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Economy to take center stage for Obama's Mexico visit

Five months after Enrique Pena Nieto took office as Mexico's new president, President Obama on Thursday embarks on a three-day trip to Mexico and Costa Rica with the intent of strengthening and expanding the United States' critical relationship with Latin America.

A number of issues will be on the table, including security and immigration -- as the U.S. hashes out immigration legislation that's sure to include an expansion of border security, cooperation from Latin America will be critical. The primary focus of the trip, however, will be the economy.

"We've spent so much time on security issues between the United States and Mexico that sometimes I think we forget this is a massive trading partner responsible for huge amounts of commerce and huge numbers of jobs on both sides of the border," Mr. Obama said in a news conference on Tuesday. "We want to see how we can deepen that, how we can improve that and maintain that economic dialogue over a long period of time."

As new trade agreements come together across the globe, Mr. Obama has the opportunity now to help Mexico raise its economic clout on the international stage -- a move that would in turn help the U.S., given the two nations' closely integrated economies. The U.S. also has the opportunity to expand the economic opportunities in Central America.

By pursuing trade agreements that include Latin America, the U.S. has the opportunity to "change the face of the relationship with the region to a first-tier issue," Carl Meacham, director of the Americas Program at the Center for Strategic and International Studies, told "It's time that the region receive the attention it deserves, and the opportunity is there for the president to push this forward."

When Mr. Obama speaks to Pena Nieto in Mexico City -- in their first extensive meeting since Pena Nieto took office -- the new Mexican administration could entreat the U.S. to support its bid to get involved in the United States' free trade negotiations with Europe. The U.S. is also working with Mexico and Canada on the Trans-Pacific Partnership (TPP) with Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam.

"The rewards would be substantial for all our countries," Mr. Obama said with respect to the developing TPP in an interview with Americas Quarterly, "greater access for our exports to some of the world's fastest-growing economies which together represent a $1.4 trillion trading relationship."

Increasing trade in Mexico helps the U.S. -- for every manufactured product "made in "Mexico," according to Shannon O'Neil, senior fellow for Latin America studies at the Council on Foreign Relations, on average 38 percent was made by U.S. workers. And as Mexico makes reforms domestically, that interdependent economic relationship with the U.S. will increase.

"On the economic side, Pena Nieto has set a very ambitious domestic reform agenda for himself," O'Neil told He has passed labor reforms, education reforms, telecommunications reforms and is pursuing energy and tax reform.

"Many of these reforms should be helpful in deepening those ties" with the U.S., O'Neil continued. "Some of them start taking on the monopolies and oligopolies that hinder economic growth... Some of them change the labor laws, making it a little easier for businesses in Mexico."

Some of the biggest potential changes could come in the energy sector, which Pena Nieto wants to start privatizing in Mexico. However, O'Neil said it's unlikely there would be any big changes on the horizon. Furthermore, she said, it's unlikely Mr. Obama could have much influence on that matter. Just as the Mexican government won't try to insert itself in the United States' immigration debate, the U.S. is unlikely to try and influence Mexico's energy debate, she said.

"The Obama administration is recognizing the political complications," O'Neil said.

Central American relations

While energy may be a tricky issue in Mexico, it will be front and center during the second leg of Mr. Obama's trip, in San Jose, Costa Rica. Mr. Obama will be there to participate in the SICA Summit, a meeting of the Central American Integration System. The economic and political organization includes Guatemala, El Salvador, Costa Rica, Panama, Nicaragua, Honduras and Belize. The Dominican Republic is not a SICA member country but is expected to participate. This will be the first meeting of SICA leaders since the United States gained observer status in the group.

"I think that the vision here is that we want to make sure that our hemisphere is more effectively integrated to improve the economy and security of all people," Mr. Obama said in his Tuesday news conference of his Central American visit. "That's good for the United States. That will enhance our economy. That can improve our energy independence."

Ricardo Zuniga, special assistant to the president, told reporters on Wednesday that one objective of the meeting will be to discuss reducing energy costs in Central America, which are about two to three times higher than they are in the United States.

"The fact that it's a large number of countries and a relatively small space, you're talking about a very complex regulatory environment," Zuniga said.

"It's important to think about Central America as a market of more than 40 million people," he added, noting that a stronger regulatory system would be more attractive to investors.

Immigration debate

Improving the economy in Latin America will, of course, help the U.S. as it attempts to tackle immigration reform. "Economic development in Mexico will ultimately get at the root cause of illegal immigration in the United States," Ben Rhodes, deputy national security adviser for strategic communications, told reporters Wednesday.

On the flip side, O'Neil said, if the U.S. handles immigration reform well, it could improve the United States' economic relationships with its Latin American neighbors by further integrating labor forces. It could also, she noted, boost political relationships.

"The language and rhetoric surrounding immigration bleeds into other aspects of the U.S.-Mexico relationship," she said. "By lowering the temperature in that area, it would be useful in all the other areas we work together."

Mr. Obama's trip could also serve to improve his already-solid standing with Hispanics in the U.S., Meacham pointed out.

"He is going to be able to benefit form the optic of meeting with leaders of these countries as equals," he said.

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