Pondering Peter Zeihan: Unraveling Trade Dynamics and North American Potential

‌‌A nuanced exploration awaits in the trade and supply chains, where the interplay of pros and cons unravels. Allow me to elucidate upon this discourse, drawing upon the wisdom of the ages, for in the Classics lies a font of understanding.

Firstly, we must acknowledge the empirical evidence demonstrating the feasibility of establishing stable supply chains. The Texans have exemplified this possibility with their resolute endeavours spanning three decades. Their fruitful interactions with Mexico have fostered a symbiotic relationship, with Texas serving as a conduit for approximately half of our trade with our southern neighbour. However, let us not be oblivious to the presence of real threats posed by cartels, for they are not an inconsequential force. We must recognize that our insatiable appetite for cocaine perpetuates its influence and power. These cartels did not simply materialize in Mexico; their emergence can be attributed to our actions to some extent. It is crucial to acknowledge that the violence propagated by cartels is confined to a mere fraction of the nation, usually encompassing only one or two percent of the country at any given time. With a diligent and astute security apparatus that remains vigilant and informed, we may detect the imminent arrival of violence and mitigate its impact.

Curiously, the cartels have not genuinely desired to disrupt the trade flow. On the contrary, interfering with trade would be detrimental to their existence. The Sinaloa cartel, reputedly the most potent among them, would perceive such interference as a death knell for their drug trafficking enterprise, which remains their raison d'être. Similarly, the Jalisco New Generation cartel views violence as an end in itself rather than as a means to an end. Pursuing trucking and manufacturing ventures holds little allure for them. Admittedly, we cannot dismiss the risk of such interference as nonexistent, for that would be an error of judgment. However, the cartels, lacking a viable business model for meddling in trade beyond their desire to control the plazas, are disinclined to disrupt this particular facet of commerce.

Now, look towards Northern Mexico, an expanse marked by desert and highlands. This unique topography engenders a scarcity of farms and small towns, which, in turn, hinders the organic ebb and flow of populations witnessed in the United States and Canada. In Northern Mexico, when a city emerges and embarks upon industrialization, attracting manufacturing enterprises, it draws labour from nearby communities. However, in this arid land, the absence of such neighbouring communities limits the mobility of the Mexican workforce. Herein lies a double-edged sword: on the one hand, the advantage lies in the hands of a select few families who control the entire metropolitan area, with the confines of this power ending where the desert begins. Such oligarchic tendencies are disfavored in our democratic sensibilities, yet they offer a streamlined avenue for conducting business. As an American seeking to engage with these dynamics, one can venture southward and forge connections with those in positions of authority. By establishing camaraderie, a traveller may depart within a few days, armed with supply contracts. These influential individuals, representing various entities such as the Power Board, mayor's office, tax office, university, and local labour units, coalesce within a close nexus. The ease with which one can navigate this interconnected web is undeniable. Yet, let us not ignore the implications of such engagement, for it entails an immersion into the familial fabric akin to becoming a godchild. The inescapable consequence of this bonding is a splitting hangover, a testament to the newfound kinship. This method of business engagement has been the Texans' modus operandi for three decades, reaping the fruits of this peculiar labour market.

However, we must confront the limitations inherent in this configuration. The Mexican populace lacks the same mobility that characterizes their northern neighbours due to the absence of secondary communities. Approximately 130 million individuals grace its territories within the vast expanse of Mexico, with roughly a quarter residing in the northern states we are most acquainted with. An estimate of the situation leads me to assert that the Texans have already claimed approximately 70 to 75% of the available labour pool in these regions. As such, a narrow window remains for others to partake in the opportunities afforded by Northern Mexico. However, given our present trajectory, this window may close within two to three years. Subsequently, we shall be compelled to extend our reach to central Mexico, a realm fraught with distinct challenges. Herein lies a different sociopolitical milieu, where individuals such as AMLO hold sway.

In contrast to the oligarchs of the North, this region is characterized by interconnected communities, interwoven with intricate ties of influence and power. Although central Mexico presents a remarkable potential for productivity, the path to unlocking this potential demands arduous negotiations and greater involvement from the governing bodies. Thus, our transition into central Mexico shall entail a more complex launch process, necessitating heightened diplomacy and negotiation skills.

