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As Jo Tuckman notes toward the end of her NYT opinion piece, Mexico's Institutional Revolutionary Party's (PRI) comeback in Sunday's election seemed a forgone conclusion. While it likely still is, there have been some interesting late breaking developments.
However, since another diary focuses on the politics, my brief diary will touch for the most part on some major economic issues.

While Mexican President Felipe Calderón hosted the Group of 20 leaders earlier this month, the New York Times published an article which highlighted the rivalry between his country and Brazil.   It is notable that US eulogies for Mexico, rare as they may be, become more copious only in a context of its juxtaposition with Brazil.  The US has a thinly veiled dislike for the rise of Brazil on the world stage.  Despite the success of its remarkably neoliberal policies, Brazil is far too independent of the United States for its comfort.

You can almost taste a trace of schadenfreude in the New York Times article :

...just as momentum can change suddenly in a match at the World Cup or an event at the Olympics -- both competitions that Brazil will host in the next four years -- so can the dynamics between nations. Last year, Mexico's economy grew faster than Brazil's, and it looks set to outpace its larger Latin rival again in 2012.

According to an optimistic outlook by the UN's Economic Commission on Latin America and the Caribbean, Mexico's GDP is expected to grow around 4% for the year.  Back to the Times article, you can tell what horse the US is betting on in this 'race':
Meanwhile, Mexican factories are exporting record quantities of televisions, cars, computers and appliances, replacing some Chinese imports in the United States and fueling a modest expansion.  Economically, Mexico does not appear as grim a place anymore.

And yet, once Brazil is taken out of the picture, you get a clearer idea of what the US really thinks about the situation in Mexico, particularly regarding the economy.  As a matter of fact, all is not well in Mexico, generally speaking, and I am not referring to the violent drug war that has been grabbing all the headlines recently.  Not much has changed under the administration of Felipe Calderón since it was stated in a US Congressional report about the Mexican economy a couple of years ago that the expected structural changes were not forthcoming:
Numerous analysts have noted that Mexico's potential to promote economic growth, increase productivity, and lower the poverty rate is very limited without implementing substantial structural reforms. President Calderón has proposed a number of reforms to address these challenges, including proposals to eliminate extreme poverty, overhaul public finances, privatize parts of the state oil company, adopt labor reforms, reform the telecommunications sector, and encourage political reforms. Most of these proposals, however, have deeply rooted political implications and have been strongly opposed by the major political parties in the Mexican Congress.

One must take care not to generalize the US discontent with the Mexican economy to mean that Mexicans are fed up for the same reasons.  Despite token references to the poverty rate the US, as alluded to above, favors policies which are not welcome among the Mexican political parties (PEMEX is a case in point).  To be certain, the poverty rate has worsened:
According to CONEVAL(e) (National Council on Evaluation of Social Development Policy) the number of Mexicans living in poverty increased by 3.2 million from 2008 to 2010, following the global economic crisis. It implies that around 46.2 percent of Mexico's total population (52 million people), live in poverty, mainly in urban areas.

Nevertheless, it is important to take the long view in order to factor out the current crisis.  After all, we are quickly approaching the twentieth anniversary of the enactment of the North American Free Trade Agreement (NAFTA) between Mexico, Canada and the United States.  Up to the time of enactment, it was publicized in Mexico as the path most likely to bring prosperity if not a ticket to the club of advanced industrial economies.  According to an oft-cited 2009 study coauthored by a reputable Mexican colleague and two prominent North American authors:
...there is now widespread agreement that the North American Free Trade Agreement (NAFTA) has fallen short of its stated goals. Rather than triggering a convergence across the three nations, NAFTA has accentuated the economic and regulatory asymmetries that had existed among the three countries. Since 2001, the region has actually seen a decline in levels of integration in key areas such as manufacturing.

While a review of the study is beyond the scope of this brief diary, I just want to draw your attention to the chapter by Mexican colleague Enrique Dussel Peters, since it concerns the manufacturing industry which was to be the cornerstone of Mexico's economic development under the treaty:
Even before the recent global financial and economic crisis, the manufacturing sectors in the NAFTA-region were under similarly extreme pressures. The share of manufacturing in terms of GDP and employment has been falling in the three NAFTA countries, particularly since 2000... . Contrary to the period 1994-2000, which saw increasing regional integration in a highly competitive global market, from 2000-2009 (March) the NAFTA region together lost 6.3 million jobs in manufacturing, or 27 percent of total employment in the sector.  This suggests that in general, and in particular since 2000, the process of regional integration has deteriorated; in fact, an increasing process of "disintegration" has been taking place since then.

