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Revolution, Oil, NAFTA and Security Cooperation: A History of U.S.-Mexico Relations in

the Twentieth and Twenty-first Centuries

Carlos Alberto Contreras, Ph.D.

Professor of History, Grossmont College

San Diego, California

[email protected]

Table of Contents:

1) Introduction

2) Setting the Stage: Mexico-U.S. Relations during the Porfiriato, 1876-1910

3) The Revolution Unmoors the U.S.-Mexico Relationship: Mexico-U.S. Relations during

the Revolution, 1910-1920

4) Reconstructing Mexico and Rising Nationalism: Mexico-U.S. Relations after the

Revolution, 1920-1940

5) Wartime Cooperation, Post-War Stability and the Cold War: Mexico-U.S. Relations

from 1940 to the 1980s

6) Mexico “Restructures” its Revolution in the 1980s and 1990s, and the end of the Cold

War: Mexico-U.S. Relations from 1982 through NAFTA and the 1990s

7) Free Trade, Economic Integration, Migration, Narcotics and Security: the

Transformation of the Mexico-U.S. Relationship in the 21st Century

8) Conclusion

Introduction

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The Mexico-United States relationship is one of the most important and dynamic bilateral

relationships in the world and is becoming even more so as the twenty-first century progresses.

It is certainly the most important and dynamic relationship between a developed country and a

developing country. Sharing a 2,000-mile border, the economies of both countries have become

truly interdependent by the twenty first century, with the economic health and vitality of one

country deeply affecting the other. Bilateral trade between the U.S. and Mexico has expanded

six-fold since the passage of the North American Free Trade Agreement (NAFTA) in 1994 and

is now valued at over $531 billion per year- that’s almost one and a half billion dollars worth of

goods and services exchanged between the two countries per day! Mexico is currently the

United States’ second largest export market after Canada, and is the United States’ third largest

trading partner behind only Canada and China. This economic interdependence also goes well

beyond the traditional border states, with almost half of all U.S. states now listing Mexico as

their number one or number two destination for exports. Mexico is also one of the largest

recipients of foreign investment for U.S. corporations, with over $107 billion in stock foreign

direct investment by U.S. firms by 2014. Mexico’s foreign investment in the U.S. is also

significant, with over $17.7 billion in stock foreign direct investment by 2014. An examination

of this enormously important bilateral relationship also reveals deeply integrated production

chains in such key industries as automobile manufacturing and aerospace production. Recent

estimates indicate that some 40% of Mexico’s manufacturing exports to the United States have

U.S.-made components. This book will discuss the importance of this intense and complex

relationship between Mexico and the United States from the beginning of the twentieth century

to the 21st century while focusing on contemporary issues such as economic integration,

migration, energy, drugs, security, and the border region. It will also trace the historic roots of

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this rich, complex, and interdependent Mexico-U.S. relationship, focusing on areas of

cooperation as well as conflict.

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Setting the Stage: Mexico-U.S. Relations during the Porfiriato, 1876-1910

To fully understand the complexities of the U.S.-Mexico relationship during Mexico’s

Revolution (1910-1917) and in the post-Revolutionary era, we need to have a sense of the deep

economic integration between Mexico and the United States at the end of the 19th century as well

as why Mexico exploded in such a cataclysmic event. In this section, I will briefly lay out the

general contours of Mexico’s economic growth at the end of the 19th century as well as its, by

then, relatively stable relationship with the United States. I will then briefly discuss Mexico’s

cataclysmic revolution and how that shook loose that once-stable U.S.-Mexico relationship,

ushering in a decade of conflictive and often hostile bilateral relations during Mexico’s

Revolution, as well as two more decades of a tense bilateral relationship in the first half of the

twentieth century.

After almost half a century of post-Independence political instability and economic ups

and downs in Mexico, a period in which it lost half of its territory to an expanding United States

but effectively defended its sovereignty against invasion by France, President Benito Juárez and

his supporters established durable democratic institutions between 1858 and 1872. During the

last third of the nineteenth century through 1910, General Porfirio Diaz came to dominate

Mexican politics, ushering in an era of enforced peace. From 1876 to 1910, Diaz and his

advisors, known as the “Científicos” for their belief in a “scientific” approach to public policy,

ruled uninterruptedly, presiding over almost forty years of export-oriented growth. Imposing

political stability with an iron fist, General Diaz invited foreign investors, particularly British and

American investors, to build Mexico's sorely needed infrastructure as well as to invest in

Mexico's abundant natural resources. He then proceeded to open Mexico to the world. Over the

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course of almost four decades, his liberal economic policies facilitated the expansion of large

landholdings, created a new class of industrialists and bankers, and attracted foreign investors to

Mexico, particularly American investors, to such an extent that they came to own over one

quarter of Mexico’s arable land and came to dominate some of Mexico's key industries like

petroleum and mining, with copper being the most important one. Fueled by agricultural and

mineral exports, the Mexican economy grew at unprecedented rates. By 1910, the Mexican

economy had been growing at rates of 6-8% every year and the U.S.-Mexico economic

relationship had been completely transformed from one marked by conflict at mid-century to

bilateral cooperation and deep economic integration.

During this time period, Mexico and the United States established a relatively stable

bilateral relationship and the two economies became more integrated than ever before, engaging

in vigorous bilateral economic activity. U.S. investments in Mexico grew tremendously during

this time period, with Mexico becoming a major source of investment for U.S. capital. By 1911

when the first rumblings of the Revolution grew stronger and Diaz was forced to flee the

country, U.S. investors had almost one billion dollars invested in Mexico (well over $25 billion

in today’s dollars), controlling about 38% of foreign investment in Mexico. 41.3% of U.S.

investments in Mexico were in the country’s newly built and extensive railroad grid, which U.S.

and British firms had built to connect Mexico’s substantial copper mines and haciendas (large

landed estates) to the U.S. market as well as to its newly built port facilities along Mexico’s

coasts. 36.6% of American investments in Mexico were in mining and metallurgy, both sectors

modernized with American capital and technology. Indeed, U.S. investors came to own and

operate about 75% of Mexico’s copper, an enormously important resource that the world

demanded in ever larger amounts for its growing electricity, telegraph and telephone grids.

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Lastly, about 22% of U.S. investments in Mexico were in land and other real estate at a time

when foreigners owned almost one quarter of Mexico’s arable land. U.S. companies also came

to dominate Mexico's extensive and growing oil industry, with British owned companies coming

close behind. Lastly, U.S. investors had a substantial interest in Mexico’s public debt, banking,

insurance and securities.

As the Mexican economy grew, a booming Mexico also became a major trading partner

to the United States, a robust economic relationship that continues to this day. Total trade

between Mexico and the U.S. increased almost tenfold, from $50 million in 1876 to $488 million

in 1910.

But despite Mexico’s very impressive economic growth, the distribution of this growth

became so unequal that, combined with Diaz’ authoritarian political practices, led to the

explosion of the Mexican Revolution in 1910, a cataclysmic event that brought this model of

economic development to a screeching halt and ushered in almost a decade of unmitigated

violence. And because U.S. investors had come to have such an outsized role in the Mexican

economy and to dominate key sectors of it, the breakdown of the Porfirian regime and the

Revolution itself would become a particular source of tension between the two countries as the

violence that engulfed the nation threatened those substantial interests.

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The Revolution Unmoors the U.S.-Mexico Relationship: Mexico-U.S. Relations during the

Revolution, 1910-1920

The Mexican Revolution exploded in 1910, beginning almost 10 years of unmitigated violence

and an especially tense and bullet riddled decade in the Mexico-U.S. relationship. Because the

Mexican and U.S. economies had become so tightly linked economically and U.S. investments in

Mexico had become so vast, this period in Mexico-U.S. relations was the most tumultuous and

conflictive in their twentieth and twenty-first century bilateral history. The U.S. intervened in

Mexico to facilitate a coup, ostensibly to protect Americans and their property in Mexico, as well

as launching two direct military interventions during this decade. Indeed a leading scholar of the

Mexican revolution, Berta Ulluoa, has called the Mexican revolution la revolución intervenida,

or “the intervened-in Revolution.”

The first U.S. intervention in Mexico occurred in 1913 when the U.S. ambassador to

Mexico, Henry Lane Wilson, conspired at the “Pact of the (U.S.) Embassy” to orchestrate a coup

that would lead to the downfall and eventual murder of President Francisco I. Madero, Mexico’s

first democratically elected president of the twentieth century. With revolutionaries chasing

Diaz out of Mexico in 1911, Madero, a middle class reformer from a wealthy landowning family

who campaigned on democracy and political reform, won the elections later that year. Charged

with neglecting land reform and social reforms, several revolutionary groups including Emiliano

Zapata from Mexico’s rural south, and Francisco “Pancho” Villa, from the north rebelled against

Madero. Behaving more like a proconsul, the U.S. Ambassador to Mexico in the Taft

administration, Henry Lane Wilson, convened General Victoriano Huerta and Felix Diaz,

Porfirio Diaz’ nephew, at the U.S. embassy in Mexico on February 18, 1913 to plot the ouster of

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President Madero, whom Wilson viewed as weak and insufficiently aggressive in the protection

of the American population in Mexico as well as U.S. investments there. The next day, Gen.

Huerta ousted President Madero and maneuvered himself to the presidency after securing the

resignation of everyone constitutionally in line to the presidency. On February 21, Madero and

his vice president José María Pino Suarez were murdered while being transferred from the

National Palace to the Federal District penitentiary. Ambassador Wilson would tell Madero's

pleading wife “the overthrow of your husband was due to the fact that he never wanted to consult

with me.” Ambassador Wilson had backed Huerta because he believed that as a strongman, Gen.

Huerta might more forcefully protect U.S. interests. Instead, Mexico exploded into even more

violence as various social forces including Zapata from the south and Villa from the north, and

now Venustiano Carranza, a former governor of Coahuila and Madero supporter, now rebelled

against the usurper, Gen. Huerta.

The newly inaugurated U.S. President Woodrow Wilson quickly dismissed ambassador

Henry Lane Wilson, and did not back General Huerta. In fact, as the fighting intensified against

Huerta in late 1913 and early 1914, President Wilson, having heard that a shipment of German

arms was on its way to Mexico, ordered the occupation of the Mexican port city of Veracruz to

deny Huerta those arms and weaken his position. On April 21st 1914, President Wilson,

launched an invasion force of over 3,000 U.S. marines to this key port city. As U.S. naval

vessels shelled Veracruz, hundreds of Mexicans were killed in the crossfire. By the time U.S.

forces departed seven months later, Huerta’s popularity had actually risen in Mexico as a result

of the U.S. invasion, but within a few months he fell to the revolutionary forces of Zapata, Villa

and Carranza and was forced to flee the country.

