The Mexican presidential race was probably over the minute it began. consistently put left-wing populist Andrés Manuel López Obrador at least 10 points ahead of the center-right National Action Party’s Ricardo Anaya. Ahead of the national vote on July 1, many Mexicans hope radical change will punish a corrupt political elite, but others fear the populist wave will spark more problems than it can solve.

López Obrador, often known as AMLO, former mayor of Mexico City and leader of the National Regeneration Movement (MORENA), has already run for president twice, in 2006 and 2012. In both cases his campaign started on a strong note, but he lost ground as his remarks became more radical, revealing an inability to take criticism. In both cases, he questioned the legitimacy of the elections immediately after his loss. This time around, he is back at the podium, raging against entrenched political graft while heralding the arrival of the country’s “.”

Mexico’s highly corrupt government has been unable to deny his accusations, laying bare a need for major change. However, López Obrador lacks the policies to underpin his campaign slogans. He has voiced his ambition to reverse structural reforms that were recently implemented to boost Mexican economy. His rhetoric has echoes of populist leaders in Europe and the United States, exploiting social inequality, driving polarization, promoting nationalism and making policy proposals based on unverified economic arguments.

In a context of rising poverty, insecurity and international tensions, populist ideas fall on fertile ground in today’s Mexico. Trust in political parties, government institutions and democracy itself has nosedived, and people are demanding political action that past administrations failed to deliver. This appetite for change is highlighted by the 2018 (BTI) that placed Mexico at 48 of 129 countries, scoring 6.3 out of a maximum 10 points, highlighting the country’s failure to steer toward democracy and a market economy.

The BTI indicator designates Mexico as a defective democracy, a fact which partly explains the populist surge that will likely define the presidential vote. In terms of political and social integration, the index graded Mexico’s “” at 5 out of 10 points, reflecting waning commitment to democratic values as governments have failed to fight widespread insecurity, corruption and impunity. According to the report, this figure could be set to sink further: “Inefficacies in both the executive and legislative powers have affected the public’s views of the political parties, a trend that risks reducing the prevailing opinion of democracy.” At the same time, the political establishment has not improved wealth distribution or economic development, another motor behind popular disaffection.

In a society where hope is in short supply, the presidential race is viewed by many as a chance to express discontent. During the first presidential debate on April 22, there were few constructive proposals, as the candidates focused on attacking each other. Attention focused on López Obrador, who was accused of repeated inconsistencies and provided no concrete response to serious evidence indicating corruption in his office. The evidence did not seem to harm the politician’s image, whose strength is mainly based on pointing out the government’s weaknesses, thus encouraging voters to express their distrust.

A large chunk of the electorate fails to acknowledge that López Obrador’s plan for the nation is unrealistic and ambiguous. Moreover, some proposals defy logic. For example, he has suggested significant investment in building oil refineries while temporarily freezing private investment in oil exploration and production. Considering Mexico’s reliance on oil exports, analysts have forecast from delaying exploration. Meanwhile, it may be unfeasible to pump enough resources into new refineries that are able to compete with those on the US Gulf Coast.

López Obrador’s proposals have reached peak absurdity with the announcement formalizing his plans to the presidential plane to Donald Trump, a populist bid for a decrease in political expenditure as well as a punishment for high-maintenance politicians.

The 2018 presidential elections will be historic for Mexico, not least because two independent candidates reached the final round for the first time. Nor has the population been polarized to this extent. Whatever the final outcome, the results will resonate internationally amid the proliferation of nationalistic leaders adopting inward-looking agendas. Under these circumstances, López Obrador’s call for nationalistic policies and a closed economic model will surely drive away foreign investment and hurt multilateral collaboration with other countries.

Meanwhile, relations with the United States are already fragile, following incriminating remarks and the militarization of the border. Clashes over migration and security, as well as a volatile renegotiation of the North American Free Trade Agreement. Adding another radical populist leader to the mix will surely deepen this schism. Yet Mexico seems poised to make the same mistake that the US did a year earlier when it elected Donald Trump, which will create shockwaves well beyond its own borders.

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At the beginning of January 2017, Ford canceled plans to build a $1.6-billion car factory in San Luis Potosí, following criticisms by then President-elect Donald Trump. The project was expected to generate 2,800 jobs. Whereas it took some 10 years to negotiate and enforce a mechanism to strengthen commercial bonds between Canada, the United States and Mexico, today, after 23 years in existence, the North American Free Trade Agreement (NAFTA) may be overrun in just a couple of months.

