Introduction

Congress has maintained interest in Mexico, a neighboring country and top trading partner with which the United States has a close but complex relationship (see Figure 1). In recent decades, bilateral relations improved as the U.S. and Mexican economies became more integrated and the countries worked together to address crime, migration, and other issues of shared concern. Disagreements on these issues have emerged on occasion, however, as exemplified by U.S. concerns about fentanyl production and trafficking from Mexico and Mexican government concerns about U.S. counterdrug actions inside Mexico and arms trafficking.¹ The history of U.S. military and diplomatic intervention in Mexico has arguably exacerbated such tension.²

Congress remains concerned about the effects of organized crime-related violence in Mexico on U.S. security interests and about U.S. citizens' safety in Mexico. It has increased oversight of U.S.-Mexico security cooperation and may continue to do so as the two nations implement the U.S.-Mexico Bicentennial Framework agreement.³ Congress has continued to appropriate foreign assistance for Mexico and oversee bilateral efforts to address illegal drug flows, unauthorized migration, environmental issues, and lessons learned on health and supply chain management from the Coronavirus Disease 2019 (COVID-19) pandemic. Implementation of the United States-Mexico-Canada Free Trade Agreement (USMCA) and its labor commitments, Mexico's treatment of U.S. energy firms, and border environmental issues may also receive oversight attention.

This report provides an overview of political and economic conditions in Mexico, followed by overviews of selected issues of congressional interest in Mexico—security cooperation and foreign aid; fentanyl trafficking, extraditions; human rights, trade; migration; energy; and border environmental, water, and health concerns.

Background

Over the past two decades, Mexico has transitioned from a centralized political system dominated by the Institutional Revolutionary Party (PRI), which controlled the presidency from 1929-2000, to a true multiparty democracy.⁴ Since the 1990s, presidential power has become more balanced with that of Mexico's Congress and Supreme Court. Partially as a result of these new constraints on executive power, the country's first two presidents from the conservative National Action Party (PAN)—Vicente Fox (2000-2006) and Felipe Calderón (2006-2012)—struggled to enact some of the reforms designed to address Mexico's economic and security challenges.

The Calderón government pursued an aggressive anticrime strategy and increased security cooperation with the United States. Mexico extradited many drug kingpins, but some 60,000 people died due to organized crime-related violence. Security challenges overshadowed the government's achievements, including its economic stewardship during the global financial crisis, health care expansion and management of the H1N1 pandemic, and efforts on climate change.

In 2012, the PRI regained control of the presidency after 12 years in the opposition with a victory by Enrique Peña Nieto over Andrés Manuel López Obrador, then standing for the leftist Democratic Revolutionary Party (PRD). In 2013, Peña Nieto shepherded reforms on energy, education, access to finance, and politics through the legislature by forming an agreement among the PRI, PAN, and PRD. The energy reform opened Mexico's energy sector to private investment, prompting foreign companies to pledge hundreds of billions of dollars of new investment in the country. During Peña Nieto's term, Mexico continued to contend with high levels of homicides, moderate economic growth (averaging 2% annually), and pervasive corruption and impunity.

Figure 1. Mexico at a Glance

Sources: Created by CRS using data from CIA World Factbook (CIA), Mexico's National Council for the Evaluation of Social Development Policy (CONEVAL), the International Monetary Fund (IMF), Mexico's National Institute of Statistics and Geography (INEGI), and the Trade Data Monitor (TDM). Notes: Mexico's 2020 census did not include ethnicity; two questions asked people whether they self-identify as Indigenous language speakers (6.1% of the population) or as Afro-Mexican or Afro-descendant (2% of the population). See the National Institute of Statistics and Geography, Así Se Contó México, 2021.

Political and Economic Environment

Mexico has undergone significant changes under the populist rule of Andrés Manuel López Obrador, leader of the leftist National Regeneration Movement (MORENA) party, who took office for a six-year term in December 2018.⁵ President López Obrador, who created MORENA in 2014, is the first Mexican president in over two decades to enjoy majority support in both legislative chambers, although the size of those majorities decreased following the June 2021 midterm elections (see Figure 2 below).

President López Obrador's approval ratings have remained high (63% in February 2023) even as he struggled to respond to the COVID-19 pandemic and continues to be challenged by entrenched poverty and corruption.⁶ Supporters of the government have generally praised its social programs and minimum wage increases, as well as López Obrador's ability to connect with his constituents through daily press conferences and frequent, countrywide travel. Critics of the government point to López Obrador's attacks on freedom of the press, independent government institutions, and judicial independence, as well as his increasing reliance on the military to perform roles previously carried out by civilian agencies in public security, health, infrastructure, customs, and other sectors. López Obrador has spared his priority, military-built, infrastructure projects from budget cuts while reducing certain other public spending. López Obrador's administration has cut public sector salaries and ministry budgets, especially those of autonomous institutions that he proposes to eliminate or merge into existing bureaucracies.

As of May 2023, MORENA controlled 201 of 500 seats in the Chamber of Deputies and 60 of 128 seats in the Mexican Senate (see Figure 2). MORENA relies on ad hoc support from other parties, including the PT, PES, and Green Party, to pass legislation. With these parties, the MORENA-led coalition controls 275 seats in the lower chamber and 76 seats in the senate, short of the two-thirds majority needed to make constitutional amendments. In 2022, the congress blocked a proposed constitutional reform that would have severely limited private sector involvement in the electricity sector.⁷ In contrast, the congress approved MORENA-backed legislation to place the National Guard, a military-led federal law enforcement body created by the López Obrador government, under the authority of the defense ministry in September 2022. Mexico's Supreme Court declared that reform unconstitutional in April 2023.⁸ Domestic and international observers criticized legislative reforms enacted in 2023 that could severely weaken the independence and capacity of the country's independent electoral commission ahead of the 2024 elections.⁹ In mid-May 2023, the Supreme Court struck down key elements of that electoral reform in a decision that prompted harsh criticism by President López Obrador.¹⁰

Figure 2. Composition of Mexican Congress by Party: May 2023

Source: Created by CRS using data from the Mexican Chamber of Deputies and Mexican Senate. Notes: MORENA = National Regeneration Movement; PVEM = Green Party; PT = Worker's Party; PAN = National Action Party; PRI = Institutional Revolutionary Party; MC = Citizen's Movement; PRD = Democratic Revolutionary Party; and PES = Social Encounter Party.

Political attention in Mexico is focused on who will stand for MORENA in the 2024 elections, as López Obrador is constitutionally prohibited from seeking reelection, and whether the opposition, which remains relatively weak and divided, will be able to select a unified candidate. As of May 2023, no leading candidates for the opposition parties have emerged. Mexico City Mayor Claudia Sheinbaum and Foreign Minister Marcelo Ebrard are among the leading contenders vying to stand for MORENA.

Security Conditions and Policy Responses

From 2015 to 2018, the homicide rate in Mexico surged some 71%, reaching a record 29 homicides per 100,000 people.¹¹ Homicides in Mexico remained near those record-setting levels leading up to and during the COVID-19 pandemic but have since declined.¹² High levels of homicides have largely mirrored trends in organized crime-related violence, as criminal groups have fought for control over illicit smuggling routes into the United States (see Figure 3).¹³ On March 3, 2023, cartel gunmen kidnapped four U.S. citizens (two of whom were subsequently killed) who reportedly had traveled to the city of Matamoros for medical services, prompting significant U.S. concern.¹⁴ By 2021, femicides (targeted killing of women) increased approximately 137% from 2015 levels.¹⁵ Enforced disappearances,¹⁶ kidnappings, and other violent crimes also have surged periodically. The estimated number of missing and disappeared people in Mexico now exceeds 112,000, with most of those reported since Calderón took office.¹⁷

Figure 3. Estimated Organized Crime-Related Homicides in Mexico (2008-2022)

Source: Created by CRS. Information from Lantia Intelligencia, a Mexican security firm.