Regarding his country, Dussel Peters adds:
Mexico´s manufacturing share in GDP has fallen constantly since the end of the 1980s, from levels above 23 percent to levels below 19 percent in the last quarter of 2008 (and since 2001). In terms of formal permanent employment, the conditions have been harsher: from 1994 to March 2009 manufacturing´s share of total formal and permanent employment fell from 33 to 26 percent. Since its peak in October 2000, the sector lost 1.04 million permanent jobs through March 2009--or 25 percent.

On the question of Mexican agriculture under NAFTA, the issue of corn figures prominently.  According to Tim Wise:
When the Mexican government unilaterally liberalized corn markets, well ahead of NAFTA's 14-year transition schedule, U.S. corn flooded the Mexican market. Over two million people have since left agriculture, a drop of more than 25 percent.  With limited employment-generation elsewhere in the economy, many have added to the rising flow of migrant laborers.

Since this is not a diary aimed at policy recommendations, I'm not going to discuss any here.  Nevertheless, the above study has policy recommendations at the end which lean toward industrial strategy.  It is instructive to compare those with what can be gleaned from more mainstream analyses north of the border.  For example, the neoliberal agenda lurks not too far beneath the surface of a recent assessment of what is "wrong" with the platforms of  presidential candidates in the upcoming Mexican election.   According to the Center for Strategic and International Studies:
Few offered bold proposals to eliminate state and family monopolies, curb the SNTE's [teachers' union] hammerlock on public education, revamp the state oil company (Pemex), or make root-and-branch changes to noncompetitive labor practices.

In summarizing, it is clear that all interested parties agree that things are not well with Mexico's economy.  However, whereas the US favors deep structural reforms along mostly neoliberal lines, Mexicans see the problems differently.  Given the resurgence of the Institutional Revolutionary Party (PRI), to the extent that they are virtually guaranteed an electoral victory, it seems obvious that Washington is not going to get its way.  Despite all the complaints about corruption in Mexico, which many expect will be given a new lease on life under the PRI, it is worth remembering that it was Mexican President Carlos Salinas de Gortari of the PRI who negotiated NAFTA with the United States and Canada.  Clearly NAFTA has failed to deliver with each side blaming the other or at least different factors for the outcome.  While it seems unlikely that NAFTA will produce in the next twenty years what it has failed to produce in the past twenty, you never can be too sure.

A version of this diary was also published at European Tribune.

Originally posted to maracatu on Fri Jun 29, 2012 at 04:50 PM PDT.

Also republished by Community Spotlight.

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Comment Preferences

  •  Tip Jar (20+ / 0-)

    "Do not judge your neighbor until you walk two moons in his moccasins." Cheyenne

    by maracatu on Fri Jun 29, 2012 at 04:50:05 PM PDT

  •  Mexicans do not see the problem differently, ... (11+ / 0-)


    While the center-left candidate for the president, AMLO, won a plurality of the stolen election six years ago, over 50% of Mexicans still voted for the other two candidates.  Come Sunday, I GUARANTEE you that the two other options, the PRI and the PAN, will again garner over 50% of the vote.

    AMLO is the only candidate who has vowed to increase taxes on the wealthy.  Mexico does not tax capital gains or dividends, nor does the country have an estate tax.  

    So, you've got to ask yourself, why does Mexico, which has grown 0.6%, GDP per capita, over the last 30 years, vote for candidates who promise more of the same.  

    Answer is Televisa.

    Televisa has 70% and 60% of the broadcast and PayTv market, respectively.  And Televisa's anchors and reporters are to the right of Fox News.  Whenever AMLO has asked the wealthy to pay their fair share, over 70% of Mexicans are treated to Televisa's anchors comparing AMLO to Chavez and Karl Marx.

    Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project.

    by PatriciaVa on Fri Jun 29, 2012 at 05:41:29 PM PDT

    •  But they still resist succumbing (3+ / 0-)
      Recommended by:
      Russ Jarmusch, indubitably, ozsea1

      to the privatization of their 'patrimonio nacional' - PEMEX.  Nevertheless, Mexico seems to share with us (Puerto Rico) the ubiquitous caciquismo (PDF):

      The PRI has employed both the sold vote and the gregarious vote to increase turnout and the PRI margin of victory.9  use of either the sold vote or the gregarious vote necessitate the availability of individuals whose costs and gains of voting can be so manipulated.  Historically, this has been maximized in the  countryside, where both methods can be combined by rural caciques.

      "Do not judge your neighbor until you walk two moons in his moccasins." Cheyenne

      by maracatu on Fri Jun 29, 2012 at 06:29:31 PM PDT

      [ Parent ]

    •  Facebook is (3+ / 0-)
      Recommended by:
      coquiero, ozsea1, davidseth

      innundated with anti AMLO ads if you're in Mexico

    •  The PRI will win tomorrow in Mexico (10+ / 0-)

      When I was in Guadalajara 2 months ago and I tried to get to the airport from the hotel, no taxi wanted to go.  The cartels had finally targeted this city of 8 million which had not been affected by the drug war.  They stopped 25 buses and trucks, poured gasoline on them and lit them on fire.  The army came in and the traffic was a mess or just not going.

      I managed to convince one taxi driver to get me to the airport for a tip (US$40 plus fare).  

      We spent almost 2 hours dodging roadblocks and burning trucks before we got there.

      I made friends with the taxi driver (married and father of two) who told me he had always voted for the PAN (Calderon) but this time he was voting for the PRI.  Why? Because he preferred the corruption of the PRI than the war on cartels brought by the PAN.  If people like him switch to the PRI, Peña Nieto wil be the next President.

      BTH Televisa is owned by Carlos Slim (friend of Calderon) who is the richest man of the world (he also owns Telmex).

      Mexico is losing money, businesspeople stay away because of the violence brought by the war on drugs (60,000 deaths in the last 5 years).

      Mexico has many capable people but IMO their social structures dominated by unscrupulous magnates is a huge hindrance.

      Daily Kos an oasis of truth. Truth that leads to action.

      by Shockwave on Sat Jun 30, 2012 at 08:50:42 AM PDT

      [ Parent ]

      •  BTW, last year saw a reversal of immigration... (3+ / 0-)
        Recommended by:
        indubitably, ozsea1, walkshills

        ...from Mexico to the US for the 1st time in decades;

        The largest wave of immigration in history from a single country to the United States has come to a standstill. After four decades that brought 12 million current immigrants—most of whom came illegally—the net migration flow from Mexico to the United States has stopped and may have reversed,
        Things will change if the drug war and the economy settle down.

        Daily Kos an oasis of truth. Truth that leads to action.

        by Shockwave on Sat Jun 30, 2012 at 08:53:41 AM PDT

        [ Parent ]

      •  What part of Guadalajara were you in? (1+ / 0-)
        Recommended by:

        It's been months since I've been there, but I have family and friends there and never encountered such a problem.  We always stay in Zapopan and I know it's a big city, but I've never seen anything along the lines of what you're describing.

        •  It was over a couple of months ago (0+ / 0-)

          The governor reported that 26 vehicles were burned at 16 separate locations, 11 within central Guadalajara. There are also accounts of sporadic gun battles between attackers and police. No casualties have yet been reported, and no suspects have been identified. Guadalajara is under heavy security this evening, provided in part by military units.

          Daily Kos an oasis of truth. Truth that leads to action.

          by Shockwave on Sun Jul 01, 2012 at 09:30:54 PM PDT

          [ Parent ]

    •  Patricia -What I meant was this... (1+ / 0-)
      Recommended by:

      It is obvious from the US Congressional report that I cited  that there remain certain structural reforms that the US would like to see implemented:  

      Most of these proposals, however, have deeply rooted political implications and have been strongly opposed by the major political parties in the Mexican Congress.
       The administration of Felipe Calderón was seen by the US as the best chance it had of getting said reforms implemented, but even Calderón was either unwilling or unable to accomplish that.  My point was that the PRI seems even less likely to fulfill that US wish-list.

