The Wilson Center’s Mexico Institute has released a series of new essays covering a range of important bilateral issues. We kick off our companion video series, “Charting a New Course,” with a focus on economic interdependence. Mexico Institute Deputy Director, Chris Wilson provides an overview of the scope and depth of U.S.-Mexico economic cooperation and also talks about what can be done to make the alliance stronger. That’s the focus of this edition of Wilson Center NOW.
Republican presidential candidate Donald Trump repeatedly lamented the loss of jobs to Mexico during his facedown with Democratic nominee Hillary Clinton on Sept. 26.
Putting aside the fact that some of his claims were untrue—the social media folks at Ford had to jump in on Twitter mid-debate to deny Trump’s claim that the car company is leaving the US—his views offer an extremely one-sided view of the relationship Mexico and the US have built under the North American Free Trade Agreement, particularly when it comes to jobs.
He didn’t mention, for example, that as a partner under NAFTA, Mexico is also supporting employment in the US