Mexican transnational criminal organizations (TCOs) have fought to satisfy U.S. drug demand while also engaging in other illicit activities such as alien smuggling, fuel theft, arms trafficking, and money laundering. A 2021 Government Accountability Office report found that some 70% of firearms recovered in Mexico originated in the United States.¹⁸ Bulk cash smuggling continues, but TCOs also launder drug profits through complex schemes, some of which involve Chinese businesses and money traders.¹⁹

President López Obrador has rejected calls for a "war" on transnational criminal organizations, as such an approached failed under his two predecessors. Instead, his administration's security strategy includes a focus on addressing the socioeconomic drivers of violent crime. The administration launched a program that provides scholarships to youth to attend university or complete internships. No one has evaluated the program's effects on youth employability or crime prevention,²⁰ and auditors have uncovered irregularities in the program's implementation.²¹ Neither López Obrador nor Mexico's prosecutor general have devoted resources to strengthening the accusatorial justice system that took effect in 2016 or the independence of the National Prosecutor's Office.²² The administration has sought to increase the types of crimes subject to mandatory pretrial detention, contravening a goal of the reforms. Impunity for homicide remains above 90%, and Mexico ranks 135 out of 140 countries ranked by the World Justice Project in 2022 based on the performance of its criminal justice system.²³

In contrast to his campaign pledges, President López Obrador has expanded, not limited, the military's role in public security and an array of other public sector tasks.²⁴ In 2019, López Obrador backed constitutional reforms that created a National Guard to replace the Federal Police (a force that had received significant U.S. equipment and training). In May 2020, López Obrador signed a decree to allow military involvement in public security to continue through 2025, a policy that Mexico's congress extended through 2028.²⁵ Although Mexico's National Guard (composed mostly of military police units of the army and navy) is involved in territorial control in high-crime areas, border and immigration enforcement, and communications interception, it has limited capacity to investigate crimes.²⁶ State and local police forces charged with investigating most crimes, including homicides, have received less federal support from the López Obrador government than they received under prior administrations.²⁷

Addressing Corruption

Corruption is an issue at all levels of government and among all political parties in Mexico. While most evident at the municipal and state level, corruption and collusion between public servants and crime groups occurs at the federal level, as well. In February 2023, a U.S. federal jury convicted Genaro García Luna, public security minister during the PAN administration of President Calderón, on charges of accepting millions of dollars in bribes from the Sinaloa Cartel.²⁸ In October 2020, the U.S. arrest of former Mexican Defense Minister Salvador Cienfuegos (2012-2018) on drug and money-laundering charges surprised and angered the Mexican government. Responding to Mexican pressure, the United States agreed to drop the case and allow Cienfuegos to return to Mexico, where he was exonerated.

President López Obrador has taken steps to combat corruption, but the key institutions to detect and address corrupt offenses—such as the new criminal justice system, the Prosecutor General's Office, and the National Anti-corruption System—remain weak (see Appendix A). President López Obrador has been unwilling to allow prosecutors to investigate allegations involving his family and allies.²⁹ His administration's focus on reducing government expenditures and efforts to punish tax evaders have won praise from some citizens. Nevertheless, observers worry that cuts in public sector salaries have made officials more susceptible to bribes and that tax-related "anti-corruption" probes have sometimes been used to intimidate government opponents.³⁰

Human Rights

Criminal groups, sometimes in collusion with state actors, have continued to commit serious human rights violations against civilians in Mexico.³¹ The vast majority of those abuses have gone unpunished, whether they were prosecuted in the military or civilian justice systems. Under Mexico's new justice system, judges have released defendants due to a lack of evidence or a lack of admissible evidence.³² The government continues to receive criticism for not protecting journalists, human rights defenders, migrants, and other vulnerable groups from abuses, as well as for its expansion of military involvement in public security despite abuses committed by security forces.³³ Reports have documented the López Obrador government's improper use of military-purchased spyware to surveil public officials, civil society leaders, and others.³⁴

For years, human rights groups and the U.S. State Department's Country Reports on Human Rights Practices have chronicled cases of Mexican security officials' involvement in extrajudicial killings, torture, and "enforced disappearances."³⁵ The unresolved case of 43 missing students who disappeared in Iguala, Guerrero, in September 2014—which allegedly involved the local police and federal authorities—galvanized global protests. Experts from the Inter-American Commission on Human Rights disproved much of the attorney general's investigation, and in 2018, a federal judge dismissed that investigation as biased. President López Obrador established a truth commission, and Prosecutor General Gertz Manero created a special prosecutor's office to focus on the case. As of May 2023, authorities have arrested more than 80 suspects for crimes related to the case but prosecutors have yet to secure any convictions.³⁶

Among the human rights challenges facing Mexico, President López Obrador has prioritized addressing enforced disappearances.³⁷ His administration has met regularly with families of the missing, launched an online portal for reporting missing persons, registered thousands of clandestine graves, and increased the budget for Mexico's national search commission. The government has sought international assistance to identify tens of thousands of bodies that have been exhumed. Still, in November 2021, the U.N. Committee on Enforced Disappearances criticized the "structural impunity" that continues for perpetrators of disappearances and the involvement of public officials from all levels of government in such crimes.³⁸

Human rights organizations have urged the López Obrador administration to fully enact the country's 2017 law against torture, investigate and punish cases of torture, and take steps to ensure that state agents do not commit acts of torture. After an April 2019 review of Mexico, the U.N. Committee Against Torture welcomed the passage of the 2017 law but stated that torture by state agents occurred in a "generalized manner" and found torture to be "endemic" in detention centers.³⁹ López Obrador has spoken out against torture, but his government has yet to develop a system to track statistics on torture cases as required by the 2017 law.

Analysts maintain that efforts to protect journalists, human rights defenders, and migrants remain insufficient and, in some cases, have worsened under López Obrador.⁴⁰ Some 157 journalists and media workers have been killed in Mexico since 2000, including 7 in 2021 and at least 12 in 2022.⁴¹ Mexico ranks among the top 10 countries globally with the highest rates of unsolved journalist murders as a percentage of population, according to the nongovernmental Committee to Protect Journalists' 2022 Global Impunity Index.

Mexico is also a dangerous country for human rights defenders. In 2022, an estimated 45 human rights defenders were killed.⁴² As politicians discredited some human rights groups and questioned their sources of funding, police periodically used excessive force against human rights defenders protesting against femicide and other issues.⁴³ The López Obrador government has neither strengthened the mechanism intended to protect human rights defenders and journalists nor ensured an adequate budget for prosecutors charged with investigating those crimes.

Migrants in Mexico are vulnerable to abuse by criminal groups and corrupt officials, including human trafficking, extortion, kidnapping, and murder. In January 2021, U.S.-trained state police reportedly killed 18 migrants in Tamaulipas, Mexico.⁴⁴

Economic and Social Conditions

Beginning in the late 1980s, Mexico transitioned from a closed, state-led economy to an open market economy that has entered into free trade agreements with 50 countries.⁴⁵ The transition accelerated after the North American Free Trade Agreement (NAFTA) entered into force in 1994. Since NAFTA, Mexico has increasingly become an export-oriented economy, with the value of exports equaling 41% of Mexico's gross domestic product (GDP) in 2021, up from 12% of GDP in 1993.⁴⁶ Mexico remains a U.S. crude oil supplier, but its top exports to the United States are vehicles and auto parts, automatic data processing machines, and electrical machinery.⁴⁷

From 2010 to 2019, Mexico recorded an average annual economic growth rate of 2.7%, but its economy contracted 8.0% in 2020.⁴⁸ Although the global pandemic was the principle cause for the 2020 contraction, Mexico's economy also shrank by 0.2% in 2019. Increased U.S. demand for goods and services, higher vaccination rates, and the reopening of businesses powered an economic rebound of 4.7% in 2021.⁴⁹ Nevertheless, concerns about tightening monetary policy, inflation and a reduction in U.S. growth projections led to 3.1% growth in 2022 and a 2023 growth forecast of 1.8%.⁵⁰

Mexico's future growth projections are mixed. According to the Organisation for Economic Cooperation and Development (OECD), financial exclusion, a lack of competitiveness, employment in the informal sector, corruption, and low female participation in the workplace are impediments to Mexico's medium-term economic performance.⁵¹ Lingering pandemic-related effects, energy sector reforms that discourage foreign investment, and new challenges related to technological innovation and climate change also could hinder long-term growth.⁵² Experts have posited that Mexico's traditional economic assets—plentiful natural resources, a relatively young labor force, and proximity and preferential access to markets in the United States—strategically position it to take advantage of potential nearshoring opportunities as policymakers from the United States and other countries seek to establish supply chains away from Chinese markets.⁵³

Despite attempts to diversify its economic ties and build its domestic economy, Mexico remains heavily dependent on the United States as an export market (roughly 76.8% of Mexico's exports in 2022 were U.S.-bound) and as a source of remittances, tourism revenues, and investment.⁵⁴ Remittances reached a record of nearly $58.5 billion in 2022.⁵⁵ U.S. foreign direct investment in Mexico stood at $110.7 billion in 2021; the United States remains Mexico's top source of foreign direct investment.⁵⁶

