towards trade with the United States. The friendshoring trend could certainly benefit other stakeholders in Latin America, but it has not been the case so far, as many of the exiting production chains from China are linked to manufactured products. As the Mexico trade is pulled towards the north and towards Washington, engaging deeply in trade with Brazil and other southern partners can perhaps play a strategy of Mexico’s own friendshoring and trade security, spacing its bets and decreasing risks of overreliance on one partner.
Trump 2.0 and global trade
All of these high-profile global trade trends which impact Latin America can also be heavily influenced by the upcoming second Trump administration. After its confirmed victory over Democratic nominee Kamala Harris, Trump brings its own stamp of brass and unpredictable influence over trade. Even though the Democratic platform of containing China over the past few years under the scope of Bidenomics has continued many of Trump’s initial propositions, the Republican can possibly enhance and intensify strategies of pressuring China and other trade partners.
Offering a strategy mix of isolationist, tariff-oriented, and self-serving trade views, Trump’s platform might accelerate the decoupling strategy and seek the promotion of other trade partners. Under this new and unpredictable scenario, Brazil and Mexico might do well in seeking a derisking and more stable strategy of common trade.
Conclusion
In conclusion, as friendshoring offers Mexico a privileged trade position with the U.S. and as Mercosur falters under the often uninterested position of its own member states, trade trends in Latin America are going through a difficult and unstable period. Larger global trends cast a long shadow over the continent and the latest conversation on trade rapprochement between its two largest economies, Brazil and Mexico, can hopefully provide an autochthonous impulse to trade in the region.
Questions
1 – Should Mexico seek other trade partners in an effort to derisk its overreliance with trade with the U.S.?
2 – Could the Mexican market complement Brazil’s industrial sector and offer a lucrative space for the export of Brazilian manufactures?
3 – How will a second Trump administration impact trade in Latin America?
Suggested readings
Jéssica Sant’Anna (2024). Brazil seeks free trade agreement with Mexico. [online] valorinternational. Available at: https://valorinternational.globo.com/foreign-affairs/news/2024/09/27/brazil-seeks-free-trade-agreement-with-mexico.ghtml [Accessed 22 Feb. 2025].
Martinez, J. (2024). Lula Envisions Stronger Brazil-Mexico Trade Ties and Equitable Growth. [online] The Rio Times. Available at: https://www.riotimesonline.com/lula-envisions-stronger-brazil-mexico-trade-ties-and-equitable-growth/ [Accessed 22 Feb. 2025].
Abhishek Gupta. (2024). Mexico: A Hot Spot for ‘Shoring’. [online] Available at: https://www.msci.com/www/blog-posts/mexico-a-hot-spot-for-shoring-/04429642951
