The Evolution and Future of U.S.-Mexico Relations

Tuesday, May 1, 2012

Experts discuss outcomes of the 2012 elections in the United States and Mexico and look at both countries' post election agendas.

This session was part of a CFR symposium, U.S.-Mexico Relations Beyond the 2012 Election, which was made possible by the generous support of the Mexican Business Council.

JAMES HOGE: If I can have your attention, please. We're going to get started. We have an hour to have some fun here and I don't want to waste any of it.

I'm Jim Hoge from the council. This has been a terrific set of sessions today on U.S.-Mexican relations. First session this morning -- for those of you who maybe didn't make it -- was on security cooperation. The second session was on economics and the third session is on evolution of the relationship -- where are we going, particularly after the elections of 2012.

Mexico has an election coming up July 1st; we have one in the fall. Both presidents take office in about seven or eight weeks of each other at the end of the year. So there is a lot that we could cooperate on and there's a lot we probably could fight about.

Now, to take us through our paces today, we've got two really terrific and very familiar people here at the council. On my far left is Jorge Castaneda, who's the former secretary of Foreign Relations of Mexico. He's also the distinguished professor at the Center for Latin American and Caribbean Studies at New York University. He's the author of a number of books. His most recent one is called "Manana Forever?:" -- with a question mark -- "Mexico and the Mexicans."

Next to me on my near left is Robert A. Pastor. He is a professor and director of the Center for North American Studies at American University. He's also an author of a number of books and his latest one is called, "The North American Idea: A vision of a Continental Future."

Welcome, gentlemen; nice to have you with us.

Since we're talking about post-election, why don't we just start out with a quick -- like we're on television or something -- preview on what's going to happen in these elections.

Bob, how about the Mexican election?

ROBERT PASTOR: Well, the Mexican one is easier to call, because Enrique Pena Nieto is far ahead in double digit figures and the election is on July 1st. I think the U.S. presidential election -- the polls indicate that the two candidates are closer and I think the economy is still a little bit uncertain. And I think the media would like a good race and I think they're going to have a good race. So we're less certain who will be taking office in the United States.

HOGE: Jorge, do you agree that Pena seems to be in a very substantial lead? Does it matter to Mexico, in your opinion, whether they get an Obama or a Romney -- a new first-termer or a second-termer?

JORGE CASTANEDA: I think that Pena Nieto does have a big lead and it looks increasingly difficult with so little time left for anyone to make that up -- especially that the rules of the election and the campaign are such that they favor the frontrunner, whoever he or she may be.

HOGE: Right.

CASTANEDA: That's very difficult to change an almost -- a 15- to 20-point lead in so little time. I generally like second-term presidents better for Mexico than the United States -- whoever they are. I particularly happen to like Obama, but even if it weren't Obama, I would still like a second-term president. It makes it generally more feasible, easier for them to do some of the stuff that I think American presidents working with Mexican presidents should do. And some of those things are not always very popular so they're too obsessed with re-election and it's complicated for them to focus on that.

HOGE: How much difference -- we were talking about this at lunch a little bit that Mexico has reached that stage of sort of political maturity where there is not that much difference on basics, on fundamentals between the candidates. Would you agree?

CASTANEDA: No. I think there's not much difference between Pena Nieto and Vazquez Mota. I think there's a huge difference --

HOGE: Who is a candidate --

(Cross talk.)

CASTANEDA: -- of Calderon and Fox's party. And there's a huge difference between Pena Nieto and Vazquez Mota on the one hand and Lopez Obrador on the other hand -- a very huge difference on just about everything. Some of that is more toned down than other parts and some of that -- some of what Lopez Obrador says he would like to do, maybe he wouldn't actually, because he couldn't -- that's a different story. What he wants to do is radically different than what Pena Nieto and Vazquez Mota want to do.

HOGE: But it looks as if he's less popular now than he was the last time he ran. Is that a fair comment?

CASTANEDA: He seems to be about 10 points below where he was last time -- what he got last time. He's around 23 (percent), 24 (percent), 25 percent. I think there is a bit of a race for second place. There are days when Lopez Obrador is leading Vazquez Mota; there are days when she comes back. The problem is that he is a better debater and campaigner than she is, and so it's not impossible that he might pick up the three or four points to send her down to third place -- not impossible.

HOGE: Bob, do you think it matters, particularly to Mexicans, who wins our election? Are there significant differences in a Romney or an Obama administration towards Mexico?

PASTOR: Well, we don't know yet, in part because I don't think Romney has spelled out an overall approach to Mexico. He has spelled out in most clearest terms his opposition to any comprehensive immigration reform that could involve any path towards legalization. So that is one issue where they're clearly different.

He's also talked about the border more in terms of walls than in terms of bridges. And so that's a second area of difference. But I think beyond that we don't have a clear idea whether there are key differences between the two candidates. Except in the case of Obama, of course, he has spent a lot of time on Mexican issues, on Canadian issues. He has high-level committees both on regulatory harmonization, on border initiatives. He's met -- met with leaders --

HOGE: Those committees are supposed to report by the end of the year, are they not?

PASTOR: That's right. They have -- unfortunately, he set up two parallel committees -- one with Canada and one with Mexico -- both on regulatory and border. He has hinted in his last meeting on April 2nd with the two leaders that he may try to encourage them to converge to a single committee, which I think would be a far wiser approach for the United States -- to approach things as Ambassador Hills did with a North American perspective rather than two bilateral perspectives. But we really haven't heard anything from Romney on any of these issues.