López Obrador Government's Economic and Energy Policies

President López Obrador promised to govern austerely and bolster economic growth, but a lack of public investment hurt Mexico's pre-pandemic growth rate and the government's limited fiscal response to the pandemic worsened its economic impact on Mexico.⁵⁷ López Obrador worked with the Trump Administration to renegotiate the USMCA, which updated and modernized the NAFTA agreement, assuaging some investor concerns about López Obrador's economic policies. However, his government's energy policies have prompted international concerns, legal challenges, and USMCA consultations that could result in a dispute settlement panel if U.S. and Canadian concerns are not adequately resolved (see "Energy" section).⁵⁸ Mexico's congress also passed mining reforms to shorten concessions for foreign companies invested in the sector and to require a percentage of revenues be shared with local communities.⁵⁹

Reduced spending on public administration and several tax settlements with large companies since October 2019 have allowed the López Obrador government to devote significant resources to social programs and major infrastructure projects without adding to public debt.⁶⁰ Many of those infrastructure projects have proven costly for the country. Upon assuming the presidency, López Obrador paid $1.8 billion to cancel the construction of a new airport outside of Mexico City, opting to build in a different location at an estimated cost of $2.6 billion.⁶¹ His government has continued to construct the Maya Train, a $9.7 billion railroad line to promote tourism in five southeastern states, despite criticism that it would damage the environment and opposition from indigenous groups in the area.⁶² The government devoted $8 billion to build the Dos Bocas coal-powered refinery in Tabasco, but cost overruns, worker strikes, and operational setbacks have derailed the project's budget and timeline.⁶³

Social Conditions

Mexico has long had relatively high poverty rates for its level of economic development, a problem exacerbated by the pandemic. Experts estimate nearly 10 million Mexicans fell into poverty in 2020, widening the poverty rate to 43.9%.⁶⁴ Traditionally, poverty has been most acute among those in southern Mexico's rural regions, indigenous populations, and those employed in subsistence agriculture or in the informal sector.⁶⁵ Despite predictions to the contrary, poor and working class households received continued remittances sent from family members abroad, even during the pandemic. Remittances to Mexico rose 27% from 2020 to 2021.⁶⁶

Mexico also has experienced high levels of income inequality. According to the 2022 World Inequality Report, 57% of Mexico's wealth was concentrated in 10% of the population, a figure that has stayed between 55% and 60% over the past century. Inequality has historically been due, in part, to the country's regressive tax system, oligopolies that dominate particular industries, a relatively low minimum wage, and a lack of targeting in some social programs.⁶⁷

Economists have asserted that reducing the untaxed and unregulated informal sector, in which workers lack job protections and benefits, is crucial for addressing poverty, while also expanding Mexico's low tax base. Under the Peña Nieto administration, a financial sector reform aimed to increase access to credit for small and medium size businesses (SMEs), which employ a majority of Mexican workers. A fiscal reform also sought to incentivize SMEs' participation in the formal economy. Barriers to formalization remain, however, including complex and sometimes costly state and local regulations.⁶⁸

López Obrador has improved many Mexicans' socioeconomic conditions amid the deepest recession in decades by increasing pensions for the elderly and raising the minimum wage several times. His program to provide monthly payments to youth aged 18-29 to attend school or complete internships has enrolled over 300,000 individuals, despite reported administrative and financial irregularities.⁶⁹ However, he has ended Prospera, Mexico's largest social program, which had won international praise for targeting those most in need.⁷⁰ The government also maintained a fiscally conservative approach during the pandemic, providing less budgetary support to its population than some other countries in the region.⁷¹

Health experts have criticized the López Obrador government's failure to coordinate "a coherent and unified national response" to the COVID-19 pandemic, which killed roughly 333,188 Mexicans through April 2023.⁷² Throughout the pandemic, President López Obrador downplayed the threat posed by COVID-19 and flouted public health guidelines. His administration's budget cuts reduced public health system personnel, testing availability, and hospital capacity; they likely contributed to excess deaths from other causes such as heart disease and diabetes left untreated as hospitals focused on pandemic response.⁷³

Foreign Policy

In contrast to his predecessor, President López Obrador generally has maintained that the best foreign policy is a strong domestic policy. He has rarely traveled outside the country since assuming office. He met in Washington, DC, with President Trump in July 2020 and with President Biden and Canadian Prime Minister Justin Trudeau for the North American Leaders Summit in November 2021. Foreign Minister Marcelo Ebrard (former mayor of Mexico City) has represented Mexico in global fora.

Under López Obradror, Mexico has returned to its historic noninterventionist and independent approach to foreign policy. Mexico has sought to remain neutral in the Russia-Ukraine conflict and proposed the creation of a high-level caucus for peace in Ukraine within the United Nations. The current administration reversed Mexico's recognition of Juan Guaidó as Interim President of Venezuela but then hosted Norway-led negotiations between officials representing Nicolás Maduro and the political opposition in 2021. The López Obrador government established closer relations with Cuba, granted temporary asylum to ousted Bolivian President Evo Morales, abstained from OAS resolutions condemning the Daniel Ortega regime in Nicaragua, and defended impeached Peruvian President Pedro Castillo.

Despite these developments, Mexico continues to participate in multilateral institutions and support development in Central America. In addition to working within trade fora, such as the Pacific Alliance, Mexico continues to promote its exports and seek new trade partners.⁷⁴ The López Obrador administration shares the view of prior Mexican governments that the best way to stop illegal immigration from the Northern Triangle of Central America (Guatemala, El Salvador, and Honduras) is to address the lack of opportunity and insecurity in that region. In December 2021, the United States and Mexico jointly announced Sembrando Oportunidades, a new effort to coordinate development projects in the Northern Triangle.⁷⁵

U.S.-Mexico Relations and Issues for Congress

Mexican-U.S. relations generally have grown closer over the past two decades. A range of bilateral mechanisms and institutions have helped the Mexican and U.S. federal governments—as well as stakeholders in border states, the private sector, and nongovernmental organizations—find common ground on difficult issues. U.S.-Mexico relations have nevertheless grown turbulent during the López Obrador administration, reaching a low point in recent months over U.S. criticisms of López Obrador's public statements and policy reversals, antidrug investigations and indictments, and proposals for addressing fentanyl trafficking from Mexico—a key congressional concern. President López Obrador has strongly objected to some U.S. antidrug operations in Mexico, U.S. support of democracy and human rights groups critical of his government, and legislative proposals introduced in the 118^th Congress, particularly those that would authorize the use of U.S. military force in Mexico and designate Mexican TCOs as terrorist groups.⁷⁶

Presidents Biden and López Obrador met in July 2022 and pledged to address inflation, promote renewable energy, modernize border infrastructure, bolster efforts against fentanyl and arms trafficking, and address the root causes of irregular migration.⁷⁷ A High-Level Economic Dialogue occurred in September 2022, a High-Level Security Dialogue (HLSD) convened in October 2022, and a second North American Leaders Summit (NALS) with Presidents Biden and López Obrador and Canadian Prime Minister Justin Trudeau took place in January 2023 in Mexico City. While the NALS advanced priorities on inclusivity, the environment, competitiveness, migration, health, and regional security, the summit did not address ongoing trade disputes or result in new initiatives to address irregular migration or fentanyl trafficking.⁷⁸

Security Cooperation and U.S. Foreign Assistance⁷⁹

Mexico is a long-time recipient of U.S. counterdrug assistance, but cooperation was limited between the mid-1980s and mid-2000s due to U.S. distrust of Mexican officials and Mexican sensitivity about U.S. involvement in the country's internal affairs. Close cooperation resumed in 2007, when then-President George W. Bush requested, and Congress appropriated, increased counterdrug assistance for Mexico. Although initial U.S. funding for what ultimately would be known as the "Mérida Initiative" focused heavily on training and equipping Mexican security forces, Congress shifted the emphasis of bilateral efforts over time to strengthening Mexican institutions under four broad pillars (see Figure 4). Until FY2016, Congress withheld some U.S. security assistance provided through the Mérida Initiative until certain human rights withholding requirements were met (see "Human Rights," below). In compliance with Leahy Law vetting requirements (22 U.S.C. §2378d),⁸⁰ U.S. agencies continue to vet individuals and units for potential human rights abuses prior to delivering training and/or equipment.