After US President Donald Trump presented a series of accusations against the Mexican government taking advantage of the treaty clauses, his counterpart, President Enrique Peña Nieto, announced at the beginning of February that no asymmetric negotiations would be accepted. In parallel, the US government started driving investment out of Mexico through different threat mechanisms that include the announcement of potential tax increases of up to 35% on Mexican imports.

Given the current tensions between both governments in terms of security and trade, collaboration within the North American region may soon suffer robust adjustments. Even though potential modifications to improve NAFTA have been discussed over the past few years, the demands currently presented by the US may lead to an impasse.

New Trade Opportunities

Although any reconfiguration of NAFTA is unlikely to take place at least before the end of the year, the Mexican government should be prepared to handle the potential negative effects of this change on its economy. This will be no small feat because at the present time the country is a low-skilled, export-oriented economy tied to the North American market as the in its latest Mexico report.

Over the past two decades, increased from $290 billion in 1993 to more than $1.1 trillion in 2016. Several industries will most likely be affected by a reconfiguration of the current agreement. That includes automobile manufacturing, agriculture, food and beverages, as well as the production of other goods such as electronics and house equipment.

However, in a scenario that sees the suspension of NAFTA, the US is also not likely to be benefited in the long term. The lack of access to cheaper labor and products from the Mexican market may ultimately increase internal costs in the US, thus increasing the price of its products against other competitors such as China.

For this reason, any modifications in the treaty could probably become temporary or limited to certain areas.��In spite of all the difficulties that the current reconfiguration of US-Mexican relations could bring along in the worst-case scenario, new doors are opening too, providing relevant opportunities for Mexico to start diversifying its economy and increase trade with countries other than the US.

In fact, as the , even before relations with its northern neighbor deteriorated, the Mexican government has actively participated in international trade negotiations to reduce its dependence on the US. However, the SGI also notes that the Mexican government has had only limited success in this respect.

Given the uncertain future of a favorable agreement between Mexico and the US in terms of trade and labor, the intensification of commerce with South America, Europe and Asia will now most likely become an even greater priority for Mexican policy-makers.

During the first months of 2017, Mexican government started a third round of negotiations to renew its agreement with the European Union and manifested its interest in establishing a new deal with the United Kingdom. Additionally, negotiations related to the Trans-Pacific Partnership (TPP, recently abandoned by the US) seek to strengthen the commercial bonds with Peru, Chile and Colombia. Attention has also been placed in maintaining close communication to exploit mutual interests with Canada and collaborate with Argentina as well as Brazil for obtaining alternative sources of products such as grains.

In the case of Asia, Mexico could seek to increase the flow of goods and services, as well as foreign direct investment with countries such as China, Japan and South Korea. China is currently placed as the second major business partner of Mexico and potential alliances could take place, for example, in the automobile industry.

Reconfiguring the Mexican Market

However, intensification of trade with other regions will not be a simple task. It is not just because of its geographic location that Mexico is such a close trade partner of the US but also because of the complementarity of both economies. For instance, Mexico sends 80% of its manufactured goods across its Northern border which are made out of goods that contain up to 40% of goods manufactured in the US.

In order to push for changes, the Mexican government will have to carefully evaluate the strategic redistribution of products between the different regions to avoid potential disruption of production chains. A drastic reconfiguration of the Mexican market could probably strengthen the country’s economy, but it would most likely represent a complicated and long process in case NAFTA negotiations reach an impasse.

Although in the short term the Mexican economy may suffer temporary contractions, following these strategies would ultimately support the country to expand and become more independent through the establishment of stronger ties with other nations. It seems that there are alternative paths that may also lead to making the southern part of North America great.

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When Republican presidential candidate Donald Trump visited Mexico on September 1, 2016, local protesters made it clear: His offensive, untrue and divisive rhetoric about the Mexican people was not welcome. Amid that backdrop of rejection on both sides it’s easy to forget that the United States and Mexico have been tied together by economic, cultural, political and geographical bonds for a long time.

Both countries share a where hundreds of thousands of people cross both ways legally each day, enabling up to $1.4 billion of annual two-way trade and more than 34 million tourists a year that generate a significant economic spillover on both sides.

Both countries share similar challenges along their sprawling border. Despite close collaboration between both governments, estimated on border controls from the US side and thousands of people dying on their attempts to cross the border, , Central and Latin America continue to come across the border without proper papers. It is nearly impossible for authorities to patrol such an expansive border. Far worse than unregulated crossings, powerful drug cartels in Mexico tied to the demand for drugs in the US have led to continuous violence in certain border regions.