HOGE: Now let's move it beyond the elections and see what some of the unfinished agenda is. And I might say at the beginning, the progress that has been made in recent years in Mexico is really very formidable. It is now, I think, a sustaining democracy. It has a large middle class which has been developed. It has economic stability to a great extent, which has not always been the case. So when we start looking at the unfinished agenda, we do so from a much better position than has been the case in the past.

Let's start with NAFTA, one of the iconic parts of our relationship. It's now almost two decades old. What sort of shape is it in? What still needs to be done to make it more effective in terms of our relationship/

PASTOR: Well, I think NAFTA has been fulfilled. It should not be opened; it should be an icon to Ambassador Hills and her counterparts.

In terms of the specific objectives in NAFTA, it's been astonishingly successful. I mean, dismantle the trade and investment barriers; trade more than tripled; foreign direct investment quintupled. But with all trade agreements, the metaphor that's often uses is if you stop pedaling, you're going to fall of your bike. And in many ways, that's what happened with regard to NAFTA.

NAFTA succeeded in its first seven years beyond wildest expectations in trade investment. Since 2001 to the present, the growth in trade declined by two-thirds; the growth in foreign direct investment declined by half. That is to say, trade in growth, trade in investment continued to increase, but regional economic integration peaked in 2001 as a percentage of our global trade.

And so what we really need to focus on is how to deepen economic integration. Because as Ambassador Hills said this morning, trade among our neighbors is decidedly different than trade with East Asia. Thirty-seven percent of our imports from Mexico are our exports. We're no longer trading products in North America; we're making products together.

And since 9/11, a lot of the restrictions on the border that have gone up have increased transaction costs maybe 15 (percent) to 20 percent. We need to find a way to create a seamless North American market right now. And perhaps even move towards a common external tariff, which would eliminate rules of origin as another transaction cost.

So we really, from an economic competitive standpoint, we have a major agenda in front of us, which in my judgment would do more to stimulate the U.S., Mexican and Canadian economies than anything else we could do in a trade area that we're contemplating right now or anything else from an economic area. How to create the seamless market -- that's the first agenda item. And that's connected, of course, to the security concerns on the border and on drug trafficking and what more needs to be done there. What more needs to be done with regard to immigration. But the totality of the North American relationship should be a key agenda item for this election campaign and for the subsequent administration as well.

HOGE: Just a footnote: I think 2001, when we peaked, was also the period of time in which China was becoming a major player here.

PASTOR: Yeah. There were multiple reasons why we peaked. I think the first reason, frankly, was 9/11 and the restrictions that went up. The second reason was China. Will Rogers like to say that even if you're on the right road, if you sit down you're going to get run over and we were run over by China.

HOGE: Let's get back to post-2012. And you've written a lot about this, Bob, that what we really need is a North American approach to infrastructure, to energy liberalization, so forth and so on.

This administration's been kind of passive on that front. They have followed sort of a dual bilateral approach -- we'll make relationships with Mexico; we made duplicate ones with Canada, but the two shall never meet. And the Canadians seem to have been very willing partners in this approach.

Jorge, what -- first of all, how important is it to you, do you think -- or to us, the two countries -- that there be a much more formidable and open and highlighted North American approach to these very big problems? And if so, why is it so difficult to get there?


HOGE: It's political.

CASTANEDA: I've agreed with Bob on this for a long time that the trilateral approach is really in our interest -- in Mexico, in any case -- than a double bilateral approach. And I think that's true for the Canadians and for the U.S. also. The big problem has been convincing the Canadians. The Canadians don't like trilateral, period. They don't like it.

When we start -- Bob talks about this in his book -- when we started with Fox in 2001 -- even in 2000, actually -- to try and push for deepening, broadening, strengthening any kind of trilateral, North American economic community, the notion -- the first negative response came from the Canadians. They don't like it. And what they say -- and I guess they have a point -- is they don't want to contaminate their border with ours. They think they have a very nice border relationship with the Americans; they think we have a terrible one and they don't want theirs to look like ours. I don't think they're right, but this is what they think -- and they say so. I mean, in private conversations, high level Canadian officials say so.

So what can you do with that? Well, first of all, I think you have to keep pushing. There's not much choice. I think just keep pushing like Bob does -- writing op-ed pieces for Toronto Globe and Mail as much as he can. And I think that many of these groups that have been set up with Pedro Aspe, with George Schultz, with others -- the one we just went to in North American futures at UBC in Vancouver -- just keep pushing and pushing and pushing knowing that it's a real problem -- there's a real problem with the Canadians.

Now, the other issue is what can Mexico do to push the Americans? And this is really the discussion, whether we really think -- we in Mexico -- that it's the United States that's going to all of a sudden have a great idea like Bob's and say, oh, guess what, guys? This is what we're going to do. Or if it makes more sense to think that who should be driving the agenda is Mexico. Why? Because this is really what we do in life: We think about the United States -- (laughter). That's what we do, whereas Americans don't just think about Mexico and for many -- all sorts of reasons.

