The Peter Zeihan Podcast Series - Crazy Little Thing Called Geopolitics - North Capital Forum 2023 || Peter Zeihan

Episode Date: February 9, 2024

⁠This conversation took place on October 5th, 2023 at the North Capital Forum 2023 in Mexico City. We discussed the opportunities and challenges that lie ahead for North America.This is an interview with Enrique Perret, Managing Director of the U.S.-Mexico Foundation (USMF) & President and Founder, North Capital Forum (NCF). Full Newsletter: https://mailchi.mp/zeihan/crazy-little-thing-called-geopolitics

Okay, Peter Sejahan, the first time I heard about you was a year ago in a podcast, and I was like, is this for real? And I'm going to start with that because the forecast that you made in that about China. I'll let you talk about China and the collapse of China. Well, let's start with the punchline. China won't exist as an industrialized unified nation state within a decade. Ten years. Ten years.

And that assumes nothing goes wrong. And the rate at which the government is degrading internally suggests that's going to be front-loaded considerably. So we're very rapidly approaching a world where $35 trillion of industrial plant will simply be worthless. And if there is a product that comes out of China that you feel you need, it's time to make it your damn self. because we are very, very rapidly out of time. Can you give me more arguments on why China and just the decade? Sure. Let me give you three. So we've got demographics, we've got debt and holdings, and we have leadership. So first demographics. The Chinese have always lied about their numbers.

It shouldn't really be a shock to anyone. But the- What was the lie? What was the number? Oh, it's whatever the data is that they think the chairman wants to see, then everyone generates that data. Okay. So for 40, 45 years, we've had the one-child policy. So the argument was that you should have fewer people. But then they incentivized local governments to inflate the numbers of kindergartners, five-year-olds that they had, because that's how you qualify for government subsidies. And so one of the things that's changed in the last three years is the Shanghai Academy of Sciences,

which is like the last bastion of people with integrity in the data. system in China have come out and started culling bullshit on a lot of it. So they're saying directly that the Chinese have overcounted their population by over 100 million people, and all of the missing millions are under age 40. We also have, because of COVID, some antacillory data that proves basically that the other data was wrong. And we've had official government updates in just the last couple of months. Anyway, it all ends up that the birth rate in China in the last five years has dropped by over half, probably closer to 70%, and the birth rate in China's major cities

is now less than 0.5.2.1 is what you need for a replacement population. And everyone is going back and kind of seeing how far back they can trace us to see how long it's been so negative. But the official data suggests that China will not have a consumption or a production-based system because they will lack enough workers under age 50 to just produce basic goods by the end of the decade. And that's now one of the better case scenarios. So that's kind of box one.

Box two, the United States has... I need the tequila. Yeah. U.S. has a debt ratio of about 100% to GDP. Mexico's is about 40%. Local governments alone in China have added more than Mexico's total national debt every year for the last 12 years.

And local governments in China cannot raise taxes. They can only make money by selling land, which they can't anymore. The government has actually criminalized the collection of the data. That's a new trick. Or getting transfers from the state. So this is local governments that now have half as much debt as the United States. That's on top of corporate debt, which is 250% of GDP, which is over triple the U.S. total for an economy that's significantly larger and more internationally wired. And my personal favorite has to do with the housing sector. The Chinese government forces the population to keep their money at home because they tap that in order to fuel all this debt. Well, that means that if you're a Chinese citizen,

you're desperate to get your money into anything that you think might preserve its value. And real estate has always been that thing. So about 80, 85 percent of the average Chinese citizens' personal holdings are in real estate. And that has now led a build to the the point that there's somewhere between 1.5 and 3 billion surplus condos in the country. There's enough spare housing to put up everyone in the Western Hemisphere and everyone in Europe. So the market value of those, assuming they were put together correctly, open question, is probably only about 10% of face value. So on top of all the other issues, the entire savings of the entire population is effectively worthless.

