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Mexico State Oil Company Files $22 Billion Debt Swap amid IMF Threats and White House Visit

Mexico State Oil Company Files $22 Billion Debt Swap amid IMF Threats and White House Visit

Mexico State Oil Company Files $22 Billion Debt Swap amid IMF Threats and White House Visit
July 10
20:16 2020

Mexico’s president, Andres Manuel Lopez Obrador, known colloquially as AMLO, arrived back in his nation’s capital yesterday aboard an American Airlines flight after his first state visit to the United States since taking office in a historic, landslide victory in 2018. The commercial flight included a stopover at Miami International Airport as coronavirus-induced protocols have resulted in the suspension of direct flights in and out of the North American country.

AMLO’s choice of traveling commercial instead of flying on the official presidential airplane is part of a carefully-crafted everyman image he has been cultivating for years since he left the ranks of the once immovable conservative ruling party, the PRI, and joined the left-leaning PRD in the late 1980s. In 2014, Obrador formed a new party called MORENA after having served as Mexico City’s mayor for four years and later losing his first bid to become president in 2006.

The Trump White House hosted AMLO on Wednesday, one day after Pemex – the embattled Mexican state-owned petroleum company – announced a $22.4 billion debt swap to mitigate its massive financial liabilities. The swap will be the largest of the recent refinancing operations carried out by the once state-owned company; and while the filing with the U.S. SEC did not specify when the bonds would be issued, the action was intended to alleviate pressure mounting on the oil giant, which Obrador had planned to use as a “pillar” in his strategy to turn the Mexican economy around. Falling oil prices, however, have severely hampered the execution of that idea.

In addition, the coronavirus-induced economic crisis is being evoked by entities like the International Monetary Fund (IMF) to predict a veritable collapse of the Mexican economy. In their June World Economic Outlook Update titled “A Crisis Like No Other, An Uncertain Recovery,” the Atlanticist organization forecasts a devastating 10.5 percent contraction for Mexico this year, nearly four percent lower than its April forecast.

 

The IMF threatens Mexico

The IMF’s dire estimate comes on the heels of the official start of the USMCA, which went into effect on July 1 and comprised a significant portion of the state visit’s agenda. The revamped NATFA agreement has mostly modest improvements over its predecessor and has served mostly as a political tool by all three heads of state.

The one sector that did get a complete overhaul in the new trilateral agreement was the U.S. tech sector, which secured important concessions from both Canada and Mexico, such as the fact that they cannot be sued for “the content appearing on their platforms” or forced to store their data on in-country servers. Intellectual property protections heavily skewed in favor of American companies were also expanded.

Related to these provisions are ones surrounding biotechnology that could have critical implications for the agricultural sector provisions in the trade deal. The original NAFTA made Mexico a net corn importer through unfair rules allowing the U.S. to subsidize its own corn industry while prohibiting the same of the country that gave birth to corn, itself. New biotech rules are sure to exacerbate these problems for the Mexican agricultural sector and a multitude of groups have come out in opposition.

 

The USMCA’s “new normal”

In a letter signed by more than 80 agricultural associations in Mexico petitioned the government to prohibit the introduction of GMO seeds into the country. The coalition, which calls itself “Group in Defense of Agricultural Diversity and Mexican Food Against Genetically Modified Organisms” warns of the “grave danger” posed by the lack of defined rules against the introduction of GMOs throughout the national territory. In addition, the group condemns the provisions in the USMCA, which forces Mexican farmers to adhere to the UPOV 91 protocol that makes seed hoarding and trading illegal.

Casting a shadow over the implementation of the USMCA is compliance to the extraneous COVID-19 “new normal” policies, which are forcing a “rethinking about global supply chains” and are sure to affect exactly how the new trade deal is ultimately enforced.

AMLO’s trip to D.C. may have been a signal to the Atlanticist power bloc that he is ready to give in to their demands, recently outlined in an article authored by a CFR senior fellow, where the Mexican president is called on to “save his presidency” by embracing globalization lest the country slip into a more severe recession. Presciently, the author recommends that AMLO “welcome foreign money and expertise into the energy sector,” foreshadowing the debt swap announcement a day prior to Obrador’s official White House visit.

“Adherence to market-based rules” are also endorsed by the perennial Atlanticist mouthpiece as a way to carve a “path out of the permanent poverty of subsistence farming” by enabling the “specialization in more profitable fruits, vegetables, coffees and other products,” a strategy first implemented by NAFTA and which has resulted in the precise opposite effect.

Feature photo | President Donald Trump and Mexican President Andres Manuel Lopez Obrador wait to sign a joint declaration at the White House, July 8, 2020, in Washington. Evan Vucci | AP

Raul Diego is a MintPress News Staff Writer, independent photojournalist, researcher, writer and documentary filmmaker.

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