So either we push the agenda -- I think -- or it's not going to be pushed. And so then we come back to the question of whether Mexico should have a vigorous, proactive, open-minded foreign policy pushing the United States in one direction or another or whether it shouldn't. And this is one of the debates in Mexico, although it's not a campaign debate, because frankly, with the exception of a few of our friends here -- myself and a few others -- nobody else cares. But it is a fundamental issue.

HOGE: What would we want when the election is over -- and I'm being impractical at the moment -- not what could we get, but would we really want out of the relationship that we don't have now -- for example, in energy, in immigration reform problems?


PASTOR: Well, I think -- I think from the U.S. national interests, it's vitally important to create the seamless market, because I think it'll stimulate our economy. From the U.S. national interests it's vitally important that the crime and the drug trafficking in Mexico is significantly reduced. I think from U.S. national interest it's important for our borders to be much more functional than before. And that our partnership with our two neighbors is a model for the world, because I personally think that one of the arguments for North America collaborating with each other is that all three countries have an independent identity internationally. The U.S. the superpower; Canada the middle power, advanced industrialized power; and Mexico, one of the leaders of the Third World and one of the most successful leaders or the Third World.

I think all three together, for example, could be infinitely more successful in lobbying China on currency reform than any of the three acting independently of each other. All three together in coming up with a formula that balances both energy security and reduction of carbon emissions could be a formula that could be adopted internationally. And all three together could modify the border so that it doesn't look like the (changing ?) borders in Europe, because we not like Europe. And the differential in gap between Mexico and its northern neighbors is too wide for it to be complete labor mobility. But to redefine the nature of labor mobility among the three countries could be a model for the rest of the world as well.

So I think that there is much that the U.S. could gain with regard to a comprehensive approach to its two neighbors -- right across the board.

HOGE: Let me pick out one that's continually controversial and we'll stay that way and that is the violence that's related to the drug trade.

Now, every sense that I have is that we're not going to change our basic approach. In fact, I think the vice president has pretty much signaled that -- don't bring a liberalization formula to us. But at Cartagena this year, the Americas summit, one after another leader of Latin American countries got up and said the current approach is a failure and liberalization of some kind is -- should be at least explored more seriously.

Now, you've written a lot about this, Jorge. Where are you at this point?

CASTANEDA: Well, I obviously agree with the statements that have been made more and more specifically and eloquently by former presidents -- Cardoso, Gaviria, Fox, Sevillo (sp) -- and by now, sitting Presidents Santos, Perez Molina and Chinchilla. And I think that, you know, I'm absolutely convinced that this is a complete failure; that the price we've paid in Mexico is just outrageous and that the results are very meager. I mean, 60,000 deaths in exchange for what?

Now, they're all gang-land killings among them? Well, that's a difficult balance to figure out, because that means, I guess 30,000 killed 30,000 or how exactly did it work? And you know, in Human Rights Watch we've been there; we've done the reports. We've spoken to everybody from the president down and the answers are just absolutely incomprehensible on all of these issues.

So the question is, do you go on with this? Does the United States go on with a policy which President Obama made a very -- Senator Obama made a very eloquent statement in 2004: The war on drugs has been a failure. He said it. He just wasn't president. This is true. You'll say all sorts of things before you're president and after you're president and you don't necessarily do them or say them when you are president. But I think he's an enlightened person who knows this stuff hasn't worked. I think most Latin American presidents know this doesn't work. So then where do you go from here?

Well, this is one of the issues that perhaps can begin to be talked about by a second-term president in the United States and by someone like Pena Nieto in Mexico who does not feel constricted or bound by President Calderon's policies.

HOGE: This came up in this morning's early session and I'd have to say there was a lot of emphasize put on the solution is much more complicated than you think. That it's easy to say the policy so far has been failure. It's then difficult to come up with what you do in its place. Do you spend a lot more money on trying to coerce your way out of it -- for example, the Merida funds are much less than they were supposed to be; or do you go to liberalization? If you go to liberalization, how do you decide where the line is going to be? Is it going to be just for marijuana or for other things? And will it really bring down the level of violence? There was a lot of discussion this morning about the fact that it really wouldn't. What's your take on it?

CASTANEDA: Well, I think placing the issue in terms of a dichotomy between the same policies with more money or legalization is a straw man --


CASTANEDA: It's in bad faith. Those generally who say that say so, because they don't like the issue of legalization and the best way of shooting it down is by saying, if you think legalization is a panacea, well, it's not. Yeah, but nobody thinks it's a panacea or nobody's serious. I mean, the people who are in favor of this are not fools. They've been presidents of big countries for a long period of time; they've studied these things. They're not just thinking through their teeth. They're writing and studying and reading these things.

So legalization can be part of an alternative policy; it's certainly not an alternative policy. If anything, it's a corollary, in the case of Mexico, to an alternative policy, which by the way, is where the two main candidates are moving. What they're both saying -- Pena Nieto specifically clear on this in an interview he gave to El Mercurio this Sunday in Chile. What we're going to do is emphasize fighting violence that affects society -- kidnapping, extortion, assassinations, automobile theft, et cetera -- that's going to be my priority. Vazquez Mota says the same thing.

Now, if you say that, you don't have to say the next thing, but I can say the next thing. If that's going to be your priority, then you're non-priority is obviously going to be drug trafficking. What that means is you are not going to devote all the money and the troops and the police and the effort to combating drug trafficking. What are you going to do? You're going to let it go through. Now, you don't want to do that, because you are encouraging a culture of illegality in Mexico by so doing. And that's something that has done the country an enormous amount of damage over the years. So what's the best way to let it go through without encouraging a culture of illegality? Make it legal.