Congress has funded and overseen the Mérida Initiative, which has accounted for the majority of U.S. foreign assistance to Mexico since FY2008. Congress maintained level funding for the Mérida Initiative even as the Trump Administration requested less support (see Table 1 for recent U.S. assistance to Mexico and Table B-1 for Mérida Initiative funding). Nevertheless, elevated organized crime-related violence in Mexico and drug overdose deaths in the United States have led many to question the Mérida Initiative's efficacy.⁸¹

U.S. security cooperation with Mexico has diminished since López Obrador took office in 2018. López Obrador campaigned against Mexico's military-led "war" on TCOs and his predecessors' strategy of focusing on cartel leaders rather than broader cartel-related crime. He criticized the Mérida Initiative for failing to stem drug-related violence. Cooperation deteriorated further after the October 2020 U.S. arrest of retired defense minister Salvador Cienfuegos on drug trafficking-related charges. By November 2020, the U.S. Department of Justice had dropped all charges against Cienfuegos and released him to Mexico, where the López Obrador government published the U.S. evidence against Cienfuegos, declined to prosecute him, and called the U.S. evidence "fabricated."⁸² Meanwhile, the Mexican Congress enacted legislation to limit U.S. law enforcement operations and intelligence sharing. The López Obrador government also paused the issuance of visas for U.S. Drug Enforcement Administration (DEA) agents, slowed extraditions, and declared the Mérida Initiative "dead."⁸³

On January 31, 2022, after months of negotiations, the U.S. and Mexican governments published an action plan for implementing the U.S.-Mexico Bicentennial Framework for Security, Public Heath, and Safe Communities. Launched at the October 2021 HLSD, the framework is a replacement for the Mérida Initiative. The framework's action plan has three broad pillars (see Figure 4) that Congress could influence, particularly through the appropriations process. At meetings in March and April 2023, U.S. and Mexican officials announced phase two of the Bicentennial Framework, an effort focused on addressing fentanyl and arms trafficking.⁸⁴

Figure 4. U.S.-Mexico Security Cooperation Frameworks

Source: U.S. Department of State.

Congress is considering the Biden Administration's FY2024 $111.4 million request for foreign assistance to Mexico, which is 14% lower than the FY2022 enacted level of $127.1 million and 30% lower than the FY2023 request of $141.6 million (see Table 1). The explanatory statement accompanying the FY2023 Consolidated Appropriations Act (P.L. 117-328) did not specify a total funding amount for Mexico, The explanatory statement did direct the State Department to continue focusing assistance on helping Mexico protect human rights, prosecute cases of human rights abuses, improve its forensics capabilities, train justice sector operators, and combat synthetic opioids. The explanatory statement includes reporting directives related to Western Hemisphere drug control efforts, migration and refugee assistance, and updating reports required in H.Rept. 117-84. Additional reporting requirements relate to the Bicentennial Framework, human rights progress by the Mexican government, U.S. training of Mexican migration units, and the resilience of North American supply chains, among other requirements.

The Department of Defense (DOD) is not providing assistance through Mérida accounts, nor is the agency mentioned in the Bicentennial Framework. However, DOD implements International Military Education and Training (IMET) funds, which totaled $1.2 million in FY2022, and support training programs for the Mexican military, including courses in the United States. DOD also provides additional training, equipping, and other logistical support to Mexico that complements the Mérida Initiative through its own authorities including, but not limited to, Section 333 Building Partner Capacity and Section 284 Counter-drug and Activities to Counter Transnational Organized Crime (both authorized under Title 10 of the U.S. Code).⁸⁵ Through 22 U.S.C. §2416, Congress requires an annual report on Foreign Military Training by DOD and the State Department; the agencies submitted the most recent version of that report to relevant committees in March 2022.

According Northern Command officials, current bilateral goals focus on "improving regional security, strengthening military ties with regional partners, and expanding force interoperability through the Defense Strategic Framework and the Bilateral Military Cooperation Roundtable."⁸⁶

Congress may seek to influence how the Biden Administration balances U.S. foreign assistance priorities in Mexico; monitor the efficacy of U.S.-funded efforts; and recommend ways to respond to challenges posed by evolving criminal activities and changes in Mexico's policies.

Antidrug Efforts: Focus on Fentanyl Trafficking

Given the ongoing epidemic of fentanyl-related overdoses in the United States, fentanyl control has become a top U.S. priority in the U.S.-Mexico relationship. Some observers have questioned the efficacy of U.S.-Mexico security cooperation since Mexico emerged as the leading source of U.S.-bound fentanyl.⁸⁷ At present, most U.S.-destined illicit fentanyl is produced clandestinely in Mexico, using chemical inputs (i.e., precursors) from the People's Republic of China.⁸⁸ This represents a significant shift in fentanyl production and trafficking trends since 2019, prior to which China was the primary source of U.S.-bound illicit fentanyl. TCOs—particularly the Sinaloa Cartel and Jalisco New Generation Cartel (CJNG)—appear to be largely responsible for the procurement of precursors from Asia (via maritime and air ports of entry).⁸⁹ TCOs also manufacture wholesale volumes of low-purity illicit fentanyl in Mexico and control the cross-border trafficking of fentanyl into the United States. Domestically, U.S.-based TCO affiliates distribute illicit fentanyl at the retail level.

As part of the Bicentennial Framework, the U.S. and Mexican governments committed to establishing working-level mechanisms to coordinate on synthetic drugs and precursor chemicals.⁹⁰ In 2022, Mexico expanded its nascent "chemical watch list" for dual-use precursors—a move that may spur opportunities for enhanced regional information sharing and regulatory action targeting fentanyl precursors.⁹¹ Joint actions in 2022 included financial sanctions targeting Mexican fentanyl traffickers, the development of a joint action plan to combat synthetic opioids, and increased U.S. efforts to help Mexican military agencies create records of fentanyl and precursor seizures to submit to a central database.⁹² The Mexican military leads customs operations at all land, air, and sea ports of entry.⁹³

At the Mexico City NALS in January 2023, President López Obrador appeared to recognize concerns about fentanyl production in Mexico and pledged to take increased actions to interdict precursor chemicals and destroy fentanyl labs.⁹⁴ With the U.S. and Canadian leaders, President López Obrador pledged to share information on chemicals used in illicit fentanyl production as a key summit deliverable; some criticized the leaders for not announcing any other significant new actions.⁹⁵ A notable development in the lead up to the NALS was Mexico's capture of Ovidio Guzmán, son of imprisoned Joaquin "El Chapo" Guzmán (former leader of the Sinaloa Cartel), on January 4.⁹⁶ Ovidio Guzmán is one of the most wanted criminals in the United States for his role in trafficking fentanyl and other drugs.

Tension between the U.S. DEA and the Mexican government—as well as ongoing corruption in Mexico, exemplified by the U.S. conviction of former Public Security Minister García Luna on drug trafficking charges—remain obstacles to cooperation.⁹⁷ In 2021, after the two governments had agreed to target companies involved in diverting precursor chemicals used to produce fentanyl, the DEA identified 50 Mexican companies to Mexico's Financial Intelligence Unit (FIU). Despite U.S. officials' suspicions, the FIU declined to seize all but one businesses' accounts.⁹⁸ President López Obador also has criticized U.S. intelligence-gathering activities that likely led to the April 2023 U.S. indictments of 28 individuals, including several of El Chapo Guzmán's sons, for fentanyl trafficking.⁹⁹ These developments could hinder efforts that have accelerated thus far in 2023 as phase two of the Bicentennial Framework has focused bilateral efforts on combating fentanyl (and arms trafficking from the United States to Mexico).¹⁰⁰

Legislative Initiatives. Members of Congress have introduced a range of proposals to address fentanyl trafficking from Mexico, including a House Foreign Committee-reported measure, H.R. 3205, that would work with Mexico to disrupt fentanyl supply chains and counter Chinese fentanyl operations in Mexico. Whereas that bill calls for U.S.-Mexican cooperation, others—including bills that would authorize the use of U.S. military force in Mexico (H.J.Res. 18) and that would designate Mexican drug cartels as foreign terrorist organizations (e.g., H.Res. 216, S. 698)—have prompted strong negative reactions from the Mexican government.