When you hear that in this side of the world, it looks like good news for North America or the whole continent, but maybe not. Well, you haven't even finished with the things that are wrong. Let's talk about the government. Okay, Chairman G has the strictest cult of personality we have seen in human history. It's much worse than what we saw under Mao. Honestly, it's like colligula levels of crazy at this point. He has purged everyone from the system who is capable of function. He spent his first five years getting rid of all the local leaders that were competent.

He spent his second five years getting rid of the two cliques, Zhengziman and Huigntao that put him in power. And he spent the last three years going through academia and the best of the best of business community to make sure there would never be a challenge. And in part of that, they've stopped collecting, not that they're not publishing, they're not even collecting data on things like land sales and the bond market and political biographies and college dissertations. He's made sure that no one can rise to theoretically challenge him. And I think the best example that I can give you is just how stilted everything has become is that stupid weather balloon from a few months ago.

The thing was roughly 120 meters side to side, and it was dangling something about the same size as an Embraer jet. You guys know Embryer's, those little commuter jets have two seats on one on one on the other, and they're absolutely cramped and tiny unless they're dangling from a freaking balloon. So, I mean, I was obviously a spy platform. I had generally the same response that President Biden did, and neither of us are balloon experts. We're like, you know, okay, it's crossing in from Canada. Thanks for that, by the way, Canada. Let's shoot it down, see what we're dealing with.

And there are balloon exports in the American intel community, lo and behold. And they went up the chain because information passes in the United States, the bureaucracy. And the CIA director and the defense department chief talked with the president. Like, Mr. President, please don't shoot this thing down. I mean, number one, we're not worried about it. We know exactly where it's going to go. It's going to float over our missile silos. Montana. But Mr. President, unless you're planning on nuking someone this week, those hatches

will be closed. They're always closed. So they're going to get pictures of closed hatches from seven miles away. We're not worried about that. But this is an opportunity. Because Mr. President, if you let us, we'll put a spy plane below it and a spy plane above it and we'll put every whisper sensor we have on it and we'll just track the sum bitch for the next nine days over the the United States. We will get a copy of all their cryptography. We'll see how they're sending signals through the satellite network, through the civilian network. And Mr. President, when we're done, we're going to be able to tell you not what city or what block or what building or what floor or what office. We'll know what terminal this thing's being controlled from. And our hackers are

much better than theirs. And so we will tag the people who use that terminal and we will turn their entire system inside out in a matter of a week. Mr. President, this is the intelligence breakthrough of the decade. We now know that Xi wasn't aware that the balloon existed until after it had been shot down because no one would tell him. We now know that their defense ministry was unaware of it until it was over the U.S. It was just some asshat in their intelligence bureau who thought this was what Wolf Warrior diplomacy means. And we're seeing this sort of disconnect and information starvation and decision-making breakdown throughout the entire bureaucracy at all levels.

Nobody wants to raise up. There's a Chinese saying, you know, the tall blade of grass is the first one to get cut. And since Xi has gone on such a bureaucratic purge for 13 years, there's no one left who will speak any truth to power. And so he's making decisions in a box. And the result is going to be, state failure. The question is whether that happens in the short term or because of insurmountable

problems because of the demographic situation or the debt situation. I mean, we're at a situation now that there's multiple guns pointed at China's head and we just don't know which one's going to pull the trigger first. And so for North America, this is either brilliant or awful based on the bets you've made in the last 30 years. Obviously for purposes of this event, The upside opportunity for Mexico is something different. People talk about Mexican moments that have been seized or missed. This is a fundamentally different situation, because we're talking about in the next six years,

there is an opportunity here for an overhaul of Mexican infrastructure and then all of the system changes that would come from that, that would allow Mexico to have a Korean-stander, growth spur that would last 20 to 30 years. You're talking about the ability here to completely overhaul everything about this country. In the United States, it is only going to generate the fastest growth in our history. That's all it's going to do. That's pretty good. If you do nothing for this, you'll have that too. But that's not being very ambitious. There are challenges. They're all manageable. There are things that need to be done, but none of them are secrets. And the bottom

line is, if we want stuff, we're just going to have to make it ourselves. That's inflationary. It's going to be expensive. It's not in a straight line. It's going to be awkward. We're going to have to do things differently. But this is a really good story. Because even if we botch it, it's still the fastest growth we've ever had. I can live with that. But there are other regions that can also use the Southeast Asia. Southeast Asia looks pretty good. Southeast Asia has the advantage of a stable demographic structure, much like Mexico and better than the United States. And they've already kind of started down this path in bits and pieces. So the ties are pretty good at the mid-level tech stuff. Same with the Malaysians, especially on the manufacturing side as opposed to design.