      I'm not denying that these parties have bent to the US will in the past.  But there appear certain neuralgic points that neither of the major parties is willing to cross (the privatization of PEMEX is a key line that hasn't been crossed, yet anyway).  Now, granted, the political parties have their own selfish reasons for not crossing that line, including that it allows them the wherewithal to dispense  favors to the electorate in exchange for votes (we call it "repartir el bacalao" here in Puerto Rico).

      "Do not judge your neighbor until you walk two moons in his moccasins." Cheyenne

      by maracatu on Sun Jul 01, 2012 at 03:51:17 AM PDT

      [ Parent ]

  •  Automation? (5+ / 0-)

    It's not politically correct to point this out.  But in the US, lots of manufacturing jobs have been lost to automation.

    No one is going to believe me, but I work in a place in the US that manufactures things.  Incredible, I know.  But my employer bought some new equipment a couple of months ago that replaced some temps we used to hire.

    The same thing must also happen in Mexico.

  •  "you can never be too sure" (7+ / 0-)

    Oh, I think you can be sure. NAFTA was a disaster, especially for America.
    What Mexico needs to do is to walk the path of independence, like south America has done over the past decade. It needs to find solutions outside of neoliberalism.

    Callate o despertaras la izquirda! - protest sign in Spain

    by gjohnsit on Sat Jun 30, 2012 at 06:51:44 AM PDT

    •  NAFTA was a disaster, but only... (3+ / 0-)
      Recommended by:
      ozsea1, Rizzo, sacrelicious

      ...because the Mexican government has refused to craft a progressive fiscal policy.

      Yesterday, the family which owns Grupo Modelo (Corona beer, among others) sold their remaining 50% stake for 20B dollars.

      They will pay precisely 0 pesos in capital gains taxes.

      Meanwhile, both the PRI and PAN have agreed that the REGRESSIVE national sales tax must increase.

      For the collective good, they argue.

      Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project.

      by PatriciaVa on Sat Jun 30, 2012 at 08:11:27 AM PDT

      [ Parent ]

    •  As an economist, (2+ / 0-)
      Recommended by:
      PatriciaVa, mariachi mama

      I've been humbled to the point that I no longer offer up predictions.  One tends to think that neoliberalism doesn't work - and in many cases it doesn't - but it certainly worked for Brazil, as Fleury & Fleury have documented in their book.

      "Do not judge your neighbor until you walk two moons in his moccasins." Cheyenne

      by maracatu on Sat Jun 30, 2012 at 09:57:50 AM PDT

      [ Parent ]

      •  Depends on what it replaces, what comes with it. (7+ / 0-)

        For example, neoliberalism is an improvement on crony capitalism and command economies.  Mexico's evolution has been from a near-command economy under Lopez Portillo (lots of prices set by law, extensive nationalizations) to crony capitalism (cf. Carlos Slim).  It is not an improvement on the mixed economy.  

        Lula also sweetened his neoliberalism with a frankly redistributionist program called Bolsa Familia, in which families with incomes under US$77/month get $12/month per child (up to three) on condition that the each child be vaccinated and enrolled in school.  Brazil also increased its minimum wage, built lots of roads and established energy independence.   (Conservatives will like that he reduced and simplified taxes.)

        "Politics should be the part-time profession of every citizen who would protect the rights and privileges of free people and who would preserve what is good and fruitful in our national heritage." -- Lucille Ball

        by Yamaneko2 on Sat Jun 30, 2012 at 11:00:35 AM PDT

        [ Parent ]

        •  Brazil (1+ / 0-)
          Recommended by:
          mariachi mama

          is the case of how bubbles allow politicians be all things to all people.  Lulu has really been a free trade neo-liberal - but because growth is so fast government revenues allow him to delivery aid to the poor.

          At some point, growth will slow, and he will have to make choices.  But over the last 5 years, he hasn't had to.

          The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

          by fladem on Sat Jun 30, 2012 at 04:44:04 PM PDT

          [ Parent ]

    •  That may happen under the PRI. (1+ / 0-)
      Recommended by:

      The PRI Presidents after Cardenas may have all been corrupt, but their stance toward the United States has varied from Salinas Gortari's desire to practically annex Mexico to the US to Lopez Portillo and Echeverría's vocal support for leftists outside the country (if not inside -- Echeverría is linked to two massacres of protestors).

      "Politics should be the part-time profession of every citizen who would protect the rights and privileges of free people and who would preserve what is good and fruitful in our national heritage." -- Lucille Ball

      by Yamaneko2 on Sat Jun 30, 2012 at 10:36:57 AM PDT

      [ Parent ]

  •  Let this be a warning to us (6+ / 0-)

      Most Mexicans are poor, and many of them are desperately poor. The middle class is small.

      And yet, election after election, they keep voting for right-wing governments. The worse economic conditions get, the more they vote for the policies that make them so.

      Anybody who thinks that the evisceration of the American middle class will ultimately result in progressive governments is deluding himself. Ignorance is a powerful thing.

    "Le ciel est bleu, l'enfer est rouge."

    by Buzzer on Sat Jun 30, 2012 at 08:46:02 AM PDT

    •  At least per "official" results (2+ / 0-)
      Recommended by:
      brainwave, lotlizard

      There was certainly one case where the PDR won with the votes of the working class and the poor but simply had the election stolen (Cuauhtemoc Cardenas's first campaign) and possibly a second, AMLO last time, although that's less certain than the theft of Cardenas's victory.

      The law, in its majestic equality, forbids rich and poor alike from sleeping under bridges. ~ Anatole France

      by ActivistGuy on Sat Jun 30, 2012 at 12:11:58 PM PDT

      [ Parent ]

    •  Right wing != groups we don't like (0+ / 0-)

      PRI, as terrible and corrupt as they are, are a left-wing political party.  PAN is the most right-wing in Mexico and they are to the left of probably more than half of the Democratic politicians in this country.  PRD has no equivalent in the U.S., as they are much better than the Green party, although I personally think Lopez Obrador is a dishonest egotistical maniac (not that any of the people running for president in Mexico is a good person.)

      My point is, in many nations, including Mexico, the balance is much further to the left than it is in the U.S.  The arguments about the U.S. being a Christian nation are pretty true, although not from the founding fathers.  Over the past few decades the country has slipped further rightward at breakneck speeds to ridiculous places.  We can go just as quickly to the left or anywhere we want to go.  It just requires enough people, which we don't have right now because those who have been pushing us further rightward are better organized, funded, and connected than we are.  It has nothing to do with the merits of the ideology.

  •  I'm a Mexican voter (6+ / 0-)

    I'll vote for AMLO again, but not with much enthusiasm. PRD are just as big of crooks as the others. Our PRD former governor is in prison for fraud and embezzelment.

  •  Is there any more ironic name for a party (5+ / 0-)

    that the Institutional Revolutionary Party?

    Pew did a poll on Mexico that surprised me.

    80% of Mexicans approved of using the army in the drug war. Pew found crime was a bigger issue than the economy in the upcoming election.

    There is this mind blowing paragraph on the Pew Poll.  Is there any country in the world where a majority of young people would move to another country if they could??

    Even though many believe life is better for those who emigrate to the U.S., most Mexicans (61%) say they would not move to the U.S., even if they had the means and opportunity to do so. Among the substantial minority who would move, half say they would emigrate without authorization (19% of the total population). These attitudes are unchanged since last year.

    The young and highly educated are more likely to want to go to the U.S. Among 18-29 year-olds, 54% would like to move north, while just 37% of 30-49 year-olds and 25% of those age 50 and older say the same. Mexicans with a post-secondary education are 11 percentage points more likely to want to emigrate than those with the lowest level of education

    The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

    by fladem on Sat Jun 30, 2012 at 04:57:36 PM PDT

    •  One immigrant agrees with you... (0+ / 0-)

      Miguel de Icaza, a person of considerable renown in the open-source community, now living in Boston, agrees with you.

      Miguel de Icaza ‏@migueldeicaza

      Llegamos al DF y hasta encontré mi credencial para votar. Mañana le damos el voto a AMLO

      Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project.

      by PatriciaVa on Sat Jun 30, 2012 at 09:51:41 PM PDT

      [ Parent ]

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