Law Enforcement Cooperation and Extraditions

Congress has expressed concerns about friction in U.S.-Mexico security cooperation. During the 118^th Congress, oversight attention may focus on the Bicentennial Framework's progress in restarting bilateral law enforcement cooperation. The framework's action plan envisions a joint objective of building on past cooperation to investigate and prosecute corrupt actors through the disruption of criminal financial networks, as well as increasing cooperation in extradition matters.¹⁰¹ However, bilateral law enforcement cooperation on all criminal matters, especially those pertaining to corruption cases, remains a source of friction between the countries.¹⁰²

During the Calderón government (2006-2012), Mexico extradited an average of 98 people per year to the United States, a significant increase over the prior administration. When President Peña Nieto took office, extraditions fell to 54 in 2013 but rose to an administration high of 76 in 2016 (see Figure 5). In January 2017, Mexico's decision to extradite Joaquín "El Chapo" Guzmán, leader of the Sinaloa Cartel and one of the DEA's top global targets, was a high point in bilateral cooperation that was praised by many Members of Congress. Extraditions remained relatively level during the first two years of the López Obrador government, fell in 2021, and rose again in 2022 to 81.¹⁰³ While some extraditions have increased, DEA Administrator Anne Milgram asserted that Mexico extradited 24 drug-related defendants in 2022 and that more than 232 such defendants were awaiting extradition as of February 2023.¹⁰⁴

Figure 5. Extraditions: from Mexico by Administration: 2000-2022

Source: CRS based on data from U.S. Department of Justice and U.S. Department of State.

Human Rights¹⁰⁵

The U.S. Congress has expressed ongoing concerns about human rights conditions in Mexico through conditions on appropriations, support for human rights programming, oversight hearings, and letters to, and visits with, successive U.S. and Mexican administrations. Recent attention has focused on violence against journalists in Mexico.¹⁰⁶ Congress has continued to monitor adherence to the Leahy vetting requirements that must be met under the Foreign Assistance Act (FAA) of 1961, as amended (22 U.S.C. §2378d), which pertains to State Department aid, and 10 U.S.C. §2249e, which guides DOD funding. DOD suspended assistance to a brigade based in Tlatlaya, Mexico, due to concerns about the brigade's potential involvement in extrajudicial killings but has also worked with Mexico to rehabilitate units once suspended from receiving U.S. assistance.¹⁰⁷ Congressional concerns about labor conditions in Mexico and the government's ability to implement USMCA commitments prompted the inclusion of $210 million in funds for the U.S. Department of Labor's Bureau of International Labor Affairs (ILAB) technical assistance programs in the USCMA's implementing legislation (P.L. 116-113).¹⁰⁸

From FY2008 to FY2015, Congress made conditional 15% of U.S. assistance to the Mexican military and police until the State Department sent a report to appropriators verifying that Mexico was taking steps to comply with certain human rights standards. In FY2014, Mexico lost $5.5 million in funding due to human rights concerns.¹⁰⁹ For FY2016-FY2021, human rights reporting requirements applied to FMF rather than to Mérida Initiative accounts. In recent years, human rights reporting requirements have been in explanatory statements rather than the legislation. The explanatory statement accompanying the FY2023 Consolidated Appropriations Act (P.L. 117-328) requires a report on human rights progress in Mexico, but the reporting directive is not tied to any conditions on assistance provided to Mexico.¹¹⁰ The State Department reportedly has not sent human rights reports to Congress since FY2017, as the agency maintains it is not legally obligated to do so.¹¹¹

U.S. assistance to Mexico has supported the Mexican government's efforts to reform its judicial system and improve human rights conditions in the country.¹¹² Congress has provided funding to support Mexico's transition from an inquisitorial justice system to an oral, adversarial, and accusatorial system that aims to strengthen due process and human rights protections for victims and the accused.¹¹³ U.S. officials have issued statements on specific human rights concerns, including a 2022 tweet by Secretary of State Antony Blinken expressing concern about violence against journalists and a 2023 State Department spokesperson statement supporting "respect for judicial independence" and an "independent electoral system."¹¹⁴ Protecting human rights and "vulnerable populations" is included under the first pillar of the Bicentennial Framework (see Figure 4). The State Department engages with human rights and freedom of expression organizations in Mexico and ensures U.S. training programs for justice sector actors have units on human rights.

The U.S. Agency for International Development (USAID) provides technical assistance to the Mexican federal and state governments as well as complementary support to think tanks and civil society organizations on human rights issues.¹¹⁵ USAID's human rights programming includes a new $24 million initiative to support national and state implementation of laws against torture and enforced disappearances and to provide forensic assistance to address unidentified remains. Other ongoing initiatives seek to better protect journalists and human rights defenders, as well as to address enforced disappearances, femicides, and torture in selected states. In December 2020, USAID published its five-year strategy for Mexico, which integrates these efforts into a broader strategy to help state and local governments committed to addressing impunity and violence.¹¹⁶ USAID continues to support organizations that have received criticism for their anti-corruption and human rights advocacy from President López Obrador and his party.¹¹⁷

Congress is likely to continue monitoring human rights conditions in Mexico, including compliance with reporting requirements included in the explanatory statement to the FY2023 Consolidated Appropriations Act (P.L. 117-328) and commitments to improve labor conditions made under USMCA.¹¹⁸ Some Members of Congress have written letters to U.S. and Mexican officials regarding human rights concerns, including allegations of extrajudicial killings by security forces, violence against journalists, and abuses of migrants.

Congress may monitor how the López Obrador administration moves to punish past human rights abusers; how Mexico's National Guard, along with other security and judicial actors, is or is not respecting human rights; what mechanisms exist to address allegations of abuse and wrongdoing by such actors; and the adequacy of victims' assistance. Congress also may question how the State Department and USAID can provide support to emerging human rights priorities, as well as the effects of ILAB technical assistance programs on labor conditions in Mexico.

Migration Management

Migration issues continue to be a high priority for U.S. policy and Congress, particularly as U.S. Customs and Border Protection encounters record levels of irregular migrants on the Southwest border. Since a 2019 U.S.-Mexico migration agreement, and particularly since the March 2020 U.S. launch of so-called Title 42 expulsions, Mexico has accepted U.S. policies that have shifted some of the burden of handling migrants from the United States to Mexico.¹¹⁹ The López Obrador administration has worked jointly with U.S. officials to help arrest 7,000 human smugglers since mid-2022 and to invest in development projects aimed at addressing the root causes of migration from northern Central America.¹²⁰ Asylum applications and apprehensions have risen significantly in Mexico; both Mexico's cash-strapped Commission for Refugee Assistance (COMAR) and overcrowded shelter system have struggled to respond, even with U.S. assistance (see Figure 6).¹²¹ In March 2023, 38 migrants perished because Mexican officials failed to unlock a migrant detention facility during a fire. Authorities charged Mexico's National Migration Institute's director for involvement in the crime; he remains in his position.¹²²

Figure 6. Mexico: Reported Asylum Applications and Apprehensions (2013-2023)

Source: CRS, based on data from Mexico's Commission for Refugee Assistance and Secretary of the Interior.

On October 12, 2022, Mexico agreed to accept an unspecified number of U.S.-bound Venezuelan migrants who do not apply to come to the United States legally through a new Venezuela parole program and are expelled at the U.S. border under Title 42.¹²³ In exchange, the Department of Homeland Security (DHS) made available additional H-2B visas for temporary nonagricultural workers. Historically, the majority of H-2B visas have been issued to Mexican nationals. On January 5, 2023, DHS announced the expansion of the Venezuela parole program to Haitians, Nicaraguans, and Cubans.¹²⁴ As part of that agreement, Mexico agreed to receive up to 30,000 expelled migrants from those three countries per month who are encountered irregularly instead of through the parole process, a number that U.S. officials assert could increase.¹²⁵

President Biden thanked Mexico for this cooperation during his remarks at NALS, but the summit did not address detailed migration policies.¹²⁶ The summit did produce an expansion of U.S.-Mexico efforts to address the root causes of migration to a trilateral action plan, as well as the creation of a virtual platform to allow migrants to access legal pathways to migration.