Vietnam has overhauled their educational system more than any other country in the world. and the new estimate is that 40% of their college grads are STEM, which is just obscene. That's like three times the country in second place. So a lot of these pieces are in place, but they've got a couple of things working against them. Number one, there's no integration physically among the Southeast Asian countries. So anyone else who has a card to play can kind of put themselves in there. In addition, the population growth system there is stalling. They have at least a couple of decades yet.

I don't mean to suggest that this is anything like what's going on in Italy or Germany and certainly not like China. But they have huge chunks of all of these countries that have been left behind in many cases on purpose. Now, I realize that Southern Mexico has been left behind here, but it's not like everyone's set out to make that happen. So the degree of internal stress in a lot of these countries is extreme. Northern Thailand is a world apart. Eastern Malaysia is a world apart. the vigorous discussions between northern and southern Vietnam or a world apart. And then Indonesia might as well be on its own planet.

It's not that I think these countries are going to do badly, but they can't act as a unit. And ASEAN is a political talk shop, not really an economic union. So once the Chinese do crack, any tech transfer that hasn't happened from China to Southeast Asia, it's going to have to come from another source. So in that context, what are the main, on one side, the main priorities for North America to leverage the moment? And what are the main values right now? What are the main advantages right now in North America? Well, let's go north to south.

Canada. Processing, processing, processing, processing, processing, processing, processing, processing. There are other things that the Canadians can and should work on. But if they can't turn iron, iron, orange, steel and bauxite into aluminum, and carbon. And that middle step we don't have here, except for a petroleum, in which case the United States has it taken care of for all of us. And so that's that's the easiest lift and the greatest need overall. For the United States, it's going to be capital. One of the things that we're seeing is we're going through a demographic transition to.

Our baby boomers are already half retired. And the 10 years before you hit retirement is the richest you'll ever be. And that decade, the financial assets of people in that 10-year period, 55 to 65, that's 70% of global private capital. And America's baby boomers have already liquidated half of it because they're half retired. And the same has happened in Europe and the same has happened in Canada and the same has happened in Japan. So this cheap capital era that we've all bathed in for the last 15, 25 years, it's gone. We've seen capital costs triple in just the last three years. They're going to triple again in the next three because the baby boomers are not done retiring.

And so having a reform process for the capital structure to keep as much of it going as possible. And honestly, it really doesn't matter how we pull that off. The Inflation Reduction Act is trying to do that for green tech, for example. But going from zero percent capital costs to something closer to a thousand basis points in five years, that will hurt like hell. But we've got the consumption and we've got the infrastructure. We've got a great start on the industrial supply chain system. For Mexico, single... Okay, so here's the thing.

Okay. Where are my northern Mexicans? You guys have done a great job. You're going to do more. Good for you. This isn't about you. Where are my central Mexicans? Interesting.

Okay. The success of NAFTA, as regards Northern Mexico isn't an American story. It's a Texan story. About 80% of American-Mexican trade is based on the relationship between Texas and Northern Mexico. That's the integration. That's the back and forth for manufacturing, for aerospace and automotive, and all the rest. 80% of that traffic is by truck. It's a successful model. It works. You think you can double it. enter central Mexico. It's got twice the population. It's got the free labor availability. It just lacks the infrastructure. And since you're not going to drive 1,500 extra miles one way in a truck

to integrate Houston with Mexico City, you have to have a heavy rail multimodal system. And right now, you don't have that. There's only three north-south corridors in the entire country. none of them make it this far south, and none of the three are integrated. So Mexico needs to go through the greatest infrastructure buildout in the country's history in order to link up the 60 million people in the center to the rest of the continent. And if you pull that off, everything else will take care of itself. Because once you provide the transport corridor, small businesses can pop up everywhere, and foreign investors know what the rules of the game are and where to go.