And among the few things the Canadians do contribute to this discussion -- not many, but one of them -- is what they did during prohibition. And we talked about this in Vancouver and the Canadians say very intelligent things about this. They helped broaden the tires on the trucks that would ride across the lakes in the winter on the ice so they could take more scotch to Chicago and Detroit. They taxed them. They welcomed the (Bronx ?) man's fortune. They were very happy that they did very well. And they never thought of contributing to American prohibition. What they thought of doing -- the government; mainly the government of Ontario -- was to benefit as much as possible from a great opportunity, which was these crazy Americans have prohibition on alcohol and we can make it here. And they keep drinking -- it's not that they're not drinking anymore; they're just not making it. Well, let's give them all the liquor they want. (Laughter.)

HOGE: Bob, any comments on this?

PASTOR: (Laughter.) Jorge has a wonderful, cynical approach to a lot of different issues. But I think on this one he has a lot of truth on his side.

I mean, when you think about the end of prohibition, what happened? It is true consumption of alcohol did increase in the United States, but violence dropped very sharply in Detroit and elsewhere. And you know, we equalized some of the taxes after that as well. It wasn't just the Canadians that got --

HOGE: I believe long term, consumption actually has gone down.

PASTOR: Well, right after the prohibition --

HOGE: Over a --

PASTOR: People were thirsty, you know? (Laughter.) Anyway, I think there are several important points to keep in mind on the drug trafficking.

Number one is President Obama himself has said we need to start thinking about this issue as a health issue as well. And as a health issue, we already know that there is two terrible drugs in America -- it's killed a lot more people than any of these other drugs. And that's tobacco and that's alcohol. And we don't prohibit either one, but we do tax and we do regulate in a manner that has sharply diminished illegal trafficking of both and has diminished consumption significantly as well.

I think the idea that we should treat all drugs coming into the United States exactly the same, that we should have criminal punishment exactly the same or even harsher for marijuana in many ways than for cocaine or the synthetic drugs is ridiculous. I think the time has come to look more sharply at each of the drugs and ask ourselves, can we have a more intelligent strategy? Some should be decriminalized, some shouldn't be. And we need to have -- we need also to have an approach that's much more collaborationist with Mexico and Canada if it's going to be more effective.

HOGE: You know, right after the elections -- before they both take office -- if they follow their predecessors, they're going to have a meeting together. If so -- say in January, in December -- what is it that the Mexican president, whichever one it will be, what are they going to want more than anything else? What's the one or two top items?

CASTANEDA: I think it depends a great deal on the debate and the fight, the struggle, within the PRI and within Pena Nieto's team -- supposing that he does win and I increasingly think, as I said, that he will -- about whether they want to have an activist, vigorous, bold foreign policy --

HOGE: So there's going to be a --

CASTANEDA: -- debate --

HOGE: The party itself is sort of split, right?

CASTANEDA: Well, there are many people in the PRI and in his team who have a very different idea; who think that the best foreign policy for Mexico in relation to the United States is for practical purposes, no foreign policy. Complain a little bit here and there about too many guns, too many drugs, not enough trucks, blah, blah, blah, but basically just complain and not do a whole lot. I mean, this has been a very traditional Mexican foreign policy. And there are people within Pena Nieto's circle who believe that absolutely sincerely -- others who also believe that what Mexico should do is have a much more activist and vigorous foreign policy towards South America. That makes much more sense than trying to get anywhere with the Americans, that you can't do that. That is one view.

The other view is whether Pena Nieto can become convinced of the kind of vision that Bob suggests in the book and where Mexico becomes the driver for that sort of a vision. Then in that meeting, what they would do is to start saying, OK, we have four years now -- six in Mexico, but four in the states -- we have a two-term, second-term president in the United States. Why don't you just listen to me for a couple of hours, President Obama, and let me tell you how I see the future of our two or three countries? Let's -- just listen. Let's not talk back; let's not argue; let's not get into specifics, but I have this view on where things can go on energy, on immigration, on drugs, on security, on trade, on investment. Starting with one basic fact, which I think goes back to your first question, Jim, which a real issue: Mexico has grown on average the last 12 years about 2.5 percent GDP per year. And with about 1.5 percent population growth, that's a little bit probably less than 1.0 GDP per capita per year. It's just too low.

You cannot solve any of the countries problems with that growth rate. You can manage them; you can make the middle class grow a little bit; you can improve some things, but you can't really transform the country with that kind of growth rate. So what can the three countries do to have Mexico grow more and also have the U.S. and Canada grow more, thanks to greater cooperation with Mexico? That's what I think the Mexican president should sit down with Obama, if Obama wins, and talk about with him. And not get into the details in this business -- we've spent so much wasted time on trucks and guns and this and that. I mean, what's the purpose of it?

HOGE: Bob, put yourself at that high level summit before they both take office. What particularly would we want from the American side that we don't have at the moment, in terms of a relationship?

PASTOR: Well, the problem is that for the United States right now, we face so many crises around the world, I think the one thing that this president -- and perhaps his successor or in his second term -- is just quiet. We don't want anybody making anymore demands on us. Instead of looking ahead with a vision and saying, how can the three countries of North America -- how can I invite not just the Mexican president and have the Mexican and Canadian prime minister trip over each other to see who can get into the White House first, invite them together and have a broader discussion.