In advance of the May 11, 2023, ending of Title 42, the United States, Mexico, and other regional partners ramped up cooperation on migration management, countering alien smuggling and disinformation, and related efforts.¹²⁷ The Biden Administration deployed 1,500 additional troops to the border in anticipation of a migration surge. Mexico has pledged to continue receiving rapid deportations of certain non-Mexican nationals who have to date been expelled under Title 42 and has deployed its National Guard.¹²⁸ Mexican border cities, some of which have high rates of violent crime, have been sheltering tens of thousands of migrants. Some migrants have experienced precarious living situations and attacks by criminal groups.¹²⁹ Human rights groups are concerned about how the end of Title 42 will affect conditions for migrants in Mexico.¹³⁰

U.S. funds appropriated under the Mérida Initiative have supported Mexico's immigration control efforts and global funds provided through the Migration and Refugee Assistance program to improve asylum processing, shelters, and assistance to migrants in Mexico. Congress is considering legislation, foreign assistance, and restrictions on U.S. assistance that could affect those efforts, as well as overseeing the adequacy of existing foreign policy efforts to manage regional migration.

Legislative Initiatives. On May 11, 2023, the House passed H.R. 2, which incorporated legislation reported by the House Committee on Foreign Affairs (H.R. 1690) as Title III. Among other measures, H.R. 2 would direct the Administration to seek to reestablish migration agreements with Mexico similar to the Migration Protection Protocols concluded during the Trump Administration.

Economic and Trade Relations and the U.S.-Mexico-Canada Agreement¹³¹

The United States and Mexico have a strong economic and trade relationship that deepened significantly through the entry into force of the North American Free Trade Agreement (NAFTA) in 1994. NAFTA removed virtually all tariff and nontariff trade and investment barriers among the United States, Mexico, and Canada, and provided a rules-based mechanism to govern North American trade. It also made permanent Mexico's unilateral market opening measures of the late 1980s and early 1990s. Most economic studies concluded the net economic effect of NAFTA on the United States and Mexico was small but positive, though there were adjustment costs to some sectors in both countries. In July 2020, the United States-Mexico-Canada Agreement (USMCA) replaced NAFTA. While maintaining most of the market opening measures of NAFTA, USMCA updated and modernized the agreement in some areas but scaled back certain provisions.¹³²

Recent U.S. Administrations have worked with Mexico to coordinate economic issues. The Obama Administration worked with Mexico to balance border security while facilitating legitimate trade and travel, promoting competitiveness, and pursuing greater energy integration through a cabinet-level High-Level Economic Dialogue (HLED) chaired by then-Vice President Biden. The High-Level Regulatory Cooperation Council helped align regulatory principles. Trilateral (with Canada) cooperation occurred under the aegis of the North American Leadership Summits (NALS).

Under the Trump Administration, neither the HLED nor the NALS took place. However, the Executive Steering Committee (ESC), which guided efforts along the border during the Obama Administration, expanded to focus on boosting competitiveness. The U.S.-Mexico CEO Dialogue also continued to convene biannual meetings and issue recommendations for both governments. As previously mentioned, the Biden Administration has restarted both the HLED and the NALS.

Modernizing the U.S.-Mexico Border

Congress has long expressed concerns about delays and unpredictable wait times at the U.S.-Mexico border. The majority of U.S.-Mexico trade passes through a port of entry along the southwestern border, often more than once, due to the increasing integration of manufacturing processes in the United States and Mexico. Past bilateral efforts have contributed to reductions in wait times at some points of entry, but infrastructure and staffing issues remain on both the U.S. and Mexican sides of the border. While Congress has enacted (P.L. 114-279) legislation to allow public-private partnerships to address some border infrastructure issues, staffing issues remain challenging.

In May 2010, the United States and Mexico declared their intent to collaborate on enhancing the U.S.-Mexico border.¹³³ A Twenty-First Century Border Bilateral ESC has met since then, most recently in December 2022, to develop binational action plans and oversee implementation of those plans.¹³⁴ The ESC sets goals within broad objectives: coordinating infrastructure development, expanding trusted traveler and shipment programs, establishing pilot projects for cargo preclearance, improving cross-border commerce and ties, and bolstering information sharing among law enforcement agencies.

The COVID-19 pandemic posed several challenge for U.S., Mexican, and Canadian officials that Congress has examined via oversight hearings. Officials initially struggled to maintain the integrity of supply chains for industries deemed essential during the pandemic while protecting the health of workers employed in those sectors. More recently, concerns over the smuggling of fentanyl through U.S. ports of entry have led to enhanced screening of commercial and passenger vehicles entering from Mexico and have sped the deployment of advanced imaging technologies used for cargo inspections. Congress may monitor how the Biden Administration balances trade and infrastructure issues with other priorities along the U.S.-Mexico border.

U.S.-Mexico-Canada Agreement¹³⁵

Congress played a key role in modifying, considering, and approving implementing legislation for the USMCA, which entered into force on July 1, 2020. Congress is actively overseeing the USMCA's implementation and USMCA-related trade disputes. In May 2017, the Trump Administration sent a 90-day notification to Congress of its intent to begin talks with Canada and Mexico to renegotiate and modernize NAFTA, as required by the 2015 Trade Promotion Authority (TPA). Negotiations began on August 16, 2017, and were concluded on September 30, 2018. USMCA was signed on November 30, 2018. The House Democratic leadership recommended modifications to USMCA (on labor, the environment, and dispute settlement, among other topics) that led to changes to the agreement and a subsequent negotiation with Mexico and Canada on a USMCA protocol of amendment on December 10, 2019. The House approved USMCA implementing legislation in December 2019, and the Senate followed suit in January 2020 (P.L. 116-113).

On April 24, 2020, the U.S. Trade Representative notified Congress that Canada and Mexico had taken the legal and regulatory steps necessary to implement the USCMA and that the agreement would enter into force on July 1, 2020.

USMCA, composed of 34 chapters and 12 side letters, retains most of NAFTA's free-trade provisions and other measures, but it makes notable changes to auto rules of origin, dispute settlement provisions, government procurement, investment, and intellectual property right (IPR) protection. It also modernizes provisions in services, labor, and the environment and addresses new trade issues, such as digital trade, state-owned enterprises, anti-corruption, and currency misalignment. Key issues for Congress in the debate surrounding USMCA included workers' rights protection in Mexico, IPR provisions and access to medicine, the enforceability of labor and environmental provisions, and the constitutional authority of Congress over international trade and its role in revising, approving, or withdrawing from the agreement.

Congress included $180 million over four years in the USCMA's implementing legislation (P.L. 116-113) for technical assistance projects related to the agreement and $30 million to pay for labor attachés and other staff to monitor Mexico's USMCA compliance.¹³⁶ The goals of recent assistance have been to ensure enforcement of Mexican labor laws and legitimate collective bargaining rights; increase measures to mitigate COVID-19 among workers; and address child labor and forced labor in Mexico's supply chains, including in agriculture.¹³⁷ Some Members of Congress have praised two recent votes by Mexican workers in favor of establishing independent unions at their automotive plants as steps toward improving workers' rights and representation.¹³⁸

Now that USMCA is in the implementation phase, Congress may wish to consider various issues regarding the agreement. These issues include how the new importing requirements under USMCA are being phased in; whether the new rules of origin for the motor vehicle industry are being implemented as planned; how the more stringent requirements are affecting the North American motor vehicle industry; how well Mexico is implementing labor law reforms to provide more workers' rights protection; how well the new labor enforcement measures are working; and the extent to which USMCA's updated dispute resolution procedures are improving the enforcement of the agreement's provisions, among other issues.

Energy

Congress has expressed ongoing interest in the future of energy production in Mexico, as it is important for Mexico's economic growth and for the U.S. energy sector. Mexico has considerable oil and gas resources, but its state oil company (Pemex), has struggled to counter declining production and postponed needed investments due to fiscal challenges. Many Members of Congress praised Mexico's 2013 constitutional reforms on energy that opened up oil, electricity, gas, transmission, production, and sales to private and foreign investment while keeping ownership of Mexico's hydrocarbons under state control. Members of Congress have expressed serious concerns about the López Obrador administration's treatment of U.S. energy companies and measures it has taken to favor the state-owned electrical utility and Pemex. Members of Congress demonstrated bipartisan support for the 2022 U.S. request for consultations with Mexico over potential violations of the USMCA.¹³⁹ Should those consultations not lead to an agreement, the U.S. and Canada could request a dispute settlement panel; the panel could result in retaliatory tariffs on Mexico.¹⁴⁰

The 2013 reforms created opportunities for U.S. businesses in exploration, pipeline construction and ownership, natural gas production, and commercial gasoline sales. Although the reforms did not privatize Pemex, they did expose the company to competition and hastened its entrance into joint ventures. Because of the reforms, Mexico received more than $160 billion in promised investment.¹⁴¹ Many experts argued at that time that deepened energy cooperation with Mexico could give North America an industrial advantage.¹⁴²