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In the last major U.S. military intervention into Mexico, on March 9, 1916, President

Wilson dispatched over 5,000 U.S. soldiers on a punitive expedition to pursue Francisco

“Pancho” Villa into Chihuahua after Villa had attacked the U.S. border town of Columbus, New

Mexico. Having felt betrayed by President Wilson's reluctant backing of Venustiano Carranza,

who had declared himself “First Chief” of the Constitutionalist forces, Villa torched Columbus,

New Mexico and killed several Americans. Despite Carranza’s vigorous objection to U.S. forces

on Mexican soil, Wilson dispatched the U.S. soldiers into Mexico under the command of John

“Black Jack” Pershing with the goal of capturing Pancho Villa. Though they chased him for

months, Villa eluded the U.S. forces, which eventually withdrew back to the U.S. where they

would soon join the Allied Powers in World War I. In Mexico, this military intervention would

help fuel anti-U.S. sentiment.

These U.S. military interventions into Mexico, along with the U.S. ambassador’s role in

President Madero’s ouster earlier, fueled Mexican nationalism and led revolutionary leaders like

Carranza to more aggressively insist on preserving and protecting Mexican sovereignty,

especially in the face of U.S. hegemony. President Carranza would issue what would became

known as the “Carranza Doctrine,” a set of principles arguing for the juridical equality among

states, regardless of their size or power. Going further, Carranza would reject the Monroe

Doctrine itself, arguing that it constituted “an arbitrary protectorate,” that it contained no

reciprocity, and that if it was applied only to the Americas, it would be interference in Latin

America’s domestic affairs. The Monroe Doctrine had been issued by U.S. President James

Monroe in 1823, declaring the Western Hemisphere “off limits” to European powers and was

then reinterpreted by President Theodore Roosevelt when he issued a “Corollary” to the Monroe

Doctrine in 1904, declaring the U.S. the sole hemispheric “police power” in the enforcement of

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the Monroe Doctrine. When Germany issued its famous Zimmerman Telegram in 1917, offering

to help Mexico take back the territories it lost to the United States in 1848 in exchange for siding

with Germany against the U.S. in World War I, Carranza rejected the proposal. Carranza kept

Mexico out of World War I and would go on to make the defense of Mexico’s sovereignty a

central foreign policy issue while espousing the cause of Latin American sovereignty more

generally. He also rejected U.S. hegemony in the region, as well as any European incursion in

the hemisphere.

The new Mexican Constitution of 1917, specifically Article 27 with its insistence on

reversing decades of “finder’s keepers” legislation of the Porfirian era, would usher in a new

nationalist era where Mexico began to assert direct control over its subsoil rights and natural

resources and to limit the overwhelming foreign economic presence on Mexican territory.

Though selectively enforced in the first few years by Mexico’s post-Revolutionary leaders to

preserve stability, this new economic nationalism would become a major source of bilateral

conflict as post-revolutionary governments moved to more aggressively assert Mexico’s

sovereignty and subsoil rights in the face of U.S. domination while the U.S., in turn, would push

back aggressively to preserve its significant and still growing foreign investments in Mexico. In

fact, despite the revolutionary violence and tensions, the already substantial U.S. investments in

the Mexican oil industry actually grew during the revolution.

With its new constitution in place, Mexico would come to assert its sovereignty and

stress diplomacy in its foreign relations, especially in its relations with the United States in the

post-revolutionary era. In asserting its underground wealth and defending its interests

internationally, Mexico would be guided by the Calvo Doctrine, which stated that international

disputes about foreign investment would be settled in the country where the investment is

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located; the Drago Doctrine, which stated that no foreign power could use force to collect debt;

the Carranza Doctrine, with its emphasis on self-determination and the elimination of any special

status for foreigners; and finally the Estrada Doctrine of 1930. Named after Mexican Secretary

of Foreign Relations Genaro Estrada, the Estrada Doctrine emphasized non-intervention in the

internal affairs of others and stated that Mexico would recognize other governments regardless of

their ideology or how they came to power. These international doctrines would serve as

Mexico’s guiding principles in its relations with the United States and rest of the world for

decades to come, even if some of them would be selectively applied by the late 1970s and early

1980s, as we shall in the next sections.

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Reconstructing Mexico and Rising Nationalism: Mexico-U.S. Relations after the

Revolution, 1920-1940

In the 1920’s Mexico focused on reconstructing a war-torn country and reigniting economic

growth while the U.S. focused on pressing its claims in Mexico and making sure Mexican

nationalism and Mexico’s defense of its sovereignty and subsoil rights, now embodied in its new

constitution, did not adversely affect its significant economic interests in the country. The U.S.

sought to advance its economic interests in Mexico and ensure that Mexico’s new constitution

and Mexico’s new nationalist economic model did not adversely affect its growing interests in

the country. They also cooperated on their many shared interests. Mexico needed access to

international capital to rebuild a war-torn nation, so access to U.S. capital and investment would

be key. This would be something that would clearly benefit both countries and that would

require a positive bilateral relationship. On the other hand, Mexico’s Constitution of 1917 was a

nationalist document that sought to limit foreign penetration of its economy and to revert

Mexico’s underground wealth back to national control. Thus, each country’s goals for this new

post-revolutionary era would in some ways be at odds with each other, and because the U.S.

continued to have a significant economic stake in Mexico, including and especially its

underground wealth, conflict would inevitably arise.

The most contentious issue in the U.S.-Mexico relationship in the immediate post-

Revolutionary era was oil. Oil had become a key component of Mexico’s economic

development and U.S. oil companies like Edward Doheny’s “Huasteca Petroleum” and British

oil companies such as Sir Weetman Pearson’s “El Aguila” played a vital role in its extraction.

American oil executives, arguing that Mexico was about to nationalize its oil holdings, worked

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through Secretary of the Interior Albert Fall to press President Harding to withhold recognition

of any Mexican government that did not guarantee the sanctity of their investments. After a

Texas oil company challenged the retroactive application of Article 27 of the Mexican

constitution in 1921, the Mexican Supreme court handed down the doctrine of “positive acts.”

This doctrine held that oil lands could not be seized under Article 27 if the oil companies had

begun extracting oil, installing drilling equipment or performed some other “positive act” before

May 1, 1917, the day the Mexican constitution went into effect. In 1923, representatives from

both countries met at the Mexican interior ministry on Bucareli Street to hammer out what came

to be known as the “Bucareli agreements,” where Mexico agreed to uphold the doctrine of

“positive acts” in its future dealings with all oil companies and the Harding administration

agreed to extend diplomatic recognition to Mexico. After the revolution-era tensions and the

U.S. having withheld formal recognition of Mexico up to this point, the reestablishment of

formal diplomatic relations was an important step for the bilateral relationship. Both countries

also agreed to establish a binational mixed claims commission to settle the contentious issue of

Mexico’s foreign debt, a large portion of which was held by U.S. bankers, and Mexican

compensation to U.S. firms and citizens for damages during the violent phase of Mexico's

revolution.

Despite the Bucareli agreements and the U.S. recognition of Mexico, U.S. officials

continued aggressively pressuring Mexico over oil and U.S. investments. Raising the unfounded

specter of a link between the Mexican revolution and the Bolshevik revolution in Russia, U.S.

Ambassador James Sheffield convinced U.S. Secretary of State Frank Kellogg that Mexico was

about to seize properties of U.S. citizens. This led Secretary Kellogg to announce to the public

that “(t)he Government of Mexico is now on trial before the world.” President Calles announced

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that Mexico would honor its international commitments but forcefully rejected Secretary

Kellogg’s statement as a threat to Mexico’s sovereignty. He then had the Mexican Congress

pass a new petroleum law in December of 1925, a law that now required oil companies to apply

to the Mexican government for confirmation to their concessions, and that these new concessions

would only be granted for a period of 50 years. Enforcement of these laws caused severe

tensions in the bilateral relationship in the following months. After this tense moment, President

Coolidge replaced Ambassador Sheffield in 1927 with the more diplomatic Dwight Morrow who

assured President Calles that the U.S. would respect the decision of the Mexican courts. When

the issue came before the Mexican Supreme court, the court again upheld the doctrine of

“positive acts,” held that oil companies would indeed have to apply for these new concessions

from the Mexican government, but that these new concessions would not expire after 50 years.

Having reduced tensions with the United States and having secured European diplomatic

recognition, Mexico would now have full acceptance into the international financial and

diplomatic community.

The last and most dramatic standoff between Mexico and the United States in the two

decades following the Revolution occurred in 1938 when President Lázaro Cárdenas (1934-

1940) nationalized sixteen U.S. and British owned oil companies after they had refused to abide

by a Mexican Supreme Court decision that favored Mexico’s newly unionized oil workers.

Mexican workers had been empowered by the nationalist legislation in the Constitution of 1917

and had taken their wage and labor grievances all the way to the Mexican Supreme Court and

won, a decision the oil companies now refused to abide by. Cárdenas’ nationalization of the oil

companies on March 18, 1838 nullified the Bucareli agreements and solidified Mexico’s

economic sovereignty, with PEMEX (Mexican Petroleum), Mexico’s new oil monopoly created

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after the nationalization, becoming the supreme symbol of Mexican nationalism. Tightening the

ratchet on Mexico, the oil companies persuaded the Franklin Roosevelt administration to boycott

Mexican oil and silver purchases, depriving Mexico of its largest market. England too boycotted

Mexican oil. But the FDR administration, taking the larger geopolitical view as World War II

loomed on the horizon and in need of a solid ally with which it shared a 2,000 mile border, did

not escalate matters in the way that the U.S. oil executives wanted, especially after Cárdenas

began actively looking for other markets for Mexican oil now that the U.S. and British markets

were closed to it. FDR feared that tightening the screws further on Mexico might lead Cárdenas,

who was already negotiating with independent oil dealers to sell Mexico’s oil to any country that

would buy it, to begin supplying oil to Nazi Germany and other Axis countries. Roosevelt

removed the restrictions on the purchase of Mexican petroleum, the United States and Mexico

came to an understanding, and the two countries began to pursue closer economic and political

cooperation. Indeed, Mexico and the U.S. would become close allies during World War II and

would cooperate on a whole range of diplomatic, economic and security matters.