This -- in some ways, the most dangerous thing -- it's not dangerous in a crisis setting and therefore, we don't even see it -- is that our neighbors may conclude we are an unreliable partner. That the United States goes to Hawaii and proposes as a major achievement a negotiation with eight tiny countries in Asia, who's combined GDP is one-sixth or one-seventh that of Canada and Mexico. And when Canada and Mexico say they want to be a part of this, we say, let's think about it a little bit. We did it completely backwards. Canada and Mexico are our two major trading partners. These eight countries -- four of whom we already have a free trade agreement and the other four are trivial economically. China is not going to be a part of it, because the TPP is aimed at China and so therefore, it's cornering China --

HOGE: Is that why it has been so popular with this administration?

PASTOR: It might be. I think it's an excuse for an Asian policy. It's a rebuttal to the Romney critique that we're soft on China. You know, we're stationing in Darwin, Australia is one more example of this absence of a strategic vision in East Asia.

But more importantly, I think the one lesson that should be drawn from NAFTA was when we were first confronted with this idea of NAFTA, we also had the Uruguayan Round of trade negotiation -- the world trade negotiations. The question is, which should come first? It turns out that by going to NAFTA first, we created an incentive for the Europeans and the Japanese to come to us and negotiate the conclusion of that round, which wouldn't have happened the other way around. So the proper way to have done a good trade policy internationally is go to our two neighbors first, deepen economic integration significantly among our neighbors, and then Asia would be creeping over to us and the world trade negotiations would be rushing to us. So we've got it completely backwards.

HOGE: What would a North -- just in sense of proportionality -- a North American trade agreement -- free trade, common -- where would that rank compared to say an Asian grouping or the European Union?

PASTOR: Very interesting. You know, when President Obama went to APEC -- 22 nations in the Asian Pacific, including China and Japan -- they talked about how this was our most important export market; that 61 percent of our exports go to APEC. Well, that's true, but 37 percent of that goes to just Canada and Mexico. So it exceeds the rest of APEC all put together.

So I think in terms of economic grouping, the truth is that we talk about a globalized world, but most of the trade is occurring within three regional blocks: European Union, North America and East Asia. The United States share -- the North American share of the world product went from 30 to 36 percent between 1994 and 2001, the halcyon years of NAFTA -- the first seven years of NAFTA -- greatest growth in jobs, 22 million jobs during that same period of time. Then from 2001 to the present, it has declined to back where it went again, which is why we need to think about first North America and how do we create a truly seamless market. When Europe went from being a free trade area in 1958 to becoming a customs union in 1970, all of the sudden -- just on the eve of the customs union and afterwards -- trade within Europe just soared again. The same thing could happen in North America, particularly if it's coupled with a different approach to the borders and a different approach to rules of origin, a different approach to regulatory harmonization as well. We could have a genuine spurt. North America would once again be the central economic region in the world.

HOGE: Before I go to the audience, Jorge: Anything you want to say on this?

CASTANEDA: Well, I think that one of the other issues that has to be addressed continues to be immigration. And they're going to -- the two presidents are going to have to talk about it. Some things have changed, but in different ways. A lot of attention was paid last week -- I'm sure many of you saw it -- to this new Pew study whereby roughly the same number of people entered the United States illegally during the 2005-2010 period as the number of people who left the United States. And so that net illegal immigration was nil.

First of all, that's -- in itself, that's a somewhat complicated number that they arrived at, because regarding the returns to Mexico, this is done by the Mexican census figures and by Mexican surveys. And the census has been very much questioned in Mexico -- the 2010 census was very questioned for all sorts of reasons I won't get into; and secondly, the surveys that are taken of asking people, were you in the United States last year, are not terribly reliable; and thirdly, in that number of 1.4 million returnees, there's a large number of deportees, which is not exactly a voluntary departure.

HOGE: In the Obama administration, deportation has gone up very dramatically.

CASTANEDA: Skyrocketed. But the interesting thing about all of this, other -- the other number which has not been addressed in all of this is that in 2010, there were approximately 700,000 legal entries from Mexico into the United States -- the highest number ever and slightly above the peak numbers of the Bracero program in the 1950s. They include a greater of H visas, including the NAFTA visas. They include the T visas. They include 150,000 Mexicans acquiring permanent resident status. Why? What happened?

Well, what happened is simple. We're just as bright anybody else is. If the United States starts telling us in 2005, 2006, 2007, look, we're not really happy about all these Mexicans in the United States. The illegals -- maybe they self deport; the permanent residents this; the other thing. What are Mexicans going to do? Well, Mexicans who are permanent residents are going to naturalize. And there's been -- there was a huge increase in naturalizations from 2005, 2006 onward. And every American citizen can bring in wife, children, parents without staying in line. The line is for the permanent residents, not for the citizens. So there was 150,000 last year in 2010, about 250,000 H and T visas, investor visas another and temporary workers in general. Seven hundred thousand Mexicans came to the United States to work in 2010 -- more than ever before.