They can look at Greenfield. They can look at Brownfield. They can look at the universities. Right now, they don't have the opportunity. So if you can pull that off, hot damn. And you're talking about... Is there another plan B? No, there's not.

I mean, again, plan B where we just kind of let it happen, still results in massive industrial spending and expansion and the fastest economic growth in your history. Plan B, failure still looks pretty. pretty good, but the potential here for a complete systemic overhaul is not hard. This sort of opportunity has never been presented to the United States. It has never been presented to Canada. It was presented once the Germans, oh, and wow, they found ways to screw that up.

When was that? Just before World War I. Yeah, I got a little ugly. Island and migration, can that in this hemisphere, in this continent, migration as is happening right now, the flows of people, right now, many people see that as a crisis. Others see that as an opportunity. Can that movement, I mean, it's not just the movement of people from this continent, south to north. There is a lot of people arriving from other continents to this country. I think the last number for immigrants passing through Mexico, it was a hundred different nationality.

Is that in the long term or in the midterm an advantage for this continent on this? Well, I was listening to the previous panel, and the studies are pretty clear that the economic benefits are significant. And the United States has a demographic structure that is atypical of most countries and that we widen out with the baby boomers and then we come back in for Gen X, and then we widen out for the millennials,

and then we narrow back down for the Zoomers, which means that our smallest generation, our Zoomers, are aged 23 and under. So most of this surge of people coming up is in exactly the age block we need, and even better, the Zoomers dream job is to work in a closet coating and that closet has to lock from the inside.

It's like they hit the concept of seeing the sky or other people. They're terrified of. So the types of jobs that are necessary to massively expand the industrial plant, they're not going to be a lot of help with. So getting a big surge in immigration from an economic point of view right now would be really helpful for our labor structure. As for you guys, yours comes down like a pyramid until you about 30, 35, and then it goes straight down. Because 30, 35 years ago is when you started mass industrialization and urbanization for NAFTA. Every country's gone through this process, but because Mexicans didn't really trust the Americans during the Cold War and before, when globalization kicked in, you didn't sign up. It wasn't until the Cold War ended that the talks on NAFTA really got going.

So you were late to the party. And in doing so, your demographics are much healthier than countries that industrialized in the 80s or the 70s or the 60s or the 50s, which notably the Chinese and the Chinese. Germans. That's bought you a lot of time. That means that in 20 years is going to be in a bad shape. If things keep going the way they are, exactly. Now, if you age at your current rate, you will not be in a German-style dissolution, because this is their last decade, too, until the 2080s. There's time to figure some of this out. But the sooner you do it, the less you have a back pedal. And so having the opportunity here to tap some of that northward migration for your own purposes, you know, there's not a whole lot that I agree with

your current national government on. That's one of them. That's a policy that I think is relatively well-thought-out, which I never thought I'd say about EMLO. We talk a little bit about the difference between millennials in U.S. in Canada and millennials in Mexico and Summers in the U.S. and Summers in Mexico. Can you explain a little bit about that? Sure. So millennials in the United States, were the children of the boomers, and they were raised to be told that they were special, and they didn't keep track of the score at the soccer match. And they could live in the basement as long as they want and go get that art history degree. Most of the stereotypes about American millennials are true. The data really does back it up, but only for half of them.

The other half have always worked their asses off. But the defining characteristic vis-a-vis Mexican millennials, is that American millennials were raised in an already heavily developed technocracy. Most of them have never had a rotary phone, if anyone here remembers those. And so they are heirs to the empire, if you will. Mexican millennials built the damn place. Manufacturing is in your blood. And while I realize that the workforce is evolving, millennials here are a much larger chunk relative to the population and very clearly going to be large in charge of the Mexican system for the next 30 years. Our millennials are constantly going to be wrestling with our other generations.

