“How the 2024 U.S. Election Could Transform Economies in Colombia and Mexico: What’s at Stake for LATAM”

The 2024 U.S. elections hold profound implications for Latin American economies, with the region poised to navigate the outcomes of policy shifts in trade, immigration, and climate originating from Washington. Latin America’s economic interdependence with the United States—its largest trading partner and a key source of foreign investment and remittances—makes the stakes especially high. Policies on trade could recalibrate market access and reshape regional supply chains, influencing the growth trajectories of major Latin American (hereinafter LATAM) economies. Immigration policy changes will impact labor markets and the flow of remittances, crucial lifelines for families and local economies. Meanwhile, U.S. climate policy will either accelerate LATAM’s energy transitions or complicate its resource-based sectors. Latin American economies thus stand at a critical juncture, with the election’s outcomes likely to reverberate across fiscal strategies, social policies, and regional alliances. This is a moment of close watchfulness and strategic preparation as governments and investors alike weigh the prospects for economic resilience in an interconnected global landscape.

1. Trade and Economic Policies

Latin America relies heavily on the U.S. for trade, investment, and remittances, with countries like Mexico, Colombia, and Brazil closely tied to the U.S. market. A potential shift toward more protectionist U.S. trade policies could impact Latin American exports, especially if tariffs increase or if reshoring efforts reduce U.S. reliance on LATAM supply chains. In contrast, policies that foster economic cooperation could strengthen trade ties, increase foreign investment, and stimulate growth in the region.

Countries such as Mexico, which enjoys a strong trade relationship with the U.S. through the USMCA, could benefit significantly if the U.S. administration prioritizes stronger North American supply chains. On the other hand, increased trade tensions between the U.S. and China could pressure LATAM countries to align more closely with one of the two superpowers, affecting export patterns and regional alliances.

2. Climate Policy and Renewable Energy

Many LATAM countries, including Brazil and Chile, are making strides in renewable energy production and are looking to grow as leaders in the global green economy. If the U.S. doubles down on climate action, it could drive demand for renewable energy resources and boost Latin America’s renewable sector, attracting foreign investment in solar, wind, and hydroelectric projects. A strong climate policy from the U.S. could further foster partnerships and funding opportunities that would allow LATAM countries to enhance their sustainable development goals.

Conversely, a rollback in U.S. climate commitments could have a chilling effect, slowing LATAM’s energy transition and discouraging multinational companies from making the necessary investments in the region’s green economy. This could leave LATAM more dependent on fossil fuels, impacting both economic and environmental resilience.

3. Immigration and Labor

U.S. immigration policy changes will likely have one of the most immediate and tangible impacts on Latin American countries. Stricter immigration policies could reduce remittances, which are vital for countries like El Salvador, Guatemala, and Honduras, where remittance inflows contribute significantly to GDP. A friendlier immigration stance, however, would allow for more workforce movement, supporting the economies of both the U.S. and LATAM by enabling the flow of labor and skills, especially in areas like technology and agriculture.

Furthermore, any adjustments in the Deferred Action for Childhood Arrivals (DACA) program or asylum policies will directly impact Latin American nationals, affecting social stability and economic contributions in both regions. This could mean either more opportunities for Latin Americans seeking stability and growth in the U.S. or, alternatively, higher social and economic pressure on LATAM countries managing migration crises if restrictive policies are enacted.

4. Geopolitical and Security Influence

U.S. foreign policy in Latin America has historically influenced political and social dynamics, with recent concerns over the spread of organized crime, drug trafficking, and political instability in some countries. Stronger U.S.-LATAM security partnerships could promote stability, reduce organized crime, and build trust. However, if the U.S. deprioritizes the region, Latin American countries may be left to handle these challenges independently or may increasingly look to China for financial and infrastructure support, shifting the regional power balance.

5. Financial Market Volatility

The U.S. dollar’s performance and interest rate policy are paramount for Latin America, where dollar-denominated debt is significant. Any U.S. election outcome that shifts fiscal policy, leading to volatility in the dollar or interest rates, can impact LATAM economies, especially those with large U.S.-denominated debt, such as Argentina and Brazil. If the U.S. Federal Reserve tightens policy, capital flows to emerging markets could decrease, depreciating local currencies and increasing debt costs. A supportive fiscal policy, on the other hand, would stabilize Latin American markets and encourage foreign investment.

Conclusion

The outcome of the U.S. 2024 elections will deeply impact Latin America across economic, environmental, and social dimensions. A U.S. administration that pursues robust trade, climate action, and cooperative security policies could empower LATAM to make strides in economic growth, sustainability, and social development. Conversely, a more inward-focused, restrictive approach could place LATAM countries at a disadvantage, amplifying economic pressures and potentially driving them closer to other global players like China. As the election unfolds, LATAM policymakers, business leaders, and investors will be watching closely, preparing for the wide-ranging effects the next U.S. administration could have on the region.

