When Claudia Sheinbaum, a woman, took over the presidency of Mexico for the first time on October 1st and the representatives frenetically cheered her speech in the congress in Mexico City, many international guests also applauded: the Brazilian head of state Lula da Silva, Chilean President Gabriel Boric and the US American First Lady Jill Biden. And Germany? Frank-Walter Steinmeier, who was in Mexico for the last time in September 2022, was represented at this historic moment. By the former Federal President Christian Wulff.
Mexican President Claudia Sheinbaum at her inauguration in Mexico CityImage: Juan Carlos Rojas/picture alliance
Olaf Scholz was actually supposed to land in Mexico City on Tuesday evening, only to be received with military honors by Claudia Sheinbaum the next day. But the government crisis in Germany quickly thwarted the Chancellor’s plans: Scholz is flying straight home from the G-20 summit in Rio de Janeiro. In Brazil, however, at least one bilateral meeting is being planned. Germany still seems to realize how important relations with Mexico are in these challenging times in global politics.
With a trade volume of 29 billion euros, the country is Germany’s most important trading partner in Latin America, and around 300,000 jobs depend on German companies in Mexico. At the same time, Germany is Mexico’s number one trading partner in the European Union. Mexican nursing staff are in great demand here, and the German economy’s Latin American offensive is also intended to attract engineers and scientists to Germany. There are increasing voices in Mexico to further intensify relations.
Shephanie Henero, Mexican geopolitics expert, tells DW: “It is always said that Mexico should move closer to Europe to reduce its dependence on the US. But so far this has not happened, 80 percent of Mexican exports go to the US USA. But now a window of opportunity is opening to deepen relations with Germany, especially in the areas of renewable energies and the automotive industry.”
“The Mexican government is also flirting with Russia and China” – Stephanie Henero Image: Private
Will the VW crisis soon reach Mexico?
Henero says that the VW crisis in Germany with possible factory closures and the loss of tens of thousands of jobs in Mexico is not yet an issue. But the Mexican economy will certainly also suffer, as VW is, after all, the most important player in Mexico’s automotive industry, with the local subsidiary “Volkswagen de México”. The largest automobile factory in Puebla produced almost 350,000 automobiles last year.
Mexican workers work on Volkswagen’s Tiguan modelImage: Pedro Pardo/AFP/Getty Images
And then there are the elections in the USA with the winner Donald Trump, who will probably shake up the geopolitical world situation – certainly at the top of Scholz and Sheinbaum’s agenda. There is great concern in Mexico that Donald Trump will take seriously his threat to massively deport illegal immigrants. Of the estimated 11 million undocumented migrants, almost half are Mexican.
This would also have a massive impact on Mexico’s economy. According to the World Bank, the country receives the most foreign remittances in the world after India, around 67 billion US dollars in 2023. More German involvement would be just right, says Stephanie Henero: “If you divide the continent down the middle, the south trades primarily with China, the center and the north trade more with the USA. Europe must not only limit transatlantic relations to the USA limit, there should also be a Latin American “Atlantism”.”
German business hopes for a breakthrough in the EU-Mercosur free trade agreement
If everything goes perfectly, the German Chancellor will land in Germany on Wednesday morning with a message that goes exactly in this direction: namely, when the free trade agreement between the European Union and the Mercosur states is signed on the sidelines of the G20 summit in Rio de Janeiro Brazil, Argentina, Uruguay, Paraguay and Bolivia will be concluded after 25 years of negotiations. And so the largest trading zone in the world with more than 720 million people would be created.
“This free trade agreement would be a liberation for the German economy. We have to take advantage of this opportunity, geopolitically it is hard to imagine a more difficult situation,” says Volker Treier, head of foreign trade at the German Chamber of Commerce and Industry. “Now the window of opportunity is open: You can’t negotiate for 25 years, then not come to a conclusion and believe that you can drag everything further like chewing gum. If not now, then when?” he asks.
“The election of Donald Trump must also be a wake-up call for us to be more willing to compromise” – Volker TreierImage: Werner Schuering/DIHK
Treier tells DW about a joint economic survey conducted by European chamber associations in Brussels. The result: “Pretty poor”. Especially in view of the threat of protectionism from the future US government, the agreement would be an important signal for Europe and the German economy. Batteries, solar panels, wind energy, green hydrogen – Europe could achieve its green transformation faster and more sustainably using South American raw materials.
China as a beneficiary?
In return, the four billion euros that European companies pay annually in tariffs for their exports to the Mercosur countries would then be eliminated, calculates Volker Treier. “We already have good relations with Mercosur, but there is a lack of real dynamism. This is also because the Mercosur countries are particularly responsible for the classic German export goods, i.e. the automobile, but also for electrical engineering or mechanical engineering products impose very high tariff rates of between 25 and 30 percent.”
Former Estonian Prime Minister and future EU foreign policy chief Kaja Kallas echoes the same sentiment: “If we don’t sign a trade agreement with them, then this gap will be filled by China.” Between 2020 and 2022, China would have increased its investment in the region by 34 times. The first Chinese-controlled mega port in South America has just opened in Chancay, Peru.
If the EU-Mercosur free trade agreement cannot be concluded at the G20 summit, supporters are aiming for the Mercosur summit on December 5th and 6th in Montevideo, the capital of Uruguay.
Opponents of the free trade agreement in Europe and South America are forming
But at the same time, resistance is growing in South America and Europe, and not just among environmental associations. European farmers are up in arms and criticize that there are double standards and therefore unfair competition with their colleagues from Latin America.
600 French MPs are calling on Commission President Ursula von der Leyen to give one Call in the Zeitung “The World” not to sign the agreement. What’s even more serious: French Prime Minister Michel Barnier announced that France could not and would not accept the agreement in its current form.
Argentine biologist and alternative Nobel laureate Raúl Montenegro tells DW: “The agreement between Mercosur and the EU is of much greater benefit to Europe than to South America. The main victims of any agreement will inevitably be South America’s biodiversity, its small and medium-sized businesses and be the poor in both regions.”
Raúl Montenegro warns of the consequences of industrial agriculture – here is a demonstration against pesticides in ArgentinaImage: Raúl Montenegro
Brazil on its way to the top of the international stage
Another herculean task awaits the G20 host Lula, who wants to enshrine the fight against hunger and climate change in the final declaration in Rio, with the endless topic of free trade agreements. “I have never been so optimistic about the EU-Mercosur agreement,” the Brazilian head of state said on the sidelines of the UN General Assembly in New York two months ago. Lula wants to make Brazil one of the most important global players in his third and probably last term in office.
This is another reason why time is of the essence, says Volker Treier, head of foreign trade at the German Chamber of Commerce and Industry: “On the side of the Mercosur countries, as with other countries in the global south, their self-confidence is growing. We were in India two and a half weeks ago with the Asian conference and there It’s analogous: people are still shaking hands with us, but it won’t stay that way forever.”