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Wartime Cooperation, Post-War Stability and the Cold War: Mexico-U.S. Relations from

1940 to the 1980s

Extensive wartime cooperation between the United States and Mexico on military, political and

economic matters during the Second World War came to replace the strained bilateral

relationship from the Revolution to the oil expropriation. By 1941 all of the oil companies had

reached compensation agreements with Mexico. A 1942 trade agreement between the two

countries lifted the final trade restrictions on Mexican exports to the U.S. market, allowing both

countries to develop even closer economic cooperation. Mexican oil was allowed back into the

United States, Cárdenas stopped oil deliveries to Germany, and Mexico went on to become an

important U.S. ally and an important supplier of oil, copper, iron ore, nickel and other industrial

products vital to the U.S. war effort. When a German U-boat sank a Mexican oil tanker in the

gulf coast, Mexico declared war on Nazi Germany and the Axis powers in 1942 and soon joined

the Allied side. Soon, Mexico sent an air force squadron to the Philippines, the Escuadrón 201,

to fight with the Allies against the Japanese in the Pacific theater. President Manuel Avila

Camacho (1940-1946) named former President Lázaro Cárdenas Minister of Defense and

worked with President Roosevelt to build unprecedented security cooperation with the United

States, including the fortification of Mexico’s military bases and coastlines as well as the

construction of radar equipped listening posts with U.S. personnel along its Pacific and Atlantic

coasts.

As the U.S. economy experienced a severe labor shortage because of the wartime draft,

the two countries signed their first formal labor agreement in 1942 that came to be called the

Bracero Program. Under these temporary guest worker agreements between Mexico and the

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United States, a U.S. agency, the Administration of the Agricultural Insurance, hired Mexican

workers to work in the U.S. agricultural and rail industries. During the war, Mexico sent over

450,000 contracted Mexican workers to work in the United States this way. Renewed for the

postwar era, the Bracero Program would continue to supply U.S. labor needs for the next 20

years, sending 4.5 million Mexican workers to work in the United States. By the time this labor

program was terminated in 1964, key U.S. industries had come to rely on Mexican labor.

Though a series of agricultural visas would provide a pathway to bring in temporary labor, they

were never enough to fulfill U.S. labor needs, thereby opening the door to a slow but steady

growth of undocumented labor in decades to come. As we shall see in the next sections, the

issue of undocumented migration would become especially contentious by the 1990s when the

U.S. experienced robust economic growth while at the same time the Mexican countryside was

battered by “the lost decade” of the 1980s as well as the loss of agricultural subsidies and

increased competition from American agriculture, especially corn, as a result of NAFTA.

The issue of international water sharing was somewhat less contentious although

persistent. In 1944 Mexico and the United States increased the amount of water the former

would receive from the latter from 60,000 acre-feet per year to 1.5 million. This allocation was

based on unusually high flow measurements and did not account for salinity, but the

International Boundary and Water Commission, the binational agency authorized to manage

distribution, developed a system of “minutes,” or ad hoc adjustments to respond to changing

conditions, such as overly saline water or drought.

The Second World War had drawn Mexico and the United States closer and this close

relationship would continue through the 1950s and 1960s as Mexico concentrated on its

industrial growth and pursued its nationalist economic project. In the postwar period, Mexico

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came to emphasize Import Substitution Industrialization (ISI) to build its own industrial base but

still clearly needed foreign investment to develop. While fomenting Mexico’s own industry and

key industries such as steel, foreign investment would continue to be welcomed in Mexico,

though now with limits as set out by Mexico’s nationalist constitution and subsequent nationalist

legislation. U.S firms such as Ford, Chrysler and GE poured into Mexico establishing Mexican

subsidiaries and forging joint partnerships in everything from automobile manufacturing to

consumer durables. Though officially limited to minority participation and to not being able to

own land outright, U.S. and other global firms thrived in this protected but growing market.

As the two nations resumed their economic integration and forged a closer relationship in

the post war era, Mexico’s Official Party continued highlighting its nationalist and progressive

foreign policy, partly for domestic political reasons, and partly to preserve “distance” from the

United States, especially as the Cold War gained ground. This Official Party was the ruling

party that had emerged from Mexico’s Revolution and came to have a lock on national as well as

regional politics for most of the 20th century, presiding over its nationalist economic project up to

1982, as well as over its dismantling from 1982 to 2000 (this party would then make a comeback

in 2012). The party that emerged from Mexico’s Revolution went through several

transformations. It was founded in 1929 as the Partido Nacional Revolucionario (National

Revolutionary Party, or PNR) by General and President Calles after the assassination of General,

past president and president-elect Alvaro Obregón right after the 1928 elections. It brought the

nation’s powerbrokers and regional strongmen together to settle their differences peacefully

instead of at the barrel of a gun and to institutionalize the gains of the Revolution. General and

President Lázaro Cárdenas then transformed this party in 1938 into a popular front as the Partido

de la Revolución Mexicana (Party of the Mexican Revolution, or PRM) in 1938. In 1946, in an

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effort to “institutionalize” the party, it was reorganized again with the military sector formally

dropped from its organization. It then became the Partido Revolucionario Institucional

(Institutional Revolutionary Party, or PRI), its current name today. While the party underwent

organizational transformations, it would also undergo ideological transformations over the

decades. In the 1930s, for example, it was considered a “center-left” party, stressing land

reform, social development and national reconstruction. After 1940 successive administrations of

the Official Party shifted to the right, concentrating on industrial growth, stressing land reform

and social development less, and pursuing closer relations with the United States. In the late

1960s, 1970s and early 1980s, amidst domestic discontent, it would shift to the left again,

stressing social development, land reform, nationalist economic development, and maintaining

“distance” from the United States. The Official Party was nationalist at home, and stressed the

country’s independence abroad by identifying itself with progressive nations as a way of

maintaining the support of student groups, labor, peasants, popular organizations and

intellectuals on the left.

The U.S. had emerged from World War II as one of the most powerful nations on earth

and leader of the Western nations that opposed the Soviet Union and the expansion of socialism

during the Cold War. Mexico, because of its geography, its close economic integration with the

United States and its anticommunist governments, was squarely in the U.S.’ sphere of influence.

As the Cold War intensified in the 1950s, the United States came to view social reform and

social revolution in Latin America through the prism of the Cold War and saw these movements

as either instigated or orchestrated by the Soviet Union. As the U.S. intervened in Latin America

during the Cold War, Mexico, citing its cherished defense of sovereignty and self-determination,

could be counted on to not give the U.S. a free pass.

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When the United States organized a coup to overthrew the democratically elected, left-

leaning President Jacobo Árbenz in Guatemala in 1954, Mexico opposed the United States,

identified itself with Guatemala and used the occasion to highlight its nationalist and progressive

foreign policy. This was the first time since the 1930s that Mexico’s foreign policy diverged

significantly from the United States. Guatemala had drawn the ire of the United States for

putting into place nationalist economic policies similar to Mexico’s, including a sweeping

program of land reform that negatively affected the powerful and well-connected American

multinational company, the United Fruit Company (now Chiquita Brands). The United Fruit

Company’s loud complaints that Árbenz was moving in the direction of communism found a

sympathetic ear in U.S. policymakers who were convinced that Árbenz would be “soft” on

communism. In describing Árbenz, John Peurifoy, the U.S. Ambassador to Guatemala said, “if

the President is not a communist, he will certainly do until one comes along.” Mexico saw

Árbenz as a nationalist reformer, the U.S. saw him as a tool of the Soviet Union. When the U.S.

used the ministerial meeting of the Organization of American States (OAS) at the Caracas

Conference on Inter-American Security in March of 1954 to get hemispheric backing for the

U.S. overthrow of the Árbenz government, Mexico abstained. Harking back to Mexico’s own

Revolution, Mexican Foreign Minister Luis Padilla Nervo defended Guatemala, telling U.S.

Secretary of State John Foster Dulles “I remember when Mexico stood alone and we were going

through an economic and social reform, a revolution, and if at that moment you had called a

meeting of the American States to judge us, probably we would have been found guilty of some

subjection to foreign influences.” Though the U.S. succeeded in toppling the Árbenz

government in June of 1954, Mexico demonstrated its independence from the U.S. by giving

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Árbenz asylum in the Mexican embassy and refusing to go along with U.S. efforts at providing

the coup with a patina of legitimacy at international organizations.

Similarly, Mexico would also welcome the Cuban Revolution in 1959 and go on to

promote its friendship with Cuba until the 1990s in order to defend its foreign policy principles,

to manifest its “revolutionary” credentials, and to balance its close economic relationship with

the United States. Mexico received Fidel Castro and his fellow revolutionaries in 1956 after they

had served time in prison and were thrown out of Cuba for trying to overthrow the Batista

regime in 1953. In Mexico, Fidel Castro, his brother Raúl, and the Argentine Ernesto “Che”

Guevara, reorganized a band of guerrillas to begin organizing and training another attack against

the Batista regime in Cuba. After they were arrested by Mexican police in June of 1956 and

charged with conspiring to assassinate Batista, Mexican student groups, popular organizations

and several prominent Mexican officials began publishing open letters to President Ruiz Cortines

(1952-1958) urging him to release Castro from prison. After Lázaro Cárdenas, one of Mexico’s

most respected ex-presidents and a pillar of the Mexican left, personally intervened to help

persuade the Mexican president to release Castro and his revolutionary group, they went on to

launch their revolution in Cuba from Mexico. The eventual triumph of the Cuban Revolution in

1959, with its emphasis on social reform, proved to be very popular with the Mexican left and

the Official Party would use this close relationship with Cuba for the next three decades to

solidify its support from students, labor, peasants and intellectuals on the left. When the United

States pressured most Latin American countries to sever diplomatic relations with Cuba in the

1960s, Mexico, citing the Estrada Doctrine, was the only country that refused. As we will see

below, this close relationship with Cuba would begin to fray once President Salinas (1988-1994)

jettisoned Mexico’s “revolutionary” foreign policy and cast his lot firmly and unequivocally with

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the United States. In fact, by the time the Official Party was defeated by the National Action

Party’s (PAN) Vicente Fox in 2000 and the PRI became an opposition party, this previously

close relationship between Mexico and Cuba became quite bitter when President Fox and his

Foreign Minister Jorge Castañeda, no longer bound by the Official Party’s embracing of Cuba in

order to promote domestic legitimacy, began to criticize Cuba openly.

For the rest of the Cold War, Mexico continued defending non-intervention, expressing

solidarity with Cuba, and demonstrating its independence from the United States at international

organizations, especially when dealing with hemispheric issues. When the U.S. launched a

military intervention in the Dominican Republic in 1965 and then led an OAS effort to create an

inter-American peace force to try to legitimize this intervention, Mexico opposed it. At the same

time and in a very important pattern that we will see for the duration of U.S.-Mexico relations

during the Cold War, Mexico would continue to align itself firmly with the United States on

essential economic and security matters. Mexico’s President Díaz Ordaz (1964-1970) would go

so far as to tell President Lyndon Johnson in 1964 that “(t)he United States could be absolutely

sure that when the chips were really down, Mexico would be unequivocally by its side.”