For practical purposes, the legalization of the flow part of migratory -- of immigration reform has happened. Nobody's noticed and I'm sure the Obama administration wants it to be. The last thing they want is Congress all over them for this sort of stuff, so you're not allowed to say this. But this has already occurred. And this is policy. They're doing it more quickly; they're giving more visas; they're doing it more expeditiously. They're doing it very well. But this means that there is less pressure on that side and a greater possibility of addressing something, for example, like the 6 million Mexican illegals in the U.S., 12 million all illegals in the U.S., and try and settle that, because the flow part has partly been -- practically been solved.

HOGE: Well, there's a question on that flow part. And I -- is it -- is this really a permanent change or is this just a dip, because we've had a very bad recession and there weren't jobs for people coming? Now, some things point to it being more permanent than that, which is Mexico's birth rate has gone way, way down -- number of children per family; the middle class has grown; economic opportunity is better than it was before. But to the larger question of once our economy ticks back up, do you think there'll be a surge again, particularly of illegal immigrants?


PASTOR: Yes. I think that the decline in undocumented migration to the United States is a result first of our economic recession -- most significantly, because people are coming for jobs, and for income even more than for jobs, because 93 percent of undocumenteds that come here say they have left a job in Mexico or Central America, wherever. They come here because they can earn five, six, seven, eight times as much. I think secondly it's gone down, because enforcement has increased -- particularly with regard to deportations. Thirdly, it's gone down because actually, the Mexican economy the last couple of years has grown twice the rate of the U.S. economy, which is really the point. That is to say, what's missing from comprehensive immigration reform -- all of the elements have been on the table and I think they're all needed, but what's missing are two things: First, a long-term and secondly, an immediate-term strategy. In the immediate term, the only way you're really going to stop or significantly reduce undocumented migration is if everybody has to use a biometric identification to become employed, because people are coming here to be employed. They're not coming here for social services or education -- although that's part of a larger motivation. The major reason is to work and to earn. And if everybody has a biometric ID, you can handle that issue. You can't do it with this e-qualify -- E-Verify system, which is quite bad.

Secondly -- and this is the fundamental element -- you need a long-term strategy. The long-term strategy is a variation on what the Europeans did. They had regional cohesion funds where they invested a huge amount of money into the Southern European countries and they narrowed the income gap in 15 years significantly. We need a North American investment fund in the long term that goes into transportation infrastructure, connects the markets of North America, takes advantage of the fact that when trade tripled, 80 percent of that trade goes by road and yet, we didn't build one road in North America. We need a broader vision of that.

So those are -- those are the elements that are needed for immigration. But I think your first -- your question is absolutely right. Undocumented immigration is going to go back up again when the U.S. economy goes up, in the absence of a concerted, comprehensive immigration plan.

HOGE: Let's go to the audience. Give us a name and association if you will. Wait for the mic to come. Try and keep it to one question and a concise one.

Yes, ma'am.

QUESTIONER: I'm Alexandra Starr from the New America Foundation. I reviewed your book for The New York Times.

CASTANEDA: Thank you.

QUESTIONER: I thought it was superb.

So I wanted --

PASTOR: You should feel free to do mine as well. (Laughter.)

QUESTIONER: Let me know.

So you spoke a little bit about Pena Nieto and you referred to this new -- a break within the PRI or that it's not a monolithic party. Some people have talked about the idea that he might be putting a new attractive face on an old guard. And I was wondering if you could both talk about whether you think that might come to pass, what you've seen -- behind the scenes.

CASTANEDA: Well, I don't see a lot behind the scenes, so I don't know. What's clear to me, I think, is that it's a different -- it's a different context to begin with. They can't do what they used to do, even if they wanted to do it. Secondly, I think at least some of them don't want to do it anymore -- I don't know how many of them, but a lot of them don't want to do it anymore and if they wanted to they couldn't do it, because of the opposition, because of the media, because of the United States, because of civil society, because of all sorts of stuff. Not as much as I would like stuff to stop things from going -- from this being a restoration, but I think there's enough limits for there -- for it not to be possible for there to be a restoration.

The other question is: What is more conducive to the quote-unquote "good guys" within this group winning as opposed to the bad guys winning? Having Pena Nieto win by a landslide, with a majority in both houses --

HOGE: Both houses.

CASTANEDA: -- which is not impossible, or having the election as tight as possible and without a majority. And I think this is really the fundamental question -- not that anybody can do a whole lot about it. But you know, wishful thinking is always good. It's fun. Besides, that's what -- speculation is what we do for a living, right, Bob?

My sense increasingly is that the greater leeway he has, the greater the possibilities of not going back to the past, of his being able to appoint whoever he wants to carry out the policies he wants, to be able to really have the liberty, the freedom to do more or less what he's been saying he wants to do. Given that, I'd rather probably he have a majority than not have one.

And the final question is what's more conducive to this also: PAN in second place or PAN in third place.

Maybe Bob wants to answer that one. (Laughter.)

PASTOR: Well, let me start by saying I agree with Jorge that context is everything. Mexico from 1988 to 2000 went from the most fraudulent, manipulative electoral system in the Americas to the most professional, impartial, the most modern electoral system. One in which I wish the United States could learn and should learn a lot from. And that changes everything. It is a democratic system right now that pre-existed as leader of an authoritarian system. It's still a party and a powerful party, but it has to work within the democratic system.


HOGE: I said, shucks. Shucks.