It won’t be easy to solve these problems, but certainly collaboration between the US and Mexico would be necessary to improve security and migration mechanisms. An example of such collaboration, the Merida Initiative, has since 2008 promoted support between both governments to tackle the drug cartels and secure the border. However, the right-wing polarization promoted chiefly by Donald Trump threatens to halt cooperation within the region.

divisive foreign policy

Trump launched his campaign in June 2015 accusing the Mexican government of intentionally sending criminals across the border, and accusing Mexican immigrants of crimes they are more likely to be fleeing than committing: “When Mexico sends its people, they’re not sending their best. They’re sending people that have lots of problems. They’re bringing drugs. They’re bringing crime. They’re rapists …”— followed by the promise of building a great wall around the southern border of the US.

One year later, during his first as a presidential candidate, Trump expressed his disapproval of the North American Free Trade Agreement (NAFTA) and advanced his nationalistic world view of adopting closed-door politics to better resolve internal affairs. Founded on the phrase “America First!” the candidate sells an isolationist foreign policy based on nationalistic and hyperbolic claims.

Even though the three signatory countries—Canada, the US and Mexico—have expressed the need to review current NAFTA conditions, it is clear that the treaty has generated relevant benefits for its members. Over its first two decades, and regional commerce has increased from $290 billion in 1993 to more than $1.1 trillion in 2016. In spite of controversial discussions regarding the flux of money and employment, it is clear that changes in the agreement would have sharp effects on the regional economies.

Besides serious threats posed to global trade, immigrants seem to be the most affected by the Trump tornado. The United States is a nation built on immigration. It is being particularly divided by Trump’s campaign, which seemingly purposefully generates clashes among different groups of the population—as would of course his election for president. Strong right-wing nationalism tends to be associated with rejection of people from different races and origins. In the case of North American relations, this scenario could potentially affect more than (27.6% of the overall foreign population) thus generating further tensions with its neighbor country.

Whereas anti-discrimination laws in the US are generally robust to protect diversity, the consolidation of an environment prone to right-wing nationalism and xenophobia is exacerbating division between the Democratic and Republican parties, as well as within��families and neighborhoods.

Political gridlock

Since 2014, findings from the indicate that Republicans and Democrats diverge more than ever before in American history. As a result, antipathy between the left and the right wing has risen, as well as political confrontation between opposite ideologically oriented citizens and politicians.

The bipartisan polarization in the US has in the past years already led to severe political gridlock in Congress, which has prevented necessary reforms in many policy areas, as the latest edition of the (SGI) project : “Governance suffers in the United States … because of the gridlock that results from polarized parties and divided government … the main manifestation of this gridlock is a low level of ability to implement government goals.”

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This is one of the main reasons why the US is doing so badly in . In terms of the quality of economic, social and environmental policies, the US ranks only 26^th of all 41 OECD and European Union nations. The country has been slow to recover economically after recent crises, unemployment among minorities is high, social policies lack efficiency, and inequalities in education and income are increasing.

The high levels of polarization that are present in the America��today endanger the future growth of North America as a region and promote a context in which Donald Trump’s divisive agenda has gained wide support. Building walls on the border is certainly not a feasible solution for tackling these and other problems currently affecting the region.

Promoting stronger collaboration and empathy between countries, political parties and people seems to be a better option. The real barrier to achieving this are not just the results of the US presidential election, but whether Trump’s attitudes and policy prescriptions maintain strong support in the US long after November 8.

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Juan Armando Hinojosa Cantú, a Mexican construction contractor and business tycoon, is famous in Mexico for his alleged role in building a $7-million mansion for the first lady—best known as the president’s “White House.” But the Panama Papers have quickly made him much more famous, for a much larger sum of money. The Panama Papers, the largest cybersecurity breach in history, uncovered that after the mansion scandal, Hinojosa moved around $100 million to offshore accounts with the help from Mossack Fonseca, the Panamanian-based law firm from which the documents were leaked by an anonymous whistleblower.

As in many other countries, the Panama Papers leak has highlighted or exposed weak tax systems and government accountability in Mexico. The terabyte of information from Mossack Fonseca included 11.5 million documents with diverse mentions of offshore firms and accounts used to hide tax evasion and illicit transactions.