In the 1970s, Mexico under President Luis Echeverría (1970-76) moved the Official

Party to the left and began to assert a larger role for the state in Mexico’s economic development,

imposed further limits to foreign investment, and tried to rally the developing world to create

new international economic institutions to try to rectify what he saw as an unjust global

economic order, in the process irritating the United States and the Mexican business community

that relied on solid relations with the United States. As he did so, President Echeverría ushered

in a more assertive and often interventionist foreign policy, projecting an image of

“Revolutionary Nationalism” on the world’s stage and trying to create even more “distance”

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between Mexico and the United States. He embraced Cuba even more tightly than his

predecessors had. He traveled to Cuba in 1975, becoming the first Mexican president to do so,

and often proclaimed Mexico’s solidarity with its “sister republic.” He cultivated a close

relationship with the democratically elected socialist president of Chile, Salvador Allende, whom

the U.S. was trying to undermine. After General Augusto Pinochet launched a military coup and

overthrew President Allende in 1973, President Echeverría welcomed Allende’s widow and

opened the door to those fleeing the U.S.-backed dictatorships in Chile, Argentina and Uruguay.

At the United Nations, President Echeverría took the lead in bringing together the countries of

the developing world to approve the Charter of the Economic Rights and Duties of States. This

UN Charter coalesced the developing world around issues of fundamental importance to them:

improving the prices of raw materials, equality among nations, non-intervention and non-

aggression, technology transfer and sovereignty. In 1975 Echeverría, in an effort to court the

Arab world and enhance Mexico’s standing with the developing world, had Mexico vote for a

UN resolution equating Zionism with racism despite strong U.S. and Israeli pressure. The

resulting backlash for Mexico was ferocious and Mexico was forced to backtrack when pro-

Israel groups and Jewish leaders mounted an effective boycott of Mexico, particularly its tourism

industry that was fast becoming a major source of revenue for Mexico. And in Central America,

President Echeverría supported revolutionary movements such as the FMLN (Farabundo Martí

Liberation Front) in El Salvador and the FSLN (Sandinista Front for National Liberation) in

Nicaragua. Because Echeverría’s assertive foreign policy diverged from and often challenged

U.S. policy on the international stage, there was more friction in the U.S.-Mexico relationship

than had been the case in the earlier postwar era.

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Despite Echeverría’s rhetorically charged foreign policy that challenged U.S. policy and

his attempts to create to create a New International Economic Order (NIEO) through the U.N.

Conference on Trade and Development (UNCTAD) that brought Mexico into the simmering

North-South debate firmly on the side of the developing countries, Mexico continued to

cooperate closely with the United States on all national security matters of substance. For

example, while Echeverría was embracing Mexico’s “sister Republic” of Cuba, Mexico was

cooperating closely with the CIA to monitor the Cuban embassy in Mexico City and working

closely with the U.S. to thwart Fidel Castro’s influence in Mexico and Latin America. Indeed,

recently declassified documents show Echeverría was more concerned about the Cubans

potentially aiding Mexico’s fledgling revolutionary groups as Echeverría waged his own “dirty

war” against Mexican dissidents and revolutionary groups. In private, he tried to convince U.S.

officials that his reformist rhetoric was “aimed at neutralizing domestic leftists and therefore

served American interests.”

Taking up where Echeverría left off, President José López Portillo (1976-1982) brought

Mexico to the height of statism after massive new oil deposits were found in Mexico in 1977 and

intensified Echeverría’s assertive and interventionist foreign policy, frequently challenging the

United States and occasionally incurring the wrath of the U.S. He famously declared in his first

state of the union address that the world was no longer divided into First World and Third World

countries. “Today,” thundered President López Portillo, “the world is divided into countries that

have oil and those that don’t. Mexico has oil!” Oil would be Mexico’s new development card as

well as its trump card with the United States, especially as the worldwide energy crisis hit the

U.S., a major importer of oil, especially hard in the late 1970s and Mexico became more

strategically important to the United States.

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Like his predecessor, López Portillo also saw Mexico as a leader of the developing world

and stressed the need for developing nations to put up a united front to grain greater leverage

against the developed countries. Emboldened by the increased attention that oil had brought the

country, Mexico was elected to the UN Security Council in 1980 for the first time since 1946, a

move that increased Mexico’s activism at the United Nations. In past decades, Mexico had

avoided the Security Council because of the responsibility that being on it entailed and the

potential conflicts that it might bring between Mexico and United States. To demonstrate

leadership among developing countries, he tried to breathe new life into the North-South

dialogue that had begun a few years earlier in Paris and that had gained little traction since.

López Portillo would eventually convene and host the North-South summit at the resort city of

Cancún in October of 1981. Mexico brought together the heads of state of twenty-two developed

and developing countries, including the United States. He would say in an interview later that it

was imperative for Mexico and the developing countries to unite with each other in order to

increase their bargaining power against “the monsters of the north.” When the summit was being

planned in 1979, the Carter administration expressed support for it, but by the time it was held in

1981, the new Reagan administration never seriously contemplated anything other than private

investment and free trade as the key to development for developing countries. Though there

were no breakthroughs on development issues, the summit did bring increased visibility to

Mexico and to President López Portillo, especially among developing countries.

As Echeverría and other Mexican presidents since the 1950s had tried to do, López

Portillo also sought to diversify Mexico’s foreign and economic relations away from the United

States, Mexico’s largest and most important trading partner. Spain, France, West Germany and

France were all eager to purchase Mexican oil and López Portillo used Mexico’s oil card to try to

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expand the country’s relations with Western Europe in the hopes of diversifying its economic

relationships away from the U.S. He also took a fifteen-day tour of Eastern Europe, then made

his way to the Soviet Union and then China to try to increase contacts and trade with the

Communist countries. But the real test as to whether Mexico would truly diversify its economic

relationships occurred when Mexico initiated discussions about joining the General Agreement

on Tariffs and Trade (GATT), the precursor to today’s World Trade Organization (WTO), in

1979. The U.S had been pressing Mexico to join, as had Mexico’s large business organizations

such as the Employers Federation of the Mexican Republic (COPARMEX) and the

Confederation of Chambers of Industry (CONCAMIN) that had not always supported Mexico’s

nationalist economic strategy but instead favored a more full engagement with the United States.

Mexico’s small, but growing opposition party, the National Action Party (PAN), a center-right

party that had been formed in the late 1930s in opposition to Cárdenas’ land reforms and

nationalist economic strategy, also argued for economic liberalization and Mexico joining

GATT. In the end, President López Portillo decided against Mexico joining GATT because, he

argued, it would mean the loss of sovereignty in the formulation of Mexico’s trade policy and a

greater competition brought about by increased imports to Mexico. Mexico would have to wait

until the de la Madrid administration (1982-1988) to become a member of GATT. As had

occurred when previous administrations had tried to diversify Mexico’s economic relationships

away from the U.S., López Portillo’s efforts did not significantly alter Mexico’s trading

relationships either. In fact, Mexico’s oil wealth intensified its already close relationship with

the United States. By 1980, Mexico became the United States’ third largest trading partner, after

Canada and Japan.

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To try to balance this increasingly close relationship with the United States, Mexico now

flush with “petrodollars” that enhanced its international standing, increased its involvement in

Central America, bolstering revolutionary groups in Nicaragua and El Salvador, strengthening

Mexico’s role as a regional power and establishing a position of independence and equality in

the face of U.S. penetration there. By the late 1970s, the Sandinista National Liberation Front

(FSLN) and a number of other guerrilla groups were close to overthrowing the dictatorship of the

U.S.-backed Anastasio Somoza Debayle in Nicaragua. The Somoza dynasty in Nicaragua had

been supported by the United States since the 1930s. President López Portillo began subsidizing

the Sandinistas, used the Mexican embassy in Managua as a haven for Sandinista leaders, and in

May of 1979, broke diplomatic relations with the Somoza regime. When the FSLN toppled

Somoza in July of 1979, the Sandinista leadership flew into Managua from Costa Rica on board

the Mexican presidential jet, the Quetzalcoatl I. Mexico then became a key ally of the

revolutionary Sandinista government though López Portillo’s support of the Sandinistas, which

U.S. officials saw as orchestrated by Soviet Union, drawing the ire of the Reagan administration.

In an effort to further broaden Mexico’s foreign policy in Central America and exercising

what López Portillo called “el derecho a disentir” (the right to dissent) in the face of U.S.

influence in the region, Mexico also supported El Salvador’s Marxist guerrillas, the Farabundo

Martí National Liberation Front (FMLN). López Portillo believed that by supporting the

Sandinistas and the FMLN in Central America, Mexico would serve as a moderating force in the

region and that this would increase Mexico’s negotiating position vis-à-vis the United States. To

López Portillo, this Central American activism was also an opportunity to reinforce Mexico’s

own revolutionary tradition and to shore up domestic support at home, especially among

Mexico’s left. In August of 1981, López Portillo withdrew Mexico’s ambassador to El Salvador

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and, together with France, issued a Franco-Mexican declaration, in which both countries

recognized El Salvador’s guerrillas as a “representative political force,” that is, a state in

formation whose members would participate in any negotiated settlement in El Salvador’s civil

war. The United States under Reagan was not interested in negotiating a settlement to the Civil

War in El Salvador with leftist insurgents. In fact, the Reagan administration, seeing the rise of

the left in Central America as the work of Soviet expansionism, vastly increased its support for

the Salvadoran military junta as well as the neighboring military government of Honduras, and

organized and funded the counterrevolutionary force that would be called the “contras,” trained

by the U.S. in Honduras, to topple the Sandinista government in Nicaragua.

Seeing Mexico’s oil wealth as limitless, López Portillo increased borrowing and spending

to unsustainable levels and almost single-handedly bankrupted Mexico in 1982, ushering in

Mexico’s greatest economic crisis since the Great Depression. This economic crisis, along with

increased pressure from Mexico’s business community, the PAN and the United States, as well

as the gradual recomposition of Mexico’s Official Party, would lead to Mexico pulling back

from its activist foreign policy. By then, Mexico’s debt was over $85 billion dollars and its

economy had grown completely dependent on petroleum. When global interest rates rose in 1981

and the price of oil began a precipitous decline, Mexico faced its greatest economic challenge in

decades. Inflation rose dramatically, investors started taking their money out of Mexico at

alarming rates, and the value of the Mexican peso dropped precipitously despite López Portillo

having vowed to “defend the peso like a dog.” In his last gasp of economic nationalism, he

nationalized Mexico’s banks, saddling the Mexican government with an even larger foreign debt.

When López Portillo handed power to his hand-picked successor, Miguel de la Madrid in 1982,

Mexico was in its worst economic state since the Great Depression and the U.S.-Mexico

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relationship had hit a new low. No longer flush with petrodollars and in the midst of severe

economic crisis, López Portillo had begun backing away from his activism in Central America in

favor of a negotiated peace by 1982, a process that his successor would continue under what

became known as the Contadora Peace Plan. Mexico’s unsustainable statist policies as well as

López Portillo interventionist foreign policy in Central America had alienated Mexico’s business

community as well as the United States. It fell to his successor, President Miguel de la Madrid

(1982-1988), to try to repair that damaged relationship.