Despite their promise, the energy sector reforms failed to reverse production declines or to address structural problems within Pemex. While proponents still predict the reforms will bring long-term benefits to Mexico, opponents within the López Obrador government have sought to curtail private involvement in the sector.¹⁴³

In light of concerns about the López Obrador government's counterreform policies, the United States sought to cement Mexico's energy reforms through the NAFTA renegotiations. NAFTA included some reservations for investment in Mexico's energy sector. USMCA reinforces Mexico's 2013 constitutional reforms and the current legal framework for private energy projects in Mexico. It includes investor-state dispute settlement mechanisms similar to those that existed in NAFTA for the oil and gas, infrastructure, and other energy sectors, even as those mechanisms were limited for other sectors.¹⁴⁴ In addition, the free trade agreement maintains tariff-free exports of U.S. natural gas to Mexico, which have increased significantly since the 2013 reforms.¹⁴⁵

Over time, López Obrador's energy policies have concerned energy investors and U.S. companies with large parts of their supply chains in Mexico. The government's decisions to halt new auctions in the oil and gas sector, as well as in wind and solar energy projects, stunned investors and put hundreds of existing projects in limbo.¹⁴⁶ Private sector actors lobbied for adjustments in the proposed electricity reform that would enable Mexico to keep its Paris climate agreement pledges and respect private investment while still strengthening the CFE.¹⁴⁷ They have filed numerous legal challenges to the 2021 enacted reforms.

Opportunities exist for continued U.S.-Mexico energy cooperation in the energy sector, but the future of those efforts may depend on the outcome of López Obrador's reforms. The Biden Administration has engaged Mexico in high-level meetings to express concerns over the electricity reform and others, citing concerns that they could hinder U.S.-Mexico cooperation on clean energy initiatives and violate the USMCA.¹⁴⁸ Bilateral efforts to accelerate Mexican action on renewable energy development and other policies to reduce greenhouse gas emissions could continue through a newly created U.S.-Mexico Climate and Clean Energy Working Group.¹⁴⁹

In addition to monitoring López Obrador's proposed energy reform as it pertains to USMCA, congressional oversight may involve broader issues related to the fairness of policies adopted by the López Obrador government toward foreign energy companies and investors.

Border Environmental Issues¹⁵⁰

The transboundary flow of raw sewage and industrial wastewater has been a focus of bilateral environmental dialogue since at least the U.S.-Mexico Water Treaty of 1944. Wastewater, trash, and sediment flowing into the United States from Mexico have caused health and environmental problems in the border region. Wastewater collection and treatment system capacity has not kept pace with the region's rapid population growth. In addition, the aging of existing wastewater infrastructure has led to increased maintenance issues, such as pipeline ruptures. To address border sanitation, Congress has appropriated funds for the International Boundary and Water Commission (IBWC), the U.S. Environmental Protection Agency (EPA), and the North American Development Bank (NADB) to construct or finance wastewater infrastructure on both sides of the border. Transboundary flows have continued to require bilateral cooperation, despite the construction of several sanitation facilities on both sides of the border.

International Boundary and Water Commission

The IBWC, consisting of U.S. and Mexico sections, implements boundary and water treaties between the United States and Mexico.¹⁵¹ IBWC's activities are conducted through Minutes, which have the force of law when both the U.S. and Mexican governments provide written approval through their respective sections of the IBWC. To address the issue of transboundary effluent flows, the IBWC has taken actions under numerous Minutes.¹⁵² Under this authority, IBWC has constructed and currently operates three wastewater treatment plants, two of which treat Mexican wastewater on the U.S. side of the border. These two wastewater treatment plants are the South Bay International Wastewater Treatment Plant in San Ysidro, CA, and the Nogales Wastewater Treatment Plant in Nogales, AZ. Further, IBWC operates the Nuevo Laredo Wastewater Treatment Plant in Nuevo Laredo, Mexico.

Congress appropriates funds to the IBWC for construction activities through State Department appropriations. The State Department's FY2023 budget requested $41.8 million in construction funds for a range of projects, including rehabilitating IBWC wastewater infrastructure in Nogales, AZ. The Consolidated Appropriations Act, 2023 (P.L. 117-328), includes an appropriation of $53.0 million for IBWC construction, roughly $2 million above enacted FY2022 IBWC construction appropriations. The State Department's FY2024 budget requested $40.0 million in construction funds.

In recent years, congressional appropriators have shown interest in oversight regarding transboundary sewage flows. The joint explanatory statement for the Consolidated Appropriations Act, 2023 (P.L. 117-328), requires the IBWC to submit to the appropriations committees an operating plan for FY2023, including plans for new and ongoing construction projects.

U.S. Environmental Protection Agency

Congress annually provides funding to EPA for high priority water and wastewater infrastructure projects in the U.S.-Mexico border region. In 1997, EPA and NADB entered into an agreement, under which EPA contributes much of its annual border infrastructure appropriation to NADB for grants to construct water infrastructure on both sides of the border. For FY2023, Congress provided $36.4 million for the Border Water Infrastructure Program (BWIP) through an EPA account in the Consolidated Appropriations Act, 2023 (P.L. 117-328). EPA in turn provides these funds to two programs: (1) the Project Development Assistance Program (PDAP) and (2) the Border Environment Infrastructure Fund (BEIF).¹⁵³ The PDAP and BEIF programs are intended to identify and fund drinking water quality and/or wastewater management infrastructure projects. Project sponsors can apply jointly to the PDAP/BEIF program through NADB, which screens for initial eligibility and prioritizes projects using EPA's ranking methodologies.¹⁵⁴

The USMCA Implementation Act (P.L. 116-113) included a supplemental appropriation of $300 million for EPA to support high-priority wastewater facilities, after consultation with the appropriate border commission. The act directs EPA to carry out design, construction, operation, and maintenance activities of high-priority treatment works in the Tijuana River Valley to treat wastewater flows originating in Mexico. Section 7069 of the Consolidated Appropriations Act, 2023, authorizes EPA to transfer funds provided by P.L. 116-113 to the IBWC to construct, own, and/or operate treatment works to (1) address transboundary pollution and inadequacies or breakdown of existing treatment works in Mexico, and (2) provide treatment of flows, including the operations and maintenance of new treatment works.

USMCA Implementation Act, IBWC, and Minute 328

In July 2022, the U.S. and Mexican sections of the IBWC agreed to Minute 328, "Sanitation Infrastructure Projects in San Diego, California – Tijuana, Baja California for Immediate Implementation and for Future Development."¹⁵⁵ Minute 328 identifies specific projects to be constructed in San Diego and Tijuana, and the financial commitments of each country to these projects. These funds are dedicated to expanding the capacity of the South Bay International Wastewater Treatment Plant in San Diego County; rehabilitating pumping plants, pump stations, and pipelines in Mexico, as well as constructing a new wastewater treatment plant in Mexico.

North American Development Bank

In 1993, the United States and Mexico adopted an agreement to establish the Border Environment Cooperation Commission (BECC) and the NADB to provide financial assistance for a range of environmental infrastructure projects in the border region.¹⁵⁶ The agreement noted the need for environmental infrastructure, especially in the areas of water pollution, wastewater treatment, and municipal solid waste. The BECC was authorized to help border states and communities coordinate, design, and mobilize financing for environmental infrastructure projects, and to certify projects for financing. The NADB evaluates the financial feasibility of BECC-certified projects and provides financing as appropriate. In 1993, Congress authorized U.S. participation in the BECC and NADB in legislation implementing the NAFTA (P.L. 103-182). In 2004, P.L. 108-215 authorized several operational reforms to the NADB. In 2017, BECC and NADB were integrated into a single institution.¹⁵⁷

The USMCA Implementation Act (P.L. 116-113), Title VIII, Subtitle C, called for U.S. NADB board members to urge NADB to prioritize financing environmental infrastructure projects (over road or commercial projects), streamline project certification and financing procedures, and develop project performance measures. The FY2021 Consolidated Appropriations Act (P.L. 116-260), Division O, Title VI, authorized the U.S. Treasury to contribute up to $1.02 billion for U.S. shares of NADB capital stock. The 2021 NADB annual report stated that, as of July 2022, the United States has provided $225 million in paid-in capital to the NADB and that Mexico intended to provide matching payments.¹⁵⁸

Water Resource Issues¹⁵⁹

The United States and Mexico share the waters of the Colorado River and the Rio Grande. These shared rivers have long presented complex issues leading to cooperation and conflict in the U.S.-Mexico border region and between the United States and Mexico.