And now, my esteemed colleagues, we must ponder the overarching trajectory of North America. Throughout our discourse, it becomes evident that a sense of optimism permeates our analyses. The Texan perspective radiates enthusiasm for the possibilities within North America, exemplified by their bullish sentiment. We have explored the multifaceted dimensions of trade, the potential pitfalls, and the avenues for growth and prosperity. Yet, as intellectual stewards, we must consider the broader implications of our deliberations.

Daniel's Take:

  • Stable supply chains can be established, as exemplified by the Texan-Mexican trade partnership.
  • Cartels pose a genuine threat but are disinclined to interfere with trade, which contradicts their interests.
  • Northern Mexico offers a unique environment for business engagement, characterized by concentrated power structures and streamlined negotiations.
  • Mobility limitations and the depletion of available labour necessitate a swift embrace of opportunities in Northern Mexico.
  • Central Mexico presents a more intricate and nuanced landscape, demanding excellent negotiation and government involvement.
  • Our transition to electric vehicles faces obstacles due to the scarcity of essential materials, necessitating thoughtful prioritization of sustainable initiatives.
  • The greening of the grid holds promise but requires careful consideration of resource constraints.
  • In the face of challenges, an underlying optimism persists, fueled by North America's resilience and adaptability.

Cameron's Take:

Mexico is an interesting case. Of the three nations in North America, they are the poorest but they have come along way in the past 20 years. Development in Mexico has been explosive. They have also developed their workforce, especially around auto manufacturing in a similar way to Canada. I think that presents some opportunities over the next few decades that could really grow the Mexican economy and grow the economies of Mexico's neighbors. Mexico has all the ingredients in terms of a relatively stable government, good legal environment, manageable amoutns of corruption, and a plentiful population. However, the cartels are a problem.

Zeihan said in one of his videos, "please stop doing cocaine." The reality is that the Mexican drug cartels are funded by the insatiable appetite for drugs of every description within the United  States and Canada. I don't think we'll convince everyone in the US to stop doing drugs that leaves the US government limited options when it comes to the drug cartels. The War on Drugs was a waste of both time and treasure. Where does that leave northern Mexico and drug cartels?

The cartels might not want to disrupt trade between Mexico and the US but driving through Matamoros or other border towns and seeing bodies hanging from the overpasses isn't exactly a positive environment for economic development. The cartels are brutal with anyone who disrupts their trillion dollar business. The reality is that to do business in Mexico, at some point, the cartels will interact with that business. It is merely a matter of how to do it without completely driving legitimate business into the ground. This is where the government involvement piece comes into play.

Turning to the sustainability piece of all of this, we have to think careful about what makes sense when it comes to sustainability. Unlike in previous epochs, there will not be one fuel that will solve all our problems, there are likely going to be a variety of fuels that will help us move away from fossil fuels. For light cars and passenger vehicles, electric can be an answer. For heavier vehicles, hydrogen presents a wonderful opportunity to use an energy dense fuel whose by-product is simple water. There is an opportunity to green aircraft, trucks and even ships with this technology. Both electric vehicles and hydrogen vehicles present an infrastructure problem. The advantage is that hydrogen pumps can be added onto gas stations fairly easily. expanding the electric grid to handle the on-boarding of millions of electric vehicles is a far greater problem with higher costs. These are the challenges of greening transportation. It is important to remember that oil is going to be part of our lives for the foreseeable future. Plastics, synthetic fibers, and other materials derived from oil are going to be part of this transition. What we need to focus on is reducing impacts and pollution from the drilling of oil.

We discern a profound potential for economic growth and collaboration within North America. The Texan example demonstrates that stable supply chains can be forged, fostering mutually beneficial trade relationships. By recognizing the limitations and opportunities the Mexican labour market presents, astute actors can capitalize on the existing window in Northern Mexico. Moreover, the challenges posed by the transition to electric vehicles underscore the need for thoughtful resource allocation and prioritization. This impetus for sustainable practices aligns with a broader vision of ecological harmony and technological advancement.

As we bid farewell to this poetic, philosophical expedition, let us embrace the lessons learned and the contemplations inspired. Through the annals of history and the wisdom of the Classics, we uncover insights that guide our understanding of contemporary trade dynamics. May these reflections serve as a lonestar, illuminating the path towards robust and equitable supply chains in the vast expanse of North America.

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