Your zoomers, like our zoomers, were raised in a more advanced society, and they're still finding their way. And they're now at that intersection of manufacturing and tech. It will be very interesting from my point of view to see how your zoomer generation adapts to this shattering of a lot of what's going on in the world. Because tech products, especially electronic products, are going to be the product set that's going to face the greatest disruption over the next decade. East Asia excels at that sector because it's a differentiated labor force.

And you've got the high-tech stuff and the systems on the chips and the semiconductors that come from places like Korea or Japan. You've got the wiring that comes from a place like Indonesia. You've got the special coatings that comes from Malaysia. You've got the design work out of Singapore, you've got the middle manufacturing in Thailand, and it's typically assembled in a place like China. You've got 13, well, really 11, 11 different major buckets of skill sets and price points. We have two.

So we can't just pick up electronics manufacturer and drop it into North America without substantially changing the way it's done. Now, if you had asked me five years ago, how we were going to do that, I'd say, I have no clue. I still have no clue. But we've had an example during COVID that gives me a lot of hope. Back when NAFTA was being negotiated, most of the textiles consumed in the United States were made in the Northern Appalachians, specifically Tennessee and Kentucky. It was all done by hand. It was all machine shops, or I'm sorry, sewing machines, small armies of women typically. NAFTA, by opening up the market, transferred that industry wholly to Mexico.

And then the World Trade Organization in 2001 picked up the whole industry and moved it wholly to China and India. Well, when COVID happened and everything shut down, all of a sudden in the United States, we didn't have clothes. Well, that's a problem. So we innovated a way around it. And we took technology that had been lying on the table for 15 years already. And we started setting up these massive facilities in North Carolina that were a hectare each that had a staff of two, a software engineering, a mechanic. And we now have these facilities that will take raw cotton, clean it, turn it into thread, weave it into yarn, weave it into cloth, cut it into panels, sew it into clothes, even do some basic finishing work. and the per item end product cost is lower than doing it with seamstresses in Bangladesh.

And this happened under the Trump administration. The point is we're going to find out a lot of things are possible once we realize that if we don't, we won't get those things. And we're going to have to do that throughout the continent, and we don't know what the price point for that is going to be. And thank God, the U.S. and Mexico are stapled together at the hip because we're going to need one another or we want to stuff. Let me ask about complementarities between the three countries. In the case of the millennials, for example, looks like there is a complementarity. There are different. The generations are different and they can produce different goods and that's a complementarity.

But there are others, right? Like agriculture, the food production in North America is super complementary. Is there more complementarities that you see in North America? Well, the United States has cracked the code on shale, and at current levels of production, we have at least another 60 years of oil and 300 years of natural gas. 300 years of oil. Yeah, we stopped looking 10 years ago because it just got silly. So the big push over the last several years has been kind of to launch what they call the Shale Revolution

in 3.0. So 1.0 was the gas and the oil. 2.0 was refining and chemicals. And 3.0 is to take the refined product and the chemical processes that come out of that and turn it into medium manufacturing. So until now, once we make the ethylene and the specialty chemicals, we usually ship it to a manufacturing destination. More and more of that is staying behind. And since we need to massively increase the industrial plant, hooray, because that's what you're going to use for that. this is going to sound awful. Please don't take this offensively. You guys are no good at processing.

We need the Canadians for that. Because they have a very large chunk of land and a very low population. And some of the provinces, especially once you get beyond Toronto and Ontario, are desperate for finding a new foothold. And they're in an environment, a lot like Mexico, where there's an opportunity here

because the Chinese right now do all the processing but have very little of the ore. The ore exists in places like Brazil and Australia and Canada. So if you have the right mix of policies, you can turn a place like Manitoba, has lithium and platinum. But they don't produce it. They probably will now.

