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May 2020, Volume 26, Number 2

Canada, Mexico

The US closed its borders with Canada and Mexico to non-essential travelers in March 2020, but allowed the free flow of goods to continue. Mexico in 2019 became the major trading partner of the US, with two-way trade of $615 billion in 2019.

There were 188 million crossings over the Mexico-US border in 2019, including cars, trucks, and buses as well as pedestrians. By some estimates, a million people a day cross the Mexico-US border.

Canada. Canada has the fastest population growth among G-7 countries, largely because of immigration. Canada has 38 million people and accepted 340,000 immigrants in 2019, up from 270,000 in 2015. Another 810,000 temporary permits were issued to international students and temporary workers in 2019, almost double the number issued in 2015.

About 60 percent of Canada’s immigrants include a family member who received at least 67 points for years of education, knowledge of English or French, and have a Canadian job offer. Many of the immigrants who passed the points test first arrived as students or temporary workers and applied for immigrant visas after receiving a job offer from a Canadian employer.

PM Justin Trudeau is struggling with energy policy. Trudeau’s Liberal government imposed a tax on carbon emissions, which gives it a “social license” to approve new mines and pipelines. The $16 billion Teck Frontier project to extract oil from bitumen in northern Alberta was withdrawn in February 2020 amidst controversy over whether the projected number of jobs and government revenues would exceed the environmental harms. The project is unlikely to be built unless oil prices approach $100 a barrel.

Rail traffic came to a halt in February 2020 as Wet’suwet’en hereditary chiefs and their Mohawk allies blocked the tracks in British Columbia and Ontario to protest the construction of a pipeline to take natural gas to a Kitimat, British Columbia plant to liquefy for shipment to Asia. Elected Wet’suwet’en leaders approved the pipeline, which promises jobs, while hereditary chiefs oppose it. Mohawks near Tyendinaga, Ontario blocked east-west tracks in sympathy with the British Columbia protesters.

Mexico. The National Immigration Institute (INM) in January 2020 reported that at least 20 migrant smuggling rings that charged Central American families up to $10,000 each were trying to move migrants to the Mexico-US border. The National Guard blocked a caravan of 3,000 Central Americans on the Guatemala-Mexico border in January 2020, prompting some migrants to turn to smugglers.

Two-way Mexico-US trade reached a record $614 billion in 2019, representing 15 percent of the $4.1 trillion in US trade; the US trade deficit with other countries was $853 billion. Two-way trade with Canada totaled $612 billion, China $559 billion, Japan $218 billion, and Germany $188 billion.

The Mexican economy shrank 0.1 percent in 2019, as industrial production and investment fell; the economy expanded by 2.1 percent in 2018. Formal private-sector employment rose by 1.7 percent in 2019 and wages increased by more than inflation. Mexico attracted $33 billion of FDI in 2019, about the same as previous years, but domestic investment fell. Agriculture expanded by 10 percent in 2019.

Mexico’s economy could shrink by up to 10 percent in 2020 if the US experiences a severe recession. A third of Mexico’s economy depends on exports to the US, and declining oil prices as well as less tourism and fewer remittances could combine to deliver an economic shock. The minimum wage was raised to 123 pesos ($6.60) a day January 1, 2020.

Mexico’s government debt of 55 percent of GDP is expected to increase as the government tackles the fallout from the virus. The value of the Mexican peso fell 20 percent against the US dollar in March 2020.

The government in April 2020 announced plans to take over the public trusts that finance particular retirement programs as well as science and cultural programs that have assets of $30 billion. There is little unemployment insurance for laid off workers, but workers can withdraw retirement savings from their IMSS accounts when unemployed.

The government ordered large businesses not to lay off their workers, even if they have been ordered to close, and to continue to pay workers who are not reporting to work. Andres Manual Lopez Obrador is resisting calls for a bailout package for large firms, but promised to support small businesses. Over 350,000 workers with formal jobs were laid off between mid-March and mid-April, including 85 percent from firms with more than 50 employees.

Mexico has the lowest government revenue among OECD countries, about 17 percent of GDP, and is financing new rail, port and refining projects by cutting spending elsewhere. President Andres Manuel Lopez Obrador doubled old-age pensions, expanded student scholarships and created an apprenticeship program, and plans a unified health care system. AMLO reduced spending on general public services, public order and environmental protection to free up funds for infrastructure projects and the new social programs.

Mexico spends six percent of GDP on education, the same share as in other middle-income developing countries, but teacher salaries in Mexico are three times Mexico’s GDP per capita, compared with two times or less in comparable countries. There have been many efforts to rein in Mexican teacher unions, some of which have contracts that allow teachers to buy their jobs and pass them on to their own children.

There were almost 37,000 homicides in Mexico in 2018, and 34,500 in 2019. AMLO promised “hugs not bullets” to reduce drug-related violence, but in February 2020 tapped the most trusted security force, the Marines, to capture drug leaders. The US believes that much of the illegal methamphetamine consumed in the US is manufactured in Mexico. Large fentanyl labs suggest that Mexico may have displaced China as the major source of US fentanyl.

Women protested femicide March 9, 2020; over 1,000 women were killed in 2019 because they were women. Mexico’s female labor force participation rate is the lowest among OECD countries, and women earn 30 percent less than men.

Caribbean. Caribbean islands are among the places most dependent on tourism. Fears of coronavirus reduced bookings, leading to layoffs and economic shocks from Cuba to Barbados. Many islands depend on remittances from residents who are abroad; remittances declined as layoffs in the US and elsewhere reduced what was sent home.

Caneel Bay Resort on St John in the US Virgin Islands National Park attracted over 1,000 visitors a month until Hurricanes Irma and Maria in September 2017 destroyed the eco-resort begun by the Rockefeller family. Caneel Bay owner CBI Acquisitions has the right to use park land until 2023, and does not want to rebuild unless the National Park Service, which owns two-thirds of St John, extends its land use rights. Caneel Bay’s relations with long-time employees deteriorated because the resort closes for six to eight weeks each year during hurricane season.

Southwestern Puerto Rico experienced a 6.4 earthquake January 7, 2020, damaging 8,300 homes. Aftershocks continued for weeks, and residents expressed frustration with slow responses to help them repair damaged homes. Over 30,000 people applied for aid to rebuild their homes, but inspectors found many of the houses for which rebuilding aid was requested to be safe, raising concerns about fraud.

Guyana, a country of 750,000 people, expects to benefit from eight billion barrels of offshore oil found by ExxonMobil; production is expected to top 750,000 barrels a day by 2025. There are disputes between the two major political parties, the Partnership for National Unity representing the Afro-Guyanese who dominate among urban residents and the People’s Progressive Party representing ethnic Indians in rural areas, about how to spend oil money. The PNU wants to spend oil money to expand government employment, while the PPP wants to revive traditional sectors, including sugar, rice, bauxite and gold mining. The PNU was declared the winner after elections in March 2020 that foreign observers deemed fraudulent.

Peru is becoming a major exporter of fruits and vegetables, and the completion of new irrigation projects near Olmos in northern Peru is likely to increase exports. Peru is on the verge of surpassing Chile in blueberry exports; northern Peru gets 12 hours of daylight year-round, generating yields of 16 tons per acre compared with 11 tons an acre in the US. Most northern Peru export farms are 1,000 hectares or more, and many are owned or financed by US buyers of table grapes, avocados, asparagus and blueberries. There are no major cities in the area with export agriculture, but a city is being built to house farm workers who earn $12 a day.