The U.S.-Mexico Water Treaty of 1944 and other binational agreements guide how the two governments share the flows of these rivers.¹⁶⁰ The binational IBWC administers these agreements and includes a U.S. Section that operates under foreign policy guidance from the U.S. Department of State. Since 1944, the IBWC has been the principal venue for addressing river-related disputes between the United States and Mexico.

Under the U.S.-Mexico Water Treaty of 1944, the United States is required to provide Mexico annually with 1.5 million acre-feet of Colorado River water.¹⁶¹ U.S. deliveries to Mexico in the Rio Grande basin near El Paso/Ciudad Juárez occur annually under a 1906 binational convention, whereas Mexico's deliveries downstream of Fort Quitman, TX, are established in the U.S.-Mexico Water Treaty of 1944. The 1944 treaty typically requires Mexico to deliver to the United States a minimum amount during a five-year cycle.

Developments in the Colorado River Basin. The United States continues to meet its Colorado River annual delivery requirements to Mexico pursuant to the U.S.-Mexico Water Treaty of 1944. Recent IBWC actions on the Colorado River have focused on how to manage the Colorado River's water and infrastructure to improve water availability during drought and to restore and protect riverine ecosystems. The most recent minute governing Colorado River basin operations, Minute 323 (signed in September 2017), is a set of binational measures that provides for cooperative basin water management, including environmental flows to restore riverine habitat. Minute 323 also provides for Mexico to share in cutbacks during shortage conditions in the U.S. portion of the basin, including delivery reductions under drought contingency plans authorized by Congress in April 2019.¹⁶² In addition, Minute 323 designates a "Mexican Water Reserve" through which Mexico can delay its water deliveries from the United States and store its delayed deliveries upstream at Lake Mead, thereby increasing the lake's elevation.¹⁶³ For the Colorado River Basin, issues before Congress may be largely related to oversight of Minute 323 implementation and water management associated with potential shortage conditions and any additional proposed delivery reductions in response to ongoing drought.¹⁶⁴ Congress also may be interested in the upcoming 2026 expiration of Minute 323 and the negotiation of any extensions or replacement agreements in the interim.

Developments in the Rio Grande Basin. On multiple occasions since 1994, Mexico has not met its Rio Grande delivery obligations of 1,750,000 acre-feet within the five-year cycle established by the U.S.-Mexico Water Treaty of 1944, most recently during the five-year cycle from 2010 to 2015.¹⁶⁵ Mexico avoided ending the October 2015 to October 2020 cycle with a water delivery deficit by transferring to the United States Mexican water stored at binational IBWC dams. A minute concluded in October 2020, Minute 325, provided that a shortfall would be avoided through the transfer of water stored at two IBWC dams from Mexican to U.S. ownership. Minute 325 resulted in the transfer of ownership of 144,728 acre-feet of water.¹⁶⁶

Minute 325 also allowed for negotiation of an agreement for potential temporary use of U.S. water for minimum municipal needs in Mexico below the Amistad Dam. In addition, Minute 325 indicated that two Rio Grande working groups would be established as part of the efforts to reach a goal of developing a minute on increased reliability and predictability of Rio Grande deliveries to water users in the United States and Mexico by December 2023. To date, Congress has been primarily involved in conducting oversight through reporting requirements for the U.S. Department of State, such as those included in P.L. 116-6 (S.Rept. 115-282). Pursuant to the various reporting requirements, reports have been delivered to various committees of Congress. During the current five-year cycle (October 2020-October 2025), Mexico's deliveries were among the lowest observed for the first 22 months of a cycle. Deliveries increased in August and September 2022 and then flattened out through March 2023. Mexico has another 2½ years to meet the 5-year delivery obligation.

U.S.-Mexico Health Cooperation

As with neighboring Canada, robust trade, migration, and an extensive shared border have made public health cooperation a critical part of the U.S.-Mexico bilateral relationship.¹⁶⁷ Collaboration on health matters has been strong for more than two decades, particularly since the Anthrax release in 2001 when Mexico became part of the Global Health Security Agenda and later on in response to the outbreaks of SARS-CoV (2002-2004). In response, both countries collaborated on the development of an electronic early warning surveillance system for infectious diseases.

Building on lessons learned from the H1N1 (2009) Influenza pandemic, Mexico, Canada, and the United States launched the 2012 North American Plan for Animal and Pandemic Influenza (NAPAPI). The 2012 NAPAPI created a flexible platform to prevent, prepare, and respond to any potential or actual health security threat to North America through the North American Health Security Working Group (NAHSWG). Since its creation, the NAHSWG has hosted multiple tabletop exercises on emergency communications and deployments of medical countermeasures, medical personnel, and laboratory samples.¹⁶⁸ The NAHSWG is led by the U.S. Department of Health and Human Services (HHS) and has U.S. government representation from several HHS offices, such as the CDC, the U.S. Food and Drug Administration (FDA), and the National Institutes of Health (NIH) and from other agencies (such as DHS and the State Department). In addition to this trilateral collaboration, Mexico is one of five countries that has a permanent HHS health attaché representing the Office of the Secretary, overseeing the work of HHS agencies operating within the U.S. Embassy in Mexico City, and leading health diplomacy efforts.

Response to COVID-19. In January 2020, the NAHSWG convened to respond to COVID-19. The group enabled the sharing of best practices on issues such as epidemiological surveillance, laboratory diagnostics regulation, testing policies, supply chains, workers' safety, COVID-19 variants, and vaccine confidence. Through the HHS health attaché, Mexico received funding support to strengthen the COVID-19 response in the areas of epidemiological and laboratory surveillance, risk communication, and research. HHS also supported Mexico with diagnostics test kits, facilitated the acquisition of ventilators, hosted bilateral dialogues on vaccine and therapeutics development, and provided expertise on vaccine deployment matters. Mexico received nearly 17 million vaccine doses from the U.S. government.¹⁶⁹

Border Health Coordination. The U.S.-Mexico Border Health Commission was created in July 2000 with the signing of an agreement by the Secretary of Health and Human Services of the United States and the Secretary of Health of México to provide international leadership to improve health and quality of life along the U.S.-Mexico border.¹⁷⁰ Under the Biden Administration's HHS leadership, the U.S. section of the commission is tasked with conducting health needs assessments and serving as a key advisory body on border health matters to the HHS Secretary in alignment with larger bilateral collaboration frameworks and with its public law mandate. Since 2018, the U.S. section has provided funding and technical advice through the CDC's Binational Border Infection Disease Surveillance (BIDS) program, which in turn funds the four U.S. states on the U.S.-Mexico border to improve the detection, reporting, and prevention of infectious diseases of binational importance.

The NAHSWG and the U.S.-Mexico Border Health Commission reviewed lessons learned from COVID-19 at the federal and border level, as called for during the 2021 North American Leaders' Summit.¹⁷¹ While some transborder communities (e.g., San Diego, California-Tijuana, Baja California) used existing mechanisms to coordinate their pandemic responses, others (e.g., El Paso, Texas-Ciudad Juárez, Chihuahua) struggled to do so.¹⁷² Limited federal support from underfunded border health entities and disjointed national travel restrictions and vaccine policies added to the challenges faced by local officials in binational communities.¹⁷³ At the 2023 NALS, a key deliverable included revising the 2021 NAPAPI to better respond to health threats.¹⁷⁴

Outlook

U.S.-Mexico relations are likely to be tested in 2023 by ongoing tension in security and energy relations and by U.S. concerns over human rights, the weakening of Mexico's democratic institutions, and the military's growing role in Mexico's economy and society. Most experts maintain the best way for both countries to address these challenges is to continue working together and with Canada to ensure the best possible outcomes for North America. A series of high-level meetings in 2022 and thus far in 2023 have kept dialogue open between the Biden and López Obrador administrations. Nevertheless, tough U.S. congressional criticism of Mexico's inability to address fentanyl trafficking and Mexican criticism of U.S. intervention and violations of Mexican sovereignty have caused renewed tension. In addition, bilateral cooperation may falter as both countries convene presidential elections in 2024. Congress is likely to maintain significant interest in Mexico, with trade, security, drug policy, migration, health, and environmental issues as probable areas of funding and oversight efforts.

Appendix A. Key Justice Institutions

Appendix B. Mérida Initiative Funding