So we're going to have to get used to prices for a lot of these raw inputs going up until we can get the processing, being knocked out of the park, energy is a good example of what this will look like 10 years from now. Because we went in the United States from having some of the most expensive fuels in the world to now having the lowest cost and highest quality because of that industrial buildout. We're going to have to do this in sector after sector after sector after sector. The other things that the Canadians have figured out that the Americans have unlearned is

there was a realization about 15 years ago, 10 to 15 years ago by the Harper government that Canada was on what we would now call a Chinese-style demographic bomb track, and so they massively, massively expanded immigration. And unlike in the past where the migrants were usually late 40s and older, and so they never had a chance to pay into the system enough to pay for their own retirement, the Canadians became a lot more selective and started really aggressively going after people aged 15 to 35. And now they're bringing in 300 to 450,000 people a year, and they've been doing that for several years. And they managed to hold that up for the most part during COVID, which is kind of bonkers.

Is that the best system that you have ever seen in bringing time? The percentage that is foreign-born is three times that of the country in second place. Now, I'm not sure this is replicable anywhere in the world. Canada is a special, special place with sparkles. But it means that unlike every other advanced country in the world, they have found a way to manage their demographic bomb. Now, there are downsides. The people who are coming are more highly skilled than the people who are already there as a rule. That generates a little resentment.

And that means that they're coming with a suitcase of cash, and the first thing they buy is a place to live, which means there's a housing shortage. and the desirable places to live in most of Canada, now the people who were born in Canada can't afford to live there. And this is going to be an ongoing political and economic crunch that will last until such time as Canada's birth rate rises. Its birth rate is still dropping. Has been now for 70 years.

So it's not rainbows and chocolate here, but they have found a way to manage what would have been a system-killing event. And that means, when it comes to intellectual property development, Canada is very good because they brought in the people to do it for them. Do you have any thought on digital nomads and what happened during COVID and the movement of many people that can work from any place for a company in their home country? That's definitely, you just described the entire future that the Zumers want to live in. The problem we're going to have is all of the equipment that makes that necessary is touching the Chinese supply chain system in some way.

So I would guess that we're going to have a lot of zoomers who will be willing to work into a factory to get a good server. It's not clear if we're going to be able to close that gap. We know that the green transition won't work because the facilities that we need just to hook the stuff up to the grid. I mean, forget the panels for a minute. Just the transition stuff. This is the stuff for the smart meters?

We can't produce enough of it now to do it within 10 years. And you break the Asian supply chain system, that just goes away. So we're going to lose EVs. We're going to lose AI. We're going to lose the green transition. The question is if we can maintain enough raw computing power to do most of everything else that we need. And I'm broadly hopeful there. There's three classes of semiconductors.

And the ones that we're good on are 90 nanometer to 10. And that is most non-cutting-edge smartphones, what's in your television, what's in your car, what's in a plane, and what's in most laptops. Those have a deep ecosystem that taps a dozen countries. There's a lot of competition. And if entire continents fall out of it, you still have a lot of production that won't be overly impacted. So, hooray. But the 90 nanometer and dumber, your analog chips, your Internet of Things, you're singing marguer. a machine. That's 80% China and that's going to break. And then your top stuff, your 10 nanometer

and better, that's high-end smartphone, satellite communications, smart grid, AI, EVs, national security. Some high-end national security stuff, although bombs use relatively dumb chips, believe it or not. It's just the guidance stuff that we lose. That's Taiwan, and that makes it sound a lot simpler than it is because there's all comes from one country, yes, but the facilities that do the fabrication, they have 9,000 companies spread around the world that contribute to the supply chains that allow the fabricate facilities to not just be built, but to operate. And if you peel off one of those countries, the whole thing stops. I'm most well concerned in that regard about the Germans. So we're going to have to rebuild that ecosystem elsewhere because for most of those companies, they make one product that

they sell to one customer and they have no competition on the global scale. And there's like 12 people who have been working on it for 30 years. And the only 12 people in the world have no how to do it. And they can only do it as a team. So it's like, yeah, they have a sick day. The company shuts down. That's not stable. And that is all AI. So we're going to have to rebuild that. and that's going to take a decade. Let me ask you about national security. Tomorrow we're going to have a panel on ally shoring, this concept, but we have also French shoring and obviously near-shoring that it's proximity.