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Mexico “Restructures” its Revolution in the 1980s and 1990s, and the end of the Cold War:

Mexico-U.S. Relations from 1982 through NAFTA and the 1990s

With Mexico’s near bankruptcy in 1982 and the ensuing “lost decade” of painful economic

contraction and austerity, Mexico under President Miguel de la Madrid (1982-1988) began a

slow process of restructuring its economy, and in the process gradually reshaping its policy

towards the United States and the global economy, scaling back on its “revolutionary”

commitments to Central America and gradually replacing its economic model from state-led

development dependent on oil to a more market oriented economy that relied on foreign

investment. The Miguel de la Madrid administration would also reduce Mexico’s activism in

Central America and try to repair the damaged Mexico-U.S. relationship.

In fits and starts Mexico began to loosen its state-led and deficit spending policies, to

gradually open itself to the world economy, and to forge a closer and less contentious

relationship with the United States. With the nationalist wing of the Official Party who had

advocated state-led policies discredited, the U.S. educated tecnócratas, so called for their

economic expertise (most held Ph.D.’s in economics from elite U.S. universities) as well their as

dominance of politics, would begin to gain prominence within the Official Party and put a halt to

Mexico’s unsustainable deficit spending, begin privatizing state owned industries, and in general

slowly transforming the Mexican economy from state-led development dependent on protection

and oil to a more market oriented economy with greater private sector participation, especially

foreign investment. Among them, Programming and Budget Minister Carlos Salinas de Gortari

would go on to become President de la Madrid's most important economic advisor, receive ‘the

nod”, or el dedazo, to become president himself in 1988. The Official Party would go on to

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institutionalize these market opening policies through the North American Free Trade

Agreement (NAFTA) in 1994. In the run up to the elections of 1988, Salinas would be

challenged by then leader of the nationalist wing of the Official Party, Cuauhtémoc Cárdenas

(former President Lázaro Cárdenas’ son), who challenged the ascendance of this technocratic

wing of the party as well as Mexico’s privatizations and austerity policies. When he was

expelled from the Official Party, Cuauhtémoc Cárdenas coalesced labor, peasants, students and

others disaffected by years of austerity and market opening policies and nearly won the elections

of 1988. Cuauhtémoc Cárdenas would go on to take almost the entire nationalist wing of the PRI

with him and form a major new party in Mexico, the Party of the Democratic Revolution, or

PRD, a center-left party that would become a major force in the modern era. The technocratic

wing of the Official Party led by Salinas would go on to have a lock on power and dominate

national politics until 2000, when the PAN’s Vicente Fox unseated the Official Party and

converted the PRI into an opposition party.

The financial repercussions and economic fallout of the 1982 crisis also led the de la

Madrid administration and his tecnócratas to begin backing away from its financial

commitments to the Sandinistas in Nicaragua, to begin seeking a negotiated peace in Central

America, and in general to forge a closer relationship with the United States. Because U.S.

banks that had been eager to lend to Mexico when the country was flush with cash held a large

portion of Mexico’s foreign debt, a possible Mexican default would send shockwaves throughout

the U.S. financial system and possibly spread to other parts of Latin America and the globe. To

prevent a possible ‘contagion,’ the Reagan administration responded to Mexico’s debt crisis with

fresh lines of credit and debt swaps to prevent further economic instability in the region. To de la

Madrid’s new technocratic advisors, López Portillo’s activist Central America policy only

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alienated the United States and the private sector and got in the way of a more productive

economic relationship. So removing Central America as a source of friction, they argued, would

inevitably lead to a more constructive relationship with the U.S. In 1983 Miguel de la Madrid,

together with the leaders of Venezuela, Colombia and Panama, formed what came to be known

as Contadora Group to bring about a negotiated peace in Central America. The Reagan

administration however, saw all of the Central American conflicts through its Cold War lens and

dismissed Mexico’s efforts at a negotiated peace as a nuisance. Only after the Berlin Wall

collapsed in 1989 and the Soviet Union imploded in 1991, signaling the end to the Cold War and

an end to the United States’ viewing most conflicts in Latin America during this time period as

either Soviet inspired or orchestrated, would Central America cease to be such a thorny issue in

U.S.-Mexico relationship.

In addition to pulling back from his predecessor’s assertive foreign policy in Central

America, Mexico under de la Madrid also began to leave behind its previous reluctance to join

international economic organizations such as the General Agreement on Tariffs and Trade, or

GATT. Mexico finally joined GATT in 1986, an historic decision that would begin the process

of transforming Mexico’s economic links to the rest of the world and to forge a closer

relationship with the United States, Mexico’s largest market, creditor, and source of investment.

Joining GATT would also begin to institutionalize Mexico’s trade policies and lessen the

periodic trade disputes that had arisen when Mexico was not part of GATT and there were no

institutional mechanisms to resolve such conflicts. After joining GATT, Mexico would go on to

intensify its links to international financial organizations and to redefine its relationship to the

rest of the world. In 1994, it would become part of the North American Free Trade Agreement,

or NAFTA, as well as the Paris-based Organization for Economic Cooperation and

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Development, or OECD, as I will discuss further below. Mexico would also continue to forge a

much closer relationship with the United States, both economically, as well as diplomatically,

withdrawing Mexico from any international commitments that might jeopardize its relationship

with the United States.

Though Mexico was withdrawing from Central America and gradually opening Mexico’s

economy, relieving somewhat the sources of tension in the U.S.-Mexico relationship in the

1980s, other important and more structural bilateral issues such as narcotics soon rose to the fore

and became major sources of friction. The 1980s had witnessed the rise of narcotics trafficking

from Colombia and other cocaine producing countries in South America through Mexico,

especially as U.S. and Colombian authorities launched a war on drugs and began to dismantle the

Colombian cartels and their Caribbean routes. As these Caribbean routes were shut down or

were made more difficult to penetrate, the Colombian cartels turned to Mexican junior partners

and began to use Mexico as a way to transport cocaine into the largest market for cocaine, the

United States. As they did so, Mexican cartels mainly from Sinaloa and Jalisco on Mexico’s

Pacific coast came to increase their power and use their wealth to buy off Mexican officials so

they could turn a blind eye to this growing narcotics trade. In 1985, members of the Guadalajara

cartel, one of Mexico’s first cartels, kidnapped, tortured and killed U.S. DEA agent Enrique

“Kiki” Camarena on Mexican soil, unleashing a major crisis that would lead to a deterioration in

the U.S.-Mexico relationship and unleash a wave of recriminations in the United States,

particularly in Congress, spilling over to other issues in the bilateral relationship that had lain

dormant. In 1986, the U.S. Senate Foreign Relations Committee under the leadership of Senator

Jesse Helms of North Carolina held what came to be called the “Mexico-bashing” hearings,

where Senator Helms and a few other Republican senators and U.S. officials leveled a variety of

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charges against Mexico. Mexico lodged a formal protest with the State Department, and Reagan

administration officials later distanced themselves from the views expressed at these hearings,

but the hearings did contribute to the deterioration in the bilateral relationship. As we will see in

greater detail in the next section, the issue of narcotics would flare up again in the late 1990s and

early 2000s and become a vexing issue for both countries as well as a major irritant in the

bilateral relationship. By then, the U.S.-Mexico relationship would become much more complex

and institutionalized, so that conflict in one policy area would not necessarily spill over and taint

the larger relationship.

Another structural issue that would become an increasing source of friction to the

bilateral relationship was migration, particularly the undocumented migration from Mexico to

the United States that accelerated in the 1980s. Mexican workers from the countryside had

begun trickling in to work in the United States without proper documentation since the Bracero

Program was terminated in 1964, especially when the temporary agricultural visas were never

enough to fulfill U.S. agriculture’s labor needs. When Mexico’s economic crisis hit in 1982,

precipitating the “lost decade,” it drove up unemployment across the board, but the Mexican

countryside was particularly battered as the loss of agricultural subsidies that were part of

Mexico’s restructuring and austerity measures led agricultural workers to abandon the

countryside for work in cities. Even more bypassed the cities entirely and made their way to the

United States, without documents, to find work in agriculture and other sectors. Combined with

a booming economy in the United States, this flow of undocumented immigrants from Mexico as

well as Central America continued even as the Mexican economy began to stabilize in the early

1990s and grow in the post-NAFTA era. As we will see in the next section, only after the Great

Recession of 2008 was this trend reversed with more Mexican immigrants leaving the United

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States than entering. By then the issue of undocumented migration had become an almost

permanent source of friction for the two countries well into the 21st century, as demonstrated by

the anti-immigrant rhetoric that become a centerpiece of the 2016 presidential campaign in the

United States.

In the late 1980s and early 1990s, domestic and international factors came together to

produce a sea change in the Mexico-U.S. relationship, one marked by a much closer and more

institutionalized relationship that would bind the two countries more closely than ever and that

would endure well into the 21st century. With the presidency of Carlos Salinas de Gortari (1988-

1994), the ‘technocratic revolution’ within the Official party was complete. The Economist

magazine would joke that people called President Salinas, who held a Ph.D. in Political

Economy from Harvard, “Harvard educated Salinas” so much that he might as well drop his first

name. His hand picked successor, Ernesto Zedillo (1994-2000) would have also a Ph.D. in

Economics from Yale. These tecnócratas, especially the more authoritarian President Salinas,

would come to wield enormous power and have a complete lock on economic policy as well as

foreign policy, reversing decades of statist economic policies and nationalist foreign policy and

move Mexico headlong in the market-opening direction. In the United States, President George

H.W. Bush replaced the more ideological President Reagan the same year Salinas was elected

and began to remove aid to the Contras in Nicaragua and to pursue a more negotiated settlement

in Central America, removing this source of friction in the U.S.-Mexico relationship.

Internationally, the reintegration of the former Soviet block countries into the European

and global economy as the Berlin Wall fell 1989 and the Soviet Union disintegrated in 1991

would have an enormous impact on Mexico’s policy choices and nudge Mexico in the direction

of a deeper North American integration. Shortly after Salinas’ inauguration, he took a trip to

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Europe to meet the world’s leaders and to signal to the world that Mexico was moving firmly in

the direction of opening Mexico’s economy to the world and that Mexico would be open for

business. Instead, he was alarmed by how little enthusiasm Mexico’s economic opening, which

had been taking place in fits and starts since Mexico’s crisis of 1982, was generating worldwide.

