"The Mexican Elite Is Absolutely In Shock" Featuring Dr. Francisco Monaldi & Dr. Tony Payan, Baker Institute

C.O.B. Tuesday

Today we were thrilled to welcome back Dr. Francisco Monaldi, Director of the Latin America Energy Program, along with his colleague Dr. Tony Payan, Director of the Center for the U.S. and Mexico, with Rice University’s Baker Institute. Francisco last joined us on COBT in December 2022 (episode linked here) and is an expert on Latin American energy, policy, and economics. In addition to his role at the Baker Institute, Tony is a Professor of Social Sciences at the Universidad Autónoma de Ciudad Juárez and his research focuses primarily on border studies and US-Mexico relations. It was our pleasure to visit with Francisco and Tony for a Mexico and Latin America energy and geopolitics focused discussion.
In our conversation, we examine President Claudia Sheinbaum’s recent election, her background as a climate scientist and former Mayor of Mexico City, concerns about her independence and potential influence from former President Andres Manual Lopez Obrador (AMLO), violence in the recent election, implications for democracy and governance, regional perspectives on Mexico’s political trajectory, and the potential future direction of Mexico’s energy policies under President Sheinbaum. Francisco and Tony share their perspectives on Mexico’s decline in energy production, Mexico as a huge consumer of US (especially Texas) natural gas, the broader implications of nearshoring for US-Mexico relations, renewable energy and climate policy, and the importance of future energy policies for economic stability. We discuss Mexico’s economic challenges, broader Latin American trends, the potential impact of President AMLO’s policies if they persist for another decade, upcoming changes to the US-Mexico-Canada Agreement, the role of US diplomacy and political leverage in shaping Mexico’s policies, the need for a comprehensive framework addressing trade, immigration, and crime, and much more. It was an enlightening discussion and we are thankful to Francisco and Tony for sharing their insights with us all.
Mike Bradley kicked us off by highlighting that this week is crucial for bonds, with the June CPI and FOMC Rate Decision on Wednesday potentially confirming or dispelling speculation about a 2024 Fed rate cut. On the crude oil front, WTI has rallied back to ~78/bbl after last week’s overselling post-OPEC meeting due to production cut confusion/uneasiness. OPEC’s June Monthly Oil Report (linked here) showed unchanged global oil demand estimates for 2024 and 2025, while the IEA’s global oil demand estimates (~1.0mmbpd below OPEC’s) will be released Wednesday. The 12-month natural gas strip has rallied to ~$3.50/MMBtu (highest since Nov ’23) driven by extreme heat forecasted through the month of June which might begin to influence current sizable E&P production curtailments. In Europe, several equity markets sold off, and EU bond yields spiked, notably in France, due to heightened political risk from the EU Parliamentary vote. Conservatives fared better than expected and Green Parties lost significant seats in Belgium, France, Germany and Italy, which could put future climate goals/policies at risk. He ended by noting US equity money flows, usually directed towards Emerging/International markets for diversification, are either stagnant or reduced due to the S&P 500 and Nasdaq’s outperformance driven by AI and Tech equities. Jeff Tillery noted there has been significant news about the Mexican stock market’s performance with Mexico and Brazil underperforming over the past one and three years, influenced by factors such as border issues, higher interest rates, post-election impacts, and cartel problems, but that Mexico’s reshoring trend suggests potential gains.
We hope you find the discussion as insightful and interesting as