Mexico – the new president seems taken with Denmark

By: Niels Husted Dall-Hansen, senior analyst at EKF

The leftist president, Andrés Manuel López Obrador, has been in power in Mexico for just 10 months, but his popularity in the Latin American country is sky-high, and he is regarded as the country's most powerful president in a generation.

The fact that the new president seems taken with Denmark and the other Nordics holds promising potentials for Danish exporters. Obrador's pledges to Mexicans include reforms within health and welfare, for which the president has drawn much inspiration from our part of the world.

In particular, Obrador has focused on Scandinavian benefits such as free healthcare, a minimum wage and a strong educational system. He is also committed to tackling the widespread corruption in Mexico and has noticed that the Scandinavian countries practise openness and are among the least corrupt countries in the world.

Demand for Danish technology

With this in mind, expectations were high when a Danish trade delegation, which focused on energy and sustainable technology, recently visited Mexico. Both the Danish trade delegation and the Danish embassy realised the magnitude of the opportunities.

Mexico is committed to heavy investment in wind and solar energy, an area where Danish companies rank among the world leaders. The supply of clean drinking water and management of waste is also a top priority, and this too is an area where Danish companies can play a prominent role.

However, the extent to which the Danish trade visit to Mexico will result in actual orders is somewhat uncertain

In a couple of weeks, yet another Danish trade delegation is due to arrive in Mexico – this time with a focus on agriculture and food production. Mexico has many large-scale farms, which drew inspiration from the likes of Danish Crown in establishing their own slaughterhouses and food production facilities. There is also a demand for Danish technology.

Slammed the door

The mutual interest between Denmark and Mexico is also underlined by the fact that several Danish companies, including Vestas and Lego, have been manufacturing in Mexico for a number of years in order to be close to the North American and Latin American markets.

However, the extent to which the Danish trade visit to Mexico will result in actual orders is somewhat uncertain. The country's economy is affected by declining confidence among investors, uncertainty concerning trade relations with the US and the fragile financial standing of Mexico's largest state-owned enterprise, the oil company Pemex. This caused the Mexican government to drastically lower its growth forecast for this year and the next, from 4 to 1 per cent.

Back in July, alarm bells really went off when the highly-regarded minister of finance slammed the door and resigned with comments about "extreme" economic policies that were not "evidence-based".

To the relief of investors, his replacement will be continuing the same tight fiscal policy. However, experts are in doubt whether the initiatives to put Pemex on the right track are adequate or whether the money is simply being flushed away.

Two-edged sword

However, the economic prospects for this large Latin American country depend more than anything on the developments in trade relations with the US and on the performance of other Latin American countries. Mexico's two major trade partners, Argentina and Brazil, are also suffering from the decline in world trade due to the US-China trade war.

And this trade war is a two-edged sword for Mexico. On the one hand, the country is impacted by the generally slowed global growth. On the other, Mexico is increasingly taking on the role of the best alternative to "Made in China" for multinationals seeking lower wages, shorter transport distances to North America and a relatively stable country with a good grip on free trade agreements and protection of investments. In particular, the northern part of the country, near the city of Monterrey, is considered an attractive location by foreign companies.

So, it seems that President Obrador has his hands full. However, for the time being, he still enjoys the support of the majority of the people and of congress, and this gives him a unique opportunity to reinvent Mexico with Nordic inspiration.

Jernbanespor

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