He saw instead the world focused on reintegrating East Germany to West Germany after the fall

of the Berlin wall and that the same had begun to occur with the former Soviet bloc countries

like Latvia, Lithuania, and Estonia as they broke free from the Soviet Union and moved to

integrate themselves to the European and global economy. Soon, the entire former Soviet block

would do the same. Thus began Salinas’ efforts to join economic forces with the United States

and Canada, two countries that had already signaled their intent to forge a free trade agreement.

In order for Mexico to not be left out of the post-Cold War global economic reshuffling, Salinas

proposed what would become the North American Free Trade Agreement, or NAFTA, to U.S.

President Bush and Canadian Prime Minister Brian Mulroney. Seeing it as a way to attract

foreign investment and reignite economic growth in Mexico, NAFTA would become the

cornerstone of Salinas’ development policy and the cornerstone of a new U.S.-Mexico

relationship. It was an unprecedented rapprochement with the United States. The Bush

administration too saw the importance of Mexico’s potential role in these emerging trading blocs

and was eager to secure NAFTA. For the United States, NAFTA was exactly the type of market

opening policies that it wanted to see in Mexico for decades. Besides, it also fit nicely into what

Bush had called “the vision thing” during his campaign.

For Mexico, it would mark a complete abandonment of its previous nationalist economic

model in favor of a new export-oriented model that relied on attracting foreign investment as

well as to integrate Mexico’s economy more firmly with the United States and world economy.

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It would also signal an end to Mexico’s previous nationalist foreign policy consensus that

stressed non-intervention and solidarity with the developing world (and that often irritated the

United States), to one that fostered Mexico’s economic opening to the world and would bring

Mexico and the United States closer than ever, especially economically. Salinas wanted

NAFTA, this treaty between three major states, to make Mexico’s market opening policies

permanent and irreversible. So important was NAFTA to Salinas’s economic strategy that he

reoriented Mexico’s entire foreign policy to ensure it was passed. Domestically, the

authoritarian PRI still had complete dominance of national politics so getting NAFTA approved

through the PRI dominated congress would not be a problem for this administration. In fact,

despite his views on modernizing the Mexican economy, Salinas ruled in such an authoritarian

fashion that he routinely removed governors, crushed the opposition on the left, the PRD, and

‘negotiated’ local victories with the PAN, the party more aligned with his free market

philosophy. His reforms were nicknamed Salinastroika by the Mexican press, a reference to

Gorbachev’s perestroika and, in the this case, Salinas’ economic reforms taking priority over any

efforts to open the political system. Salinas’ negotiated gubernatorial victories with the PAN

came to be called concertacesiónes, a play on the words ‘negotiate’ and ‘cede.’

Because Mexico was moving aggressively to open its economy and was abandoning its

assertive and rhetorically charged foreign policy from the 1970s, the U.S., not wanting to rock

the boat, did not openly criticize Mexico’s undemocratic practices. The U.S.’s primary concern

was stability. Salinas also launched a massive lobbying campaign in the United States, playing

“Washington’s game” in earnest for the first time, to secure NAFTA’s passage in the U.S. and to

“rebrand” Mexico as a rapidly modernizing country that was open for business. He enlarged and

reoriented Mexico’s consular corps in the United States to engage with U.S. policymakers and

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the U.S. business community, as well as to engage with Mexico’s migrant communities and the

more established Mexican American community, whom he saw as potential allies for Mexico. In

a further sign of how much Mexico’s foreign policy had changed, Salinas abandoned Mexico’s

historic solidarity with its “sister republic,” Cuba, and went to Miami in 1992 to meet with the

staunchly anti-Castro Cuban American community to seek their support for NAFTA. In

Washington, President Bush, whose administration had completed most of the NAFTA

negotiations, was not reelected in 1992, leaving it to the centrist Democrat President Bill Clinton

to add new environmental and labor provisions and to create a new binational development bank,

the North American Development Bank (NADBANK), before it was finally ratified in

November of 1994 and took effect on January 1, 1994. Shortly thereafter, Mexico was admitted

as a full member of the OECD, the Organization for Economic Cooperation and Development

that is often referred to as the “rich countries club.” Under Salinas, Mexico also became part of

APEC, the Asia-Pacific Economic Cooperation. And as we will see in the next section, NAFTA

would then become a catalyst for further trade agreements between Mexico and other areas of

the world in the decades to come, both by PRI administrations, Ernesto Zedillo’s (1994-2000), as

well as PAN administrations, Vicente Fox’s (2000-2006) and Felipe Calderón’s (2006-2012),

and now that the PRI is back in power after 2012, with Enrique Peña Nieto’s. All would build

on NAFTA and integrate Mexico more tightly into the world economy by hammering out more

free trade agreements with more parts of the world such as Central America, Japan, the European

Union, the Pacific Rim countries of Chile, Colombia and Peru and the Asia-Pacific countries.

Though NAFTA would indeed mark a watershed moment of economic cooperation

between Mexico and the United States that would endure into the next century, the bilateral

relationship, because of its complexity, still had its serious moments of crisis in the mid to late

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1990s. The first of several political crises that would strain the U.S.-Mexico relationship began

on the very day that NAFTA took effect, January 1st, 1994. On this day, Maya and Tzotzil

peasants from the southern state of Chiapas, calling themselves the Zapatistas after the

revolutionary hero Emiliano Zapata, declared themselves against “Neoliberalism” and “500

years of oppression” and led an uprising against the government of Mexico. Though never

widespread, the rebellion exposed some of the inequalities and social costs of Mexico’s

economic modernization. It also rattled investors and punctured the image of Mexico as a

rapidly modernizing country that Salinas had cultivated abroad. While Mexico was negotiating

with the Zapatista rebels, Luis Donaldo Colosio, Salinas’ handpicked successor to represent the

PRI in the 1994 presidential elections, was assassinated on March 23, further shaking confidence

in Mexico’s reforms. And then shortly after Ernesto Zedillo, Colosio’s replacement, pulled off

another victory for the Official Party, José Francisco Ruiz Massieu, the Secretary General of the

PRI, was assassinated on September 28, further exposing the unraveling of the party and leading

already jittery investors to pull even more money out of Mexico. This series of political crises,

combined with a botched transfer of power between the Salinas and Zedillo administrations in

December of 1994, would cause a major run on the peso that would test Mexico’s financial

stability and the U.S.-Mexico relationship. By the end of the year the peso had become

overvalued and Mexico’s financial reserves were dangerously low. The outgoing Salinas, who

wanted to head the new World Trade Organization (WTO), had heeded the lesson of his

predecessor José López Portillo who had said “a president who devalues is himself devalued,”

did not want a peso devaluation to come on his watch. Zedillo took office on December 1 and by

the middle of the month, Mexico was bleeding over $1.65 billion in reserves per day. When the

bottom fell out of the market in the last days of December 1994 and early 1995, the “herd” of

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investors taking their money out of Mexico became “the stampede,” and the “Peso crisis,” as it

would come to be called, had plunged Mexico into a deep economic crisis that threatened to spill

over to the United States if Mexico could not meet its financial obligations, especially given the

exposure of American investors in Mexico and the tight economic integration between both

countries. The U.S. Congress balked at a bailout for Mexico, but the Clinton administration was

able to dip into an executive reserve of $20 billion and help Mexico cobble together another $30

billion from the IMF for a total rescue package of $50 billion for Mexico. Mexico had to put up

some of its oil reserves as a guarantee and launch a new round of austerity measures, including

tax hikes, which were extremely painful for Mexico. In 1995, the Mexican economy shrank by

6.5 %, unemployment rose dramatically and poverty began to increase. Over the next couple of

years, the Mexican economy would begin to grow again and Mexico was able to pay off its loans

early, with the U.S. Treasury even making a nice profit, demonstrating the close economic

collaboration between the United States and Mexico. Zedillo would be the last president of the

Official Party and would go on to transfer power peacefully and without any economic crisis to

the PAN’s Vicente Fox in 2000. From that period forward, the transfer of power between

administrations would become more transparent and institutionalized and far less prone to

economic crises like the one in 1994.

Lastly, despite the increasingly important economic cooperation between Mexico and the

United States, thorny issues like narcotics would continue to cause some friction despite both

countries’ efforts to “compartmentalize” economic issues from security issues and de-link them

from the increasingly important U.S.-Mexico economic integration. Drug consumption in the

United States continued to increase in the 1990s despite the efforts of Reagan era programs like

the “(S)ay no to Drugs” campaign. By this time the Mexican cartels had gone from junior

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partners to the Colombian cartels to full-fledged and increasingly powerful drug trafficking

organizations (DTO’s) that were vying for control of the Mexican corridors leading into the

United States. Mexico’s gradual political pluralism, which was very important for Mexico’s

gradual democratization, was disrupting the traditional top-down arrangements in which the

DTO’s had thrived under the PRI’s hegemonic rule, often bribing politicians, police, and

members of the military. The PRI had lost control of Congress for the first time ever in 1997.

President Zedillo believed that democracy was a prerequisite for flourishing markets and had

proposed to “liquidate centralism” and to share presidential power with states and municipalities.

Several northern states, including those bordering the United States, were no longer controlled

by powerful PRI governors, but by the opposition PAN. One result of this political pluralism in

Mexico was the “fractionalization” of the DTO’s, as David Shirk has called it, with four major

DTO’s now locked in a struggle for control of these drug routes to the U.S. Along with violence

against rivals, the DTO’s also used their vast drug money to buy influence and to penetrate law

enforcement agencies assigned to combat them. In one egregious example that caused a major

rift to the bilateral relationship, Mexico’s Drug Czar, General Jesús Gutiérrez Rebollo, whom his

U.S. counterpart Gen. Barry McCaffrey had called “a guy of absolute unquestioned integrity,”

was found to be on the take by the Juárez Cartel and protecting them while going after their

rivals, the Tijuana Cartel. The arrest of General Gutiérrez Rebollo in February of 1997 exposed

the growing corruption of Mexico’s security institutions and alarmed U.S. officials because by

now, U.S. officials from various U.S. law enforcement agencies had been working closely and

sharing information with their Mexican counterparts. The arrest of Mexico’s Drug Czar also

brought to the fore the thorny issue to the bilateral relationship of the U.S. “certification” of

Mexico’s counter-narcotics efforts. Since 1986, the U.S. Congress had mandated the yearly

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certification of countries in their counter-narcotics efforts. Mexico had always objected to this

process of certification on the grounds that it violated Mexico’s sovereignty, but because the

flow of narcotics from South America through Mexico and into the United States was a

transnational issue and interdiction efforts required a joint effort, Mexico had grudgingly

accepted. In this case, Mexico argued that the arrest of Gen. Gutiérrez Rebollo was proof of

Mexico’s counter-narcotics efforts. In March of 1997, President Clinton recommended

certification with the proviso that Mexico cooperate on extraditing drug traffickers and that

Mexico beef up its prosecution of drug traffickers under Mexico’s new money laundering laws.