There are some industries that are more driven by factors on national security, like semiconductors. But my question here is, Mexico looks like a good friend for the U.S. a good neighbor. We produce good for the U.S. and for Canada. There is an agreement. But are we allies? No. Who are the allies? Well, the United States has very few allies anymore. In the post-Cold war era, things got slimmed down. I mean, if it wasn't for the Ukraine war, we probably would have ditched the Europeans for the most part. But in terms of firm allies that we actually trust, Australia, doesn't involve anything too sensitive, New Zealand, doesn't involve anything too sensitive, Canada,

the United Kingdom, Singapore, and Japan bought their way in. And that's it. India? No? Oh, God, no. No, I mean, no, no offense to the Indians. They do some great work, but no, no. No, the whole idea of an ally is you can tell them your deepest darkest secrets as you uncover what those deepest darkest secrets are. And when we tried that with Mexico, we lost a lot of DEA agents. So, no, not an ally. Friend, family, solid things. I'm not saying that there's not a relationship there. It's just not an ally. But, you know, you're perfectly honest, by that definition, the Germans really aren't either. French are hit and miss. Should Mexico follow that pad? I can't answer that for you. That's a decision. I mean, Mexico knows what it's like to be on the

wrong side of the United States. It's not a pretty place to be. Mexico knows what it's like. to be on the right side of the United States. That's not always a pretty place either. We're moody. But the United States has some very real security concerns, as involves the border in places south, and how we define those in our own heads evolves with the times. And right now, we are at a point

where our entire political system is up in the air as the parties move around and the factions shift. We've been here before. This is our seventh rearrangement. One of those rearrangements involved the Mexican-American War. I'm not saying that that's how this one's going to end. I'm just saying that when America's political pull stars are reevaluated, we go in a different direction.

And right now, today, both unions and the business community are no longer part of the political conversation. That makes it a really awkward start to any sort of meaningful conversations between Mexico City and Washington. Because our relationship is business. And if labor and business is not even in the room, then all of a sudden all these other issues that you're not used to hearing

coming from the trade representative and the president are dominating the conversation. So you're hearing more about the green transition, regardless of whether or not it's appropriate. You're obviously hearing a lot about migration and border security. And we are real close to having a fight about fentanyl. So we have two more minutes, and I want to talk about politics in the U.S. next year.

Good boy. Understanding that we are going for a tequila, so you can talk about that. The longer version, sure. What will happen in 2024? Okay, so the biggest impact that Trump has had on the American political scene, because remember, he came in during this period when everything is being reshuffled, is he attracted Mexican-Americans, well, sorry, Hispanic-American. more heavily on the Cubans than on Mexicans into the Republican coalition.

He broke the unions out of the Democratic coalition, but he drove away business voters, fiscal conservatives, national security voters, and law and order voters. And so he's got a social conservative core that is very powerful, but doesn't have the numbers necessary to win elections at scale. And because of that, he has to get the independence. But last year when we had our midterms, something happened that had never happened before. Midterms, usually the independents don't show up at all. And if they do show up, usually they vote for whoever they voted against the last time.

They're very fickle. They have buyer's remorse. And in exit polling, over 80% of American independents who showed up for the first time in a midterm, said they really hated the Biden administration. economic policies. They really regretted voting for him two years ago. They think those policies cause immense harm to the American system and really heavy harm to independence personally. And they all voted for Democrats anyway. Donald Trump's position is that the general election shouldn't matter. And that's the only places, that's the only place where American

independents have a voice. There's this saying in the State Department for all our Middle East. embassies is that we believe in one vote, one person, but not one time. And so Trump has alienated core conservatives and made it impossible for independence to vote for him. The Republican Party is not going to survive this next general election. It will break. And Donald Trump will face, what will probably go down in history is the second worst defeat for a presidential candidate ever. Surprise. Before you get happy, we're still going through this transition. Don't celebrate until you see what happens on the other side, which,

whew! Peter Sehan, thank you so much. My pleasure.