More on Brazil-Mexico

Sean Goforth trumpets the possibility of greater trade between Mexico and Latin America's largest economy:

Strengthening ties to Brazil, on the other hand, offers significant economic -- and strategic -- potential for Mexico. Mexico's oil sector has been declining since the 1980s because the state-owned oil company, PEMEX, suffers from gross inefficiencies and a lack of deep-sea drilling capacity. Petrobras, Brazil's state-owned petroleum company, has the capacity to aid PEMEX in tapping the estimated 30 million barrels of crude deposited beneath the Gulf of Mexico. It can also invigorate PEMEX's refining capacity (Mexico is forced to import 40 percent of its oil because it lacks refineries), and expand Mexico's presence in the biodiesel market.

Additionally, Brazil's growing middle class is ripe for Mexican durable goods. Home ownership is growing rapidly in Brazil, and consumer credit has expanded by more than 20 percent annually since 2002. Unlike Europeans or Americans, Brazilian consumers were undaunted last year, another hopeful sign. Hitching its economy to another large consumer market would diversify Mexico's exports, and would likely engender a positive cycle by attracting foreign direct investment into Mexico in order to target the Brazilian market.

A pact with Brazil could also prove a strategic coup for Mexico. Brazil's opposition to U.S. agricultural subsidies is currently the biggest barrier to a regional free trade agreement between the Americas. The prospect of being excluded from a trade pact between Latin America's two largest economies may entice the U.S. to negotiate on its agricultural subsidies as a means of relaunching a hemispheric trade deal. (Currently the U.S. is only offering to negotiate on agricultural subsidies via the Doha talks at the WTO.) Opposition by populist leaders may impede a regional free trade deal in the short term, but if the U.S. reconsiders its subsidies, Mexico stands to benefit regardless.

Building ties with Brazil offers Mexico better prospects than with Europe, but the two needn't be mutually exclusive. Indeed, Brazil's growth could mean the rapid development of domestic enterprises that could whittle away room for Mexican goods, leaving a narrower window for developing trade ties than with Europe. And in either case, trade cannot cure all ills, as NAFTA attests.

I think that last bolded part is key, and it's equally (if not more) applicable to Mexican trade with the US. Both sides of the argument often imply that it's an either/or question: either Mexico puts its eggs in the US basket, or it looks south. On trade, that's not really necessary. (Politically it's a little more complicated.) If Mexico were to increase its commerce with Brazil or any other nation, as an overall percentage of Mexican commerce, it's not like the gross trade numbers with the US would have to decline. Rather, everyone gets wealthier. Mexico doesn't turn its back on the US in expanding trade with Brazil or China or Europe, any more than the US does by doing business with the same nations.