The U.S. House initially overruled Clinton’s certification of Mexico, but after intense debate, the

Senate upheld certification but required the Clinton administration to issue a detailed report

following up on Mexico’s full cooperation on counter-narcotics. In Mexico too there was

vigorous debate, with many arguing that this annual certification was an example of U.S.

“meddling” in Mexico’s affairs. Others pointed to the danger of the powerful DTO’s corrupting

Mexico’s security institutions, as General Gutiérrez Rebollo’s example had just shown. In the

end, Mexico and the U.S. continued cooperating on all essential matters to the bilateral

relationship. The U.S. needed a stable partner, especially given the increasing economic

integration between the two nations and the importance of Mexico to the economic vitality of the

United States. Similarly, Mexico continued to need U.S. investments for its own economic

growth and development as well as needing access to the vast U.S. market for the country’s

growing exports. Despite Mexico’s historic efforts in the past to diversify its commercial

relationships with other parts of the world, the United States had always remained Mexico’s

most important trading partner. Now that NAFTA had irreversibly locked Mexico into a deeper

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economic integration with the United States, neither country could afford to alienate the other

and disrupt this vital and increasingly important relationship without harming itself.

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Free Trade, Economic Integration, Migration, Narcotics and Security: the Transformation

of the Mexico-U.S. Relationship in the 21st Century

The end of the Cold War and the passage of NAFTA marked a tectonic shift in the United States-

Mexico relationship over the past century, making Mexico’s market opening policies permanent

and binding the two countries much closer as the twenty-first century approached. The new

century also ushered in a new, more democratic era in Mexico when the PAN’s Vicente Fox

ousted the PRI in the 2000 presidential elections, ending seventy-one years of the Official

Party’s complete dominance of power and ushering in an era of contested elections. Though the

PRI would make a comeback with the election of Enrique Peña Nieto in 2012, the dedazo, or

“the nod” as the practice of the Official Party’s outgoing president anointing his successor for 71

years was called, was a thing of the past. Each administration in the twenty first century would

face unique circumstances and come to stress different policy preferences, but NAFTA had

irreversibly changed the bilateral landscape ushering in a process of unprecedented economic

cooperation and integration between Mexico and the United States as well as institutionalizing

the bilateral economic relationship. Since then, successive administrations have sought to

compartmentalize the bilateral relationship and to fully institutionalize the dispute resolution

mechanisms so that conflicts in one area of the bilateral relationship, whether trade or security

spats, would not interfere with or damage the larger U.S.-Mexico diplomatic, economic, and

security relationship.

In the presidential elections of 2000, amidst cries for “el cambio,” or simply, “change,”

the PAN’s Vicente Fox swept the PRI out of office, converting it into an opposition party, and

began the difficult process of trying to further institutionalize Mexico’s nascent democracy,

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while building on NAFTA to bind Mexico and the U.S. closer. U.S. President George W. Bush,

who was also elected in 2000, something that only occurs every twelve years, made his first visit

outside of the United States to President Fox’s ranch in Guanajuato. Having taken office almost

simultaneously and sharing a similar worldview about the importance free markets should play

in a nation’s development, there were high hopes on both sides about building on this very

important bilateral relationship. With the legitimacy conferred by having freely won the

presidential elections, President Fox and his Foreign Relations Minister Jorge Castañeda, citing

Mexico’s “democracy dividend,” wanted a deeper economic engagement with the United States,

what Fox had called “NAFTA Plus” in his campaign. By this he meant a deeper European

Union-style economic integration that would include development projects and would also take

into account the freer movement of labor between Mexico and the United States, as well as a

comprehensive immigration accord with the United States, something that had not been part of

NAFTA. As part of this comprehensive migration accord, Fox hoped the U.S. would

“regularize” the status of the estimated four million Mexicans residing and working in the United

States without legal status at the time. Castañeda had called this approach to linking the

legalization of the Mexican undocumented population in the United States with the broader

comprehensive immigration accord that would include guest worker programs and development

projects in states that traditionally sent migrants, or sending states, “the whole enchilada.” This

was also a major departure for Mexico in that the country had never had a formal migration

policy before. As we have seen in the previous sections, a combination of historic “push” and

“pull” factors had led to steady flows of migrants from Mexico to the United States over the

course of the previous century: the “push” factors of the Revolution; the “pull” factors of U.S.

economic growth, especially with the fully documented close to five million migrants that came

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to work in the U.S. as part of the Bracero Program from 1942 to 1964; the “push” factors during

Mexico’s “lost decade” of the 1980s, when the number of undocumented migrants spiked; and

again the “pull” factors of robust economic growth in the U.S. in the 1990s when key sectors of

the U.S. economy like agriculture, meat-packing, construction and hospitality had become reliant

on migrant labor. Since the end of the Bracero Program, which had established the patterns of

certain sectors of the U.S. economy’s dependence on migrant labor by the mid-1960s, there has

been a mismatch between the demand for migrants in various sectors of the U.S. economy and

the nation’s immigration laws, which have provided a smaller number of agricultural visas for

temporary workers and “green cards” for permanent residency. By the end of the 1900s, the

majority of Mexican-born people in United States already had legal status, having received

permanent residency in prior decades through work visas, changes in immigration laws such as

the Immigration Reform and Control Act, or IRCA, which had granted permanent residency to

about two million Mexican immigrants in 1986, or through family reunification programs. This

comprehensive migration accord that Fox was proposing in 2001 would have also entailed

“regularizing” the status of the approximately four million Mexican immigrants who did not

have legal status at the time, something that Bush had signaled some support for in recognition

of the broken immigration system but his advisors were reluctant to push given the enormous

amount of political capital they would have to expend with the U.S. Congress to make it happen.

That point was rendered moot when the terrorist attacks of September 11, 2001 occurred, shifting

the Bush administration’s priorities to focus on national security.

The Al-Qaeda attack on the twin towers in New York and the Pentagon on September 11,

2001 and the Bush administration’s dramatic shift in priorities to focus on national security put

the final nail in the migration accord’s coffin and ushered in an era of the securitization of the

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U.S.-Mexico relationship. While most of the world expressed solidarity with the United States,

the Bush administration took umbrage at Mexico’s less than enthusiastic response to the 9/11

attacks. Foreign Minister Castañeda had expressed support for the U.S.’s “right of reprisal” and

had declared that “friends should not haggle over their support,” but opponents and the Mexican

press criticized him for being too “pro-U.S.” Subsequent statements of solidarity by Fox and his

foreign policy advisors were not enough for Bush administration officials. The United States

took migration completely off the table and turned its full attention to security and its fight

against terrorism, with the U.S.-Mexico relationship coming to focus almost exclusively on

security matters. When Mexico, as a rotating member of the UN Security Council for the first

time since 1981, did not endorse the U.S. invasion of Iraq in 2003, which most countries did not

do either, the previously jovial Bush-Fox relationship became even more strained. Despite the

strain at the presidential level, both U.S. security agencies, especially its newly formed

Department of Homeland Security, and Mexico’s security agencies continued their close

cooperation on security and narcotics issues. Mexico’s Interior Minister (Gobernación), the

ministry in charge of most of Mexico’s security matters, declared that the country would not

allow terrorists to use Mexico as a base to attack the United States and proceeded to secure its

southern border as well as to work closely with the United States to secure its northern border.

Mexico and the United States continued cooperating on all essential matters and deepening the

economic relationship, but with the migration accord dead, no other Mexican president would

again stake their political capital on policies over which Mexico had no control.

Though not related to the terrorist attacks, another very important security issue that had

already challenged the Mexico-U.S. relationship since the 1980s, narcotics trafficking, became

more prominent and at times more contentious in the 21st century. As we have seen in the

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previous section, the demand for narcotics in the U.S. had continued unabated since the 1980s,

and because Mexico shares a 2,000 mile border with the United States, Mexico’s by now very

powerful DTO’s continued funneling South American cocaine, Mexican marihuana, and by the

twenty-first century, meth and opium across the border. On Mexico’s geographic proximity to

the U.S., Porfirio Diaz is said to have quipped a century earlier: “Poor Mexico so far from God

and so close to the United States.” It is most likely apocryphal given Diaz’ close relationship to

the U.S., but it gained new relevance and currency in the modern era when looking at Mexico’s

geography and the way the DTO’s have had a corrosive effect on Mexico as they warred with

each other over access to smuggling routes to the United States.

Upon taking office in 2006, President Felipe Calderón (2006-2012) continued deepening

the economic relationship between Mexico and the U.S., but also decided to focus on

militarizing Mexico’s fight against the DTO’s which had grown even more powerful in this new

democratic era and were becoming an increasing threat to Mexico’s own security and

institutions. The capture of a handful of DTO leaders by successive Mexican administrations

and the full frontal assault on the DTO’s by the Mexican army, which Calderón had enlisted to

lead Mexico’s fight against them, led to the further fractionalization of these drug trafficking

organization. As the DTO’s splintered and broke up into new ones, each one using even more

violence to assert its territorial claims, violence in Mexico spiked. As part of his security and

defense strategy, Calderón sought a much closer security relationship with the United States than

the two countries had had in decades. The Mérida Initiative of 2007 exemplified this

unprecedented security cooperation between Mexico and the United States. Under this initiative,

which has been renewed in subsequent years, Mexico has received about $1.3 billion dollars

since 2008 to fight drug trafficking, for training and equipment, and to help build Mexico’s new

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security agencies and strengthen the country’s security institutions, including strengthening its

justice sector. For its part, Mexico has spent over $12 billion dollars since then on counter-

narcotics efforts. Mexican authorities across various cabinets and agencies, especially those in

charge of security and law enforcement, came to work very closely with their U.S. counterparts,

a closeness without precedent. Though the Peña Nieto administration in 2012 initially backed

away from such closeness with U.S. agencies on security cooperation, preferring to stress

economic reforms and opening Mexico’s energy sector instead, the escape for the second time of

Mexico’s most notorious drug lord and head of the Sinaloa DTO, Joaquín “El Chapo” Guzmán,

from Mexico’s high security prison in 2015, led Peña Nieto to rethink this strategy. Guzmán’

subsequent arrest again in 2016, with substantial intelligence cooperation from U.S. authorities,

and his impending extradition to the United States demonstrates the importance of continued

close security cooperation for both countries. In addition to continuing close cooperation with

Mexico on these counter-narcotics efforts, the Obama administration (2012-2016) has also

worked closely with Mexico on gun smuggling from the United States to Mexico and money-

laundering operations to go after the DTO’s money, while also addressing the demand side of

drug consumption in the United States. These latest efforts were especially welcome by Mexico

given that Mexico has borne the brunt of the war on drugs, with over 100,000 drug related deaths

since 2006 alone.