Before moving to the U.S., I spent years living in Colombia and Mexico, two countries that hold a special place in my heart. My experiences there deepened my understanding of the economic and social fabric that connects Latin America with the United States, as well as the unique challenges these nations face. It’s for this reason that I feel compelled to highlight the potential impacts of U.S. election outcomes on Colombia and Mexico. Both countries are not only economic partners but also vibrant cultures with resilient people who are directly affected by shifts in U.S. policy. This personal connection drives my focus on how critical policies in trade, immigration, and climate can shape the future of these two beloved countries. As follows there is a highlight for Colombia and Mexico:

1. Trade and Economic Relations

• Mexico: Mexico has one of the closest trade relationships with the U.S., primarily through the United States-Mexico-Canada Agreement (USMCA). A new U.S. administration could either strengthen this relationship by further encouraging nearshoring or introduce new challenges if it seeks to impose stricter trade protections. Mexico’s manufacturing and automotive industries, which have developed in large part to serve the U.S. market, could see growth opportunities if policies encourage supply chain relocation from Asia to North America. On the other hand, any protectionist policies could strain Mexico’s export potential, impacting its economic growth and job creation.
• Colombia: Colombia is a major trading partner of the U.S., with a Free Trade Agreement (FTA) that facilitates the export of Colombian goods like coffee, flowers, and textiles. An administration favoring strong trade relationships with Latin America would support Colombia’s economic growth, but potential protectionist measures could hinder exports, making it challenging for Colombia to balance its trade amid pressures from other markets. Additionally, trade incentives could impact Colombia’s agricultural and mining sectors, which are crucial for its GDP.

2. Immigration Policy and Remittances

• Mexico: Mexico’s economy is highly reliant on remittances from the United States, making immigration policy a top concern. A more lenient U.S. immigration stance would support continued or increased remittances, which reached record highs in recent years, benefiting rural and economically vulnerable areas. Stricter immigration policies, however, would directly impact this income flow and place added pressure on Mexico’s social services if more nationals are unable to migrate or are returned from the U.S. In addition, labor shortages in the U.S. could impact demand for Mexican workers, which has ripple effects on remittance levels.
• Colombia: Although Colombia does not receive remittances on the same scale as Mexico, immigration policy remains important, especially for its Venezuelan migrant population, many of whom transit through or settle in Colombia on their way to the U.S. If U.S. immigration policies tighten, Colombia may face increased migration pressure, which would require more resources for healthcare, housing, and integration. Relaxed policies, on the other hand, could ease the strain on Colombia by facilitating the legal movement of migrants, creating new economic opportunities for migrant families.

3. Security and Anti-Drug Cooperation

• Mexico: Security cooperation between the U.S. and Mexico is central to combating organized crime and drug trafficking. Any changes to U.S. policy that reduce aid or shift the focus away from security could lead to challenges for Mexican law enforcement, potentially destabilizing regions affected by cartel activity. A proactive administration may push for continued collaboration under the Mérida Initiative, focusing on combatting drug trafficking and enhancing security along the U.S.-Mexico border. However, a more inward-focused U.S. administration may reduce funding or assistance, leaving Mexico to address drug trafficking and violence with fewer resources.
• Colombia: The U.S. has historically played a crucial role in Colombia’s security strategy, particularly in the fight against drug trafficking and organized crime. Any shift in U.S. commitment to these efforts could impact Colombia’s progress in reducing illegal drug trade and violence associated with armed groups. Conversely, a commitment to strengthening security cooperation would provide Colombia with much-needed resources to combat drug production and trafficking, reinforcing the country’s stability and economic resilience. However, Colombia may also need to weigh its reliance on U.S. security aid with the potential need to diversify partnerships with other countries.

4. Climate and Energy Policy

• Mexico: Mexico is both a major oil producer and a burgeoning hub for renewable energy, but U.S. policy changes will directly impact its climate goals and energy sector. Mexico’s proximity to the U.S. means it could become a key partner in clean energy projects if the U.S. prioritizes green policies, attracting investment into Mexico’s solar, wind, and geothermal sectors. On the other hand, a rollback on U.S. environmental policies could impact funding and slow Mexico’s progress on sustainability targets, as the country balances its energy mix between fossil fuels and renewables.
• Colombia: Colombia has been proactive in promoting renewable energy and reducing its reliance on fossil fuels, but it remains a major exporter of oil and coal. If the U.S. prioritizes climate cooperation, Colombia may receive increased investment in its renewable projects, boosting its economy and supporting its climate goals. In contrast, if the U.S. deprioritizes environmental policy, Colombia’s oil and coal exports may gain temporary support, but at the cost of environmental progress. Additionally, the green economy could face reduced investment, potentially slowing the country’s energy transition.

5. Investment and Financial Stability

• Mexico: As a destination for foreign direct investment (FDI), Mexico relies heavily on a stable and favorable U.S.-Mexico relationship to attract investment in sectors like manufacturing, technology, and infrastructure. Any instability in the U.S. post-election could lead to a cooling effect on FDI in Mexico, affecting job creation and economic growth. A U.S. administration that prioritizes stable economic partnerships, however, would attract continued investment, benefiting Mexico’s GDP and employment rates.
• Colombia: Colombia is equally dependent on foreign investment, particularly in the oil, mining, and finance sectors. Policies favoring economic stability and open trade in the U.S. would encourage FDI in Colombia, providing economic resilience and diversification. Alternatively, financial market instability or a weakened dollar could impact Colombia’s exports and currency, leading to higher costs for international debt obligations. Increased borrowing costs could also limit public spending and slow development projects.