It took 190 journalists from 65 countries to sort through the information. In Mexico, two smaller outlets— and —partnered with the (ICIJ) to go through the data and build cases such as Hinojosa’s offshoring habits. But whereas in countries like Iceland the leak led to the immediate impeachment of the prime minister, in Mexico the legal case is still being examined, thus far with no consequences.

As recognized by Christine Lagarde, the managing director of the International Monetary Fund (IMF), the Panama Papers show that toward the rich. By allowing vast economic transactions to proceed unnoticed and remain hidden, individuals with large amounts of money are able to increase their fortunes without providing a fair contribution to their governments. This leads to the formation of economic elites and perpetuation of income inequality. Funds that should return to states to provide benefits and services to the population are sent abroad to be kept in unmonitored personal accounts.

Magnates and Multimillionaires

Mexico is yet another example of how inadequate international financial regulation combined with weak local laws can perpetuate income inequality. Tax regulation reforms in Mexico have been recently : Among other things, a new tax regime for small taxpayers was introduced that includes reduced personal, social security, VAT and exercise taxes in firms’ first 10 years of operation. The aim is to induce informal enterprises to regularize their operations and start paying taxes.

However, a similar emphasis should be placed on multimillionaire companies. While entrepreneurs and middle-class businessmen struggle through the local bureaucratic process, adoption of digital tools and high tax rates, Mexican magnates have historically been able to find diverse mechanisms for tax evasion such as taking their fortunes abroad through shell companies.

There is still much sorting out to do in Mexico, and so far no legal actions have taken place in spite of the accusations against powerful businessmen, drug-related transactions and even current president Enrique Peña Nieto.

The Bertelsmann Stiftung’s (SGI) project ranks Mexico last in its assessment of tax systems of countries in the Organization of Economic Co-operation and Development (OECD) and the European Union (EU). This reflects that tax collection in Mexico is fairly complex—it takes a lot of time to pay and prepare taxes, generating additional costs that may be a burden for small organizations—and has seen little advancement over the past 50 years. , in Mexico “equitable tax collection is not really on the agenda due to the low level of direct tax collection; reform fatigue is thus likely to cement social inequality in the country.”

The Panama Papers revelations indicate that the Mexican federal government should be more watchful of multimillionaires and their companies, rather than focusing merely on targeting stricter fiscal auditing for small organizations. Such misguided targeting restricts legitimate and upstart entrepreneurship in Mexico, placing burden unequally on smaller businesses that have less capacity to keep up with compliance, and allowing big players to evade their fair tax contributions. Further attention should be paid on transparency to track large multinationals and fortunes, to strengthen federal resource collection and ensure a fair environment for lowering levels of inequality.

Although inefficiencies in the Mexican tax system are widely known, major regulatory improvements as an effect of the Panama Papers leak seem quite unlikely due to a persistent culture of corruption. On , Mexico is among the least efficient of all OECD members. Court cases are prone to be highly influenced by wealth and power, as is every part of the government and justice system.

No Consequences

Currently the Mexican Tax Ministry is conducting an investigation into 29 individuals and four organizations implicated in the leak. However, there is yet no certainty of the situation and further analysis must be performed to punish those who are found guilty of illegal tax evasion. However, considering weak national government systems for tax collection and enforcement coupled with high levels of corruption, it is likely that those hiding resources in offshore accounts will not suffer the consequences.

There is still much sorting out to do in Mexico, and so far no legal actions have taken place in spite of the accusations against powerful businessmen, drug-related transactions and even current president Enrique Peña Nieto. Some of the 289 Mexican names that have appeared in the Panama Papers include (President of TV Azteca), (Executive Vice President of Televisa), ��(both drug dealers) and government officers such as (President of PEMEX national oil company) or (Department of Treasury). The great labor of international investigative journalists processing this information has pointed out clear tracks to follow. However, as John Doe—the anonymous Panama Papers leaker—, “It will take years, possibly decades, for the full extent of the firm’s sordid acts to become known.”

The case of Mexico is just one example of a worldwide story of corruption and a few wealthy individuals propping up inequality. Both national and international tax systems as well as executive accountability have been publicly challenged through exposing some major gaps to the media.

The world’s biggest data leak demonstrates a precedent that may potentially drive adjustments in worldwide financial systems. Until then, the example of Mexico and the Panama Papers will either see whistleblowers and investigative journalists either spur change in attitudes and policy, or the prevailing power structure will remain too strong and citizens’ expectations of government too weak to affect lasting change.

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