Economically, every Mexican administration in the twenty-first century has continued to

build on the market opening policies that President Salinas put into place with NAFTA and to

deepen the economic integration between Mexico and the United States as well as with the rest

of the world. With the return of the PRI to the presidency in 2012 after twelve years of PAN

rule, Enrique Peña Nieto has even opened Mexico to foreign participation in its energy sector,

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something the U.S. had historically wanted Mexico to do and every Mexican administration

since Zedillo had tried, but been unable to do given the importance of Mexico’s oil as a symbol

of Mexican nationalism and self-determination. Stressing economic reforms from the beginning

of his administration, Peña Nieto’s signature legislation has been the Pacto por Mexico, or “Pact

for Mexico,” an agreement between the PRI, the PAN and the PRD that produced a series of

constitutional revisions in late 2013 that dealt with energy, education, telecommunications and

judicial reforms. Particularly salient for the U.S.-Mexico relationship were Mexico’s energy

reforms. Forging an agreement with the PAN, a party that had always sought to open Mexico’s

energy sector to private and foreign investment but ironically was not able to when it held the

presidency and the PRI was an opposition party, and surprisingly the center-left PRD, which had

historically resisted such moves, the Peña Nieto administration secured the constitutional reforms

necessary to allow private and foreign participation in Mexico’s oil and natural gas for the first

time since the Porfirio Diaz era over a hundred years before. The secondary legislation for these

energy reforms was completed in 2014 and 2015, allowing foreign participation in developing

and extracting Mexico’s oil and gas for the first time. Mexico has a tremendous amount of deep

sea oil deposits as well as shale oil and gas deposits which it has not been able to develop, partly

because Mexico’s oil monopoly, PEMEX, had historically been starved of research and

development funds as successive administrations used it as the government’s “cash cow.” With

these unprecedented energy reforms, PEMEX lost its monopoly status and now private and

foreign companies can bid on the exploration and extraction of oil and gas in Mexico. Though

completed in early 2015, a time of low oil prices due to U.S. producers bringing much more oil

and natural gas to the market through new hydraulic fracturing, or “fracking” techniques,

Mexico’s energy sector has begun to gradually attract significant investments. As oil and gas

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prices return to higher levels, these energy reforms have the potential to further transform U.S.-

Mexico energy cooperation in a way that Canada and the U.S. were already doing. U.S. energy

companies are already being awarded contracts to participate in the exploration and extraction of

the country’s natural gas and oil, as well as in building a series of giant gas pipelines to serve

Mexico’s industrial areas of Monterrey, Aguascalientes, and Guanajuato, all of which sorely

needed energy upgrades as they boomed economically after NAFTA and become even bigger

industrial hubs.

In addition to increasing the economic integration between Mexico, the United States and

Canada since NAFTA took effect, Mexico has also opened itself to the world and forged

significant trade and investment agreements with other parts of the world. In fact, Mexico has

more trade agreements now, forty-four, than almost any other country in the world. It has a trade

agreement with the European Union, Japan, the Central American countries and several South

American countries. Mexico is also a leading member of the Alianza del Pacifico, or Pacific

Alliance, a regional economic integration organization that looks to the broader Asia Pacific

World and consists of Mexico, Peru, Chile and Colombia, with Panama and Costa Rica as

candidates for full membership. Mexico and Canada also joined the Trans Pacific Partnership

negotiations that will, if ratified by all member countries, further deepen economic ties between

Mexico, the U.S. and Canada, along with Peru, Panama, Chile, Colombia as well as Japan,

Australia, Vietnam, New Zealand and other countries in the Asia Pacific region. Lastly, Mexico

is upgrading its trade agreement with the European Union (EU) and is now in negotiations to

become part of the TTIP, the Transatlantic Trade and Investment Partnership that began as a free

trade agreement between the United States and the European Union.

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Conclusion

Over the past century, the vital Mexico-U.S. relationship has at times been tumultuous and

conflictive, but it has also been marked by remarkable stability and cooperation. Despite its

moments of tension, each country has been very important to the other for over a century and this

importance has only grown as the two countries have become more integrated economically over

the course of the twentieth and twenty-first centuries. Having developed a close relationship

with the United States and an extremely close economic integration with the U.S. economy at the

end of the 19th century and into the early twentieth century, Mexico exploded in a Revolution in

1910. The Revolution was catastrophic for Mexico and there was much conflict between the two

countries during this tumultuous period, with the U.S. intervening in Mexico directly three times.

In the decades after the Revolution there was significant cooperation between both countries and

further gradual economic integration as Mexico turned inward and pursued its nationalist

economic model, which included industrialization and state-led development. There were also

periodic bouts of tension in this post-revolutionary period, especially when Mexico nationalized

U.S. and British oil firms in 1938. The Second World War alleviated the bilateral tensions

brought about by the oil nationalization and the resulting U.S. boycott of Mexican oil and

brought the two countries closer than ever in the twentieth century, with the two countries

cooperating closely on security and economic matters. This post-war cooperation and a

relatively harmonious bilateral relationship then continued from the 1940s to the 1970s despite

some Cold War tensions when Mexico asserted its independent foreign policy and defended the

sovereignty of states, opposing U.S. interventions in countries like Guatemala and Cuba at

international forums. In the late 1970s to 1982, Mexico intensified its nationalist economic

model and engaged in a more activist foreign policy partly as a result of its new oil wealth.

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There were episodes of friction here too as Mexico’s activist foreign policy in Central America

drew the wrath of the United States, but even then the economic ties between both countries

continued to grow. In the 1980s as Mexico’s nationalist economic model ran out of steam and

Mexico entered its deepest economic crisis since the Great Depression. As this occurred,

México began backing away from its activist foreign policy, resulting in less friction with the

U.S. At the same time, Mexico began to restructure its economy from a nationalist, state-led

model of development to a more market-oriented model with significant foreign investment. The

U.S. educated policymakers who gained control of the Official Party in the 1980s and 1990s

pursued a much closer relationship and a deeper economic integration with the United States

through NAFTA, which took effect in 1994. The end of the Cold War and the passage of

NAFTA produced a sea change in the U.S.-Mexico relationship, deepening the economic ties

between the two countries, institutionalizing the bilateral relationship, and compartmentalizing

areas of conflict so that periodic crises, which are inevitable in any deep relationship between

two large neighboring countries, would not contaminate or permanently damage the larger

relationship. Before the institutionalization of this bilateral relationship, flashpoints spilled over

into other policy areas and became crises, which were then more difficult to repair.

In the two decades since the passage of NAFTA, the Mexican and U.S. economies have

become more integrated than ever, with bilateral trade between Mexico and the United States

expanding six-fold, with over $531 billion worth of goods and services being traded per year.

Bilateral trade between the two countries amounts to over one and a half billion dollars per day.

With over 128 million people and a growing middle class, Mexico is an enormously important

market for U.S. exports, and similarly, the United States is an enormously important market for

Mexico’s exports. Mexico is currently the United States’ second largest export market after

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Canada and is currently the United States’ third largest trading partner, only behind Canada and

China. The U.S. exported $237 billion worth of goods and services to Mexico in 2015. For

Mexico, the United States is by far its biggest trading partner, with Mexico exporting $295

billion worth of goods to the United States. Mexico is a member of the G-20, the international

forum consisting of the twenty largest economies, as well as the OECD, the Organization for

Economic Cooperation and Development. Similarly, U.S. investments to Mexico have increased

dramatically, as have Mexican investments in the United States. Mexico is one of the largest

recipients of foreign investment by U.S. firms, with over $107 billion in stock foreign direct

investment by U.S. firms in 2014. Mexico’s foreign investment in the U.S. is also significant,

with over $17.7 billion in stock foreign direct investment by 2014.

This post-NAFTA economic integration has also led to increasingly interdependent

production on both sides of the border with tightly integrated productions chains in key

industries such as automobile manufacturing and aerospace production. Examples of global

firms that are integrating their production in both countries in this way in the post-NAFTA era

are automobile companies like Ford, General Motors, the now Italian controlled Chrysler, as well

as Toyota, Nissan and Volkswagen. A wide range of other global manufacturers and producers

like General Electric and Hewlett Packard have also dramatically increased their production in

Mexico, integrating production on both sides of the border. In an important indicator of the

significance of cross-border production, about 40% of Mexico’s substantial manufactured

exports to the United States contain U.S. made components. This integrated production by

global firms in Mexico and in the United States has been key to their competitiveness in the

global marketplace. Mexican multinationals such as cement maker CEMEX, the glassmaker

Vitro, and Grupo Bimbo Bakeries and an array of other Mexican firms have also taken advantage

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of NAFTA to invest and make huge inroads in the growing U.S. market. Investments now

regularly flow both ways, making cross-border production an everyday occurrence and linking

Mexico and the United States in more profound ways than ever. With Mexico’s recent telecoms

and energy reforms, U.S. based AT&T is now expanding and investing in Mexico’s cellular

network, and several U.S. energy companies are winning bids to develop Mexico’s shale oil and

gas deposits.

The populations of both countries are also inextricably linked and have become a

permanent element of the bilateral relationship. There are over one million Americans living in

Mexico and over twelve million Mexicans living in the United States. Remittances to Mexico

from Mexicans working in the United States regularly top $20 billion per year, making

remittances a major source of revenue along with Mexico’s significant manufacturing and oil

exports. In addition to the number of Mexican citizens living in the U.S., there are over 35

million Mexican Americans in the United States. Their combined purchasing power in the

United States has been estimated at over 1.5 trillion dollars.

Recognizing that the vital Mexico-U.S. economic relationship will only expand as each

country continues to grow, Mexico and the United States have been building new border

infrastructure to facilitate this expanding trade and investment. Examples include the newly

expanded San Diego/Tijuana pedestrian border crossing as well as the new “Cross Border

Express,” a new ‘sky-bridge’ connecting pedestrians from San Diego directly to the Tijuana

International airport. The two countries have also recently completed the new

Brownsville/Matamoros international railroad crossing further linking Mexico to Texas, the first

new international railroad crossing built in over a century. Though not enough to handle the

burgeoning binational trade – indeed much more investment in border infrastructure is needed –

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important border infrastructure projects like these will deepen the already robust and vital

bilateral economic relationship. Mexico and the United States have become so interdependent

and inextricably linked to each other, and the relationship between the two has become so

institutionalized, that going forward, the bilateral relationship will remain robust and the

conflicts that are inevitable between any two large countries will probably not permanently

damage this vital relationship.

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Bibliography/ For Further Reading Babb, Sarah. Managing Mexico: Economists from Nationalism and Neoliberalism. Princeton, New

Jersey: Princeton University Press, 2001. Bucheneau, Jurgen. In the Shadow of the Giant: The Making of Mexico's Central America Policy, 1876-

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