PASTOR: Well, I actually think that's great. (Chuckles.) And I think it means -- it means, among other things, that there is a middle class, as Jorge has written about, very eloquent, in his book that's grown up in Mexico that is transforming the country in ways that we haven't seen, because we're so focused on the drug trafficking and violence that we haven't realized this dramatic transformation has occurred on our doorsteps and we haven't begun to take advantage of it.

So I think the question about the old PRI and the new PRI misses the whole point of Mexico.

HOGE: Yes? Yes, sir. Right there.

QUESTIONER: Thank you. My name is Ike Savit (ph). I represent a small export trading company and we deal a lot with Mexico. We specialize in the graphic arts and printing-related industries.

Mr. Castaneda, in your article in The New York Times in January, you mentioned something very, very important -- the middle class of Mexico. And to me, this comment that you made here is the answer to everything -- immigration, you name it, you name it. Mexico has a growing middle class and enjoying it, OK? And our relationship with Mexico is getting better step by step. For example, in our industry we have now a new tracking regulation. One of the big problems of the --

HOGE: Let me ask you: Do you have a question, sir? Because we don't have a lot of time.

QUESTIONER: Yeah. All the maquiladoras used to be a question of tracking. So now we're allowed to bring the tracks into the United States from Mexico. This is a big, big help to the industry.

The last very important thing: The maquiladoras program is already sort of finished, but Mexico came up with a new program, which is extension of the maquiladoras program in a new free-trade zone, which is going to be big benefits to Mexico, benefits to us. So the extension of maquiladoras is something bigger and better for all of us.

HOGE: Thank you very much.

OK. Next question? Do we have a question? Yes, sir. Right there. Yes, ma'am.

QUESTIONER: Hi. My name's Andrea Dinamarco and I'm with Allen & Overy.

One of the things I've been thinking throughout this conference today is how there is no lack of answers for the many problems and issues in Mexico with drug trade and foreign policy and what will happen in the future. But what I've noticed -- especially in my own background being a Brazilian -- I see here that there's been a tremendous influx of Brazilians now in the United States with the surge of the Brazilian real and so much more Brazilian spending here in the United States. There are three new consulates in Sao Paulo opening up and visa requirements have become a little bit easier.

So attitudes about Americans -- attitudes Americans have towards Brazilians have definitely improved and that has led to a change in foreign policy. What I wonder with Mexico is: Is the issue not that we don't know what to do? Is it more that we have these preconceived notions about Mexico as a country of workers and not as a country of potential clients and customers that can come and spend their money and that can contribute to our economy as well? Is the major issue here -- and something that has not been brought up during these lectures -- a deep-seated racism? Or maybe that's too strong of a word, but maybe some sort of stereotype that as a neighbor, we can't address political, openly and overcome?

HOGE: Very sensitive question. Let's see what we get as a response.


CASTANEDA: Well, I mean, I think the point that you're making is a valid one. There is that sense in the United States, but there is that sense because the overwhelming majority of Mexicans who have come to the United States over the last century have been people who have come to work in unskilled, low-wage labor in the United States. And that is, up to a point, the image most Americans have of Mexico and Mexicans, because that's the image they confront every day when they go to a restaurant, when they go to a hotel, when they eat strawberries, what have you. This is what Mexican immigration to the United States has been for a hundred years.

We face problems with the consul general here. We've talked about it. The educational level of Mexicans -- Mexican kids in New York -- undocumented Mexican kids in New York schools is lower than Salvadoran, than Ecuadorian, than Colombian, than Peruvian -- lower. Mexicans. We're not comparing them to Americans or South Koreans, no, no, no. It's a -- this is the reality of our immigration to the United States over the past century. That's what it is. And this is something that we have to face and then change, but it's true.

There are some things that are changing. I'm not sure that they're a great -- they're for the better. There's a long piece today in some paper in Mexico, but a lot of people have been writing about it: The new immigration from Mexico, from Northern Mexico to Austin, San Antonio, a little bit to Dallas and Houston, which are basically people who are much wealthier, professional, et cetera who are fleeing the violence in the north. But they're fleeing now not just for awhile; they're settling in San Antonio and in Austin. They're starting new businesses; they're very dynamic, very entrepreneurial, they have high levels of savings. They want to make a -- they want to start a new life in these areas. And that's going to change, but of course, that changes only in those towns.

What's most important is to try and change not the immigration from Mexico, but to try little by little to diminish that immigration by broadening the middle class. I mean, the key question in Mexico is when we can begin finally to sell this idea, which is not true -- even though it wasn't before -- that Mexico has become a middle-class society. It's a different kind of middle class than the one you have here, than the one that Western Europeans have, et cetera, but it is a majority now -- 55-56 percent a middle-class society. And if things continue improving the way they are, 10 or 15 years from now we would have 60-65 percent of the population being middle class.

HOGE: Jorge, you mentioned --

CASTANEDA: If we can sell that, we're in business.

HOGE: -- that some are now moving to the southern part of the United States. And that one of the sort of generators of that movement is violence.

I remember a piece you wrote awhile back now to Americans, essentially saying, look, Mexico -- if you take it as a whole -- is a reasonably peaceful place. The violence is targeted in certain areas. Is that still the case or has it expanded much?

CASTANEDA: I don't know what the security folks said in the morning, but what seems to be the case is that it still remains limited to a certain number of places, but they're not the same places. It shifts around. If you fix Tijuana and Juarez, you have a disaster in Tamaulipas. If you fix Michaocan, you have a disaster in Guerrero.

The government, state, does not have the wherewithal to control the drugs routes and the drug trade in the entire country. It would need to have far more police or far more troops. And this is a political decision that the next president's going to have to make. Colombia spends about five points of GDP on overall security stuff. We spend about two points of GDP. So we can double it and that's what we're going to do. We're going to find a way to get two or three points of GDP and we're going to stick it into that, not in education, not in infrastructure, not in health, but in that, because we can't do all of this stuff. You can't do that and education and health and housing and infrastructure.

Well, it's a tough decision. I think it's absurd to do that, but I could understand that others might think differently. What I know you can't do is that and everything else.

HOGE: Bob, did you have a?

PASTOR: Yeah. Let me just respond to the question about racism. I think in the debate on the immigration bill between 2005, 2007, it was a poisonous debate. And it bordered at moments on racism. But there are several other elements that need to be understood. Number one is this occurred at the end of about two decades of a dramatically large increase in immigration, dramatically larger undocumented migration. And part of that was a response. Indeed, the most interesting part of that whole debate was that no one -- not even the most rightwing, racist member of Congress suggested reducing legal migration. It was really focused on undocumented migration. And in fact, as Jorge pointed out, more than one-third of all of the legal immigrants to the United States come from Mexico. And nobody was suggesting doing anything about that at all.

So I think that while it was a very bad debate for America in my judgment -- and certainly, if you look at it from a Mexican standpoint -- I think it needs to be understood in a broader context.

HOGE: Yes, sir. Right here.

QUESTIONER: Thank you. Richard Downie from the Center for Hemispheric Defense Studies.

You know, it's always difficult to interpret what political candidates say or what they mean, but I wonder -- and my question is for Jorge Castaneda: This morning we have a little discrepancy between your view of what the candidates have said -- and I think it was Claudio Gonzalez, but I won't swear to it -- this morning one of the speakers said that all three of the candidates said that they basically would not change the approach that Calderon has had with respect to confronting organized crime. And what you said a little earlier was that all three of the candidates have essentially said they're going to focus on crime -- kidnapping, other things -- which in effect says they're willing to let drugs pass onto the United States. And you've made the issue before, you know, with this. The United States has not done anything about demand or arms or cash so let this go.

I wonder if you could help clarify that discrepancy. And if you're right, what would that approach mean for relations with the United States? Thank you.

CASTANEDA: Well, you know, I can only go by what I read and what they say. And obviously, all candidates in all elections tend to say different things to different audiences. Specifically in the case of Pena Nieto, he made this very -- I think the most specific statement he's made is in this interview with Mercurio on this Sunday where he says Calderon's policy is a failed policy -- (speaking in Spanish). That's pretty clear. And then he says that he's going to maintain the army, but use it to combat violence. That's my reading of what he's saying, though. I have no way of knowing whether he believes this or doesn't, whether he understands the implications of what he's saying or not. I don't know.

If it was cloudy -- I'm sure it was accurate in the sense that they also have said that they thought that you had to keep the army doing -- involved in this until you have a police force. Well, yes, obviously. The question is, how do you decide? You can decide that the next day. You know, on December 2nd, the new president -- whoever he or she is -- can say, we won. Thanks to Calderon, all of this is over and now bring the army back, period. Since there's no way of knowing whether you won or you lost, because there's no definition of victory or of defeat, you can say pretty much whatever you want. It's not terribly meaningful.

What's important is what you do if you bring the army back or you leave the army on the highways and the streets. What do you want to use the armed forces for? Do you want to use them -- I always give the example, I'll ramble for two minutes here, of -- maybe a couple of you were there at the talk I gave yesterday and repeated.

I went with Aguilar Camina (ph) about a year and a half ago to Tampico to her big book presentation there. And so we flew into Tampico -- we were probably the only people to ever go to Tampico now where Aguilar and myself -- nobody else wants to go. But anyway, we went to Tampico and we got off the plane. And then instead of giving us our carryon luggage to just take it off the small plane, they sent it to the band --

PASTOR: Carousel.

CASTANEDA: The carousel and we had to wait for about half an hour there, because there were five soldiers and two dogs -- both the five soldiers and the two dogs very thin, very emaciated; I don't know who was worse -- looking, sniffing, picking up the two little bags and making as if this was a big deal. And at the same time that this was happening at the airport in Tampico, there were shootouts on the main avenues of Tampico on the main causeway -- an enormous amount of violence those days in Tampico. And Aguilar (ph) and I asked ourselves: What in the world are these two dogs and five soldiers doing here? This is not where they should be. They should be there -- or at least the soldiers, maybe not the dogs. The dogs should go home, I don't know. Why? Well, because suppose our two carry-ons were stuffed with cocaine that we were bringing up and going to deliver to somebody to take it to the United States. So what? Is that what we want to use our armed forces for or have them patrol the streets of Tampico so there are no shootouts, there are no kidnappings, there's no extortion. Everybody tells you Tampico is the extortion capital of Mexico. (Speaking in Spanish.) I don't know if that's true or not, but it makes more sense to me to have the army -- if you're going to have the army in the streets of Tampico, do that instead of inspecting carry-ons at the airport, but this is the discussion.

HOGE: And we need a sequel to get the answers to some of these questions, but we're out of time today. So thank -- help me thank our very stimulating panelists.

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