OBELA Analysis

In the year of the Dragon 2024, there were two major technological business problems that shook the world. On the one hand, a Boeing vehicle flew into the international station and could not return, and on the other, Volkswagen announced the closure of two very large factories. These are symptoms of the technological and productivity problem in the West and its inability to compete with the East, beyond China. It was a year in which the economies of Asia grew again at rates above 5% and those of Latin America and Europe at less than 2%, with the US at a similar rate. The fiscal deficits of the G7 economies maintained their high trend and the public debts of these economies continue to rise above 100% of GDP, with no signs of reducing. The US is projected to continue to increase, while its GDP grows very moderately and with a massive external deficit despite neo-protectionism.

Mexico is the second-largest economy in Latin America. It has a deep-rooted relationship with the United States through the T-MEC, now affected by the U.S. announcement of unilateral tariffs. It benefits from preferential access to the U.S. market, which has allowed it to export manufactured goods, automobiles, and agricultural products at the cost of importing all the inputs from China to export these products to the North. In the context of the trade war between Washington and the Red Dragon, the tariffs against Mexico prevent Chinese brand products manufactured in the country from entering its market without tariffs. The Aztec country has sought to diversify its relations by exploring trade agreements with other countries and strengthening Asian investment in strategic sectors for domestic purposes. Given the growing importance of the Asian giant in the country, Washington has pressured its southern neighbour to take measures against China, both in terms of tariffs and investment restrictions, considering them a possible risk to U.S. national security. Such policies limit Mexican growth and productive diversification. This article analyses the presence of the Asian giant in trade and investments in the Aztec country and the limits to this relationship due to its alignment with its northern neighbour.

For two decades, China has been transforming its domestic financial architecture into a part of the new international financial architecture, opening the door to a new global order. China's issuance of sovereign bonds in 2024 in Dubai is a significant development. It challenges the narrative that China wants to de-dollarise the world. In its place, it introduces a new order in which the dollar plays a different role. The fact that the U.S. has held the top currency position allowed them to finance their huge deficits despite their poor macroeconomic data, as the world's international reserves are held in U.S. treasury bonds (T-bonds). It has now changed.