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.