Redefining Sovereignty: How the Narco Act and CFIUS Are Rewiring U.S.–Mexico Relations
The Narco Act and CFIUS are not mere bureaucratic measures—they are levers of geostrategic influence.
By Ghaleb Krame and Raúl Flores
In 2025, Mexico ise facing the greatest redefinition of its sovereignty since the Cold War. The source is not an overt military invasion, but something far more insidious: a growing arsenal of legal and financial instruments emerging from Washington—chiefly, the Narco Act and the expanded scope of CFIUS.
Together, these measures signal a strategic shift. U.S. security doctrine is no longer treating Mexican cartels solely as criminal threats but as terrorist actors. The consequences go far beyond border enforcement or drug seizures. What’s emerging is a framework to legally justify sanctions, deny remittance flows, monitor Mexican investments, and—under the right political conditions—even authorize cross-border operations under counterterrorism authority.
The implications for Mexico are profound.
From FTO Designations to Sovereignty Dilemmas
The designation of multiple Mexican cartels as Foreign Terrorist Organizations (FTOs) in early 2025 under the Narco Act represents a point of no return in U.S.–Mexico relations. While the immediate goal may be to curb fentanyl trafficking, the tools now available—ranging from OFAC sanctions to extraterritorial prosecutions—can be turned against a wide array of actors, including financiers, real estate companies, and logistics firms deemed to be “materially supporting” these organizations.
It’s a policy with teeth—and one increasingly influenced by domestic U.S. politics. In an election year, figures like Kristi Noem and Pam Bondi have openly called for drone strikes against cartel targets inside Mexico. Donald Trump, now a central player again, has argued that “Mexico has lost control of its territory” and warned that the U.S. must act, with or without Mexican approval.
This isn’t just rhetoric. The legal infrastructure is now in place.
CFIUS: The Economic Front
While the Narco Act garners headlines, CFIUS—the Committee on Foreign Investment in the United States—has quietly expanded its scope. Originally designed to vet Chinese and Russian acquisitions, it now operates under a broader interpretation of “national security.”
Cartel-linked entities seeking to launder money through logistics companies or acquire fintech platforms could trigger CFIUS scrutiny, particularly if they have Mexican state or business connections. U.S. lawmakers have even floated the idea of designating certain Mexican sectors as “high-risk,” effectively pressuring American firms to divest or avoid investments altogether.
For Mexico, this signals a new form of economic containment—one where sovereign financial decisions can be challenged or invalidated by U.S. security narratives.
A New Map of Friction
This isn’t happening in a vacuum. Structural tensions are mounting on multiple fronts:
Fentanyl-related deaths in the U.S. have created intense political pressure for decisive action, regardless of Mexico’s position.
Digital gentrification—the influx of Americans into cities like Mexico City and Tulum—has sparked social friction, nationalist backlash, and new debates over sovereignty.
Energy theft (huachicol) and cartel penetration into natural gas and lithium sectors have reframed criminality as a threat to hemispheric energy security.
China’s growing footprint in Mexico—from 5G infrastructure to port logistics—is raising alarms in Washington, fusing anti-cartel policy with anti-Beijing containment.
The result: a convergence of financial, technological, and legal pressures that is reshaping how the United States engages with Mexico—not as a neighbor, but as a potential liability.
What Mexico Must Do
Mexico cannot afford to respond with nostalgia or nationalism. It must define a strategic doctrine of asymmetric co-responsibility. This means:
Leveraging the USMCA (T-MEC) as a legal shield against unilateral sanctions.
Establishing a cyber-financial defense framework aligned with international AML standards, while maintaining autonomy from Washington’s punitive logic.
Activating forums like CELAC and BRICS to signal diplomatic balance—without necessarily aligning with revisionist powers.
Developing a coordinated communication strategy that reframes Mexico not as a failed state, but as a sovereign partner confronting hybrid threats.
Sovereignty in 2025 is no longer defined solely by borders or armies—it is defined by who controls the narrative, the regulations, and the financial flows.
Scenario Outlook for 2025
Despite the legal and diplomatic escalation, the path ahead is not predetermined. Three possible trajectories are emerging in the U.S.–Mexico relationship:
1. Managed Cooperation (Most Likely)
Behind the scenes, President Claudia Sheinbaum has quietly expanded informal cooperation—extraditing key cartel figures, allowing cross-border coordination, and sidelining rivals who oppose bilateral alignment. While maintaining nationalistic rhetoric, her government has shown pragmatism. If this trend continues, a structured but low-visibility partnership could take hold, balancing security needs with diplomatic caution.
2. Prolonged Tension
Ideologically, Sheinbaum’s base is skeptical of U.S. intentions, and some members of her coalition favor distancing from Washington. However, full alignment with China or BRICS has not materialized—Mexico remains a cautious observer. While diplomatic friction may grow, an open break is unlikely, as the economic and political costs would be too high.
3. Incremental U.S. Unilateralism
Some aspects of this scenario are already unfolding—OFAC designations, drone surveillance, financial blacklists—without Mexican consent. Yet, these actions appear calibrated not to rupture the bilateral relationship entirely. If U.S. political rhetoric escalates, this “covert pressure” strategy could intensify, putting Mexico’s diplomatic balancing act to the test.
Conclusion
The Narco Act and CFIUS are not mere bureaucratic measures—they are levers of geostrategic influence. Unless Mexico anticipates this shift and responds with innovation, it risks becoming the object—not the subject—of 21st century security politics.
The battle is not just over cartels. It is over who gets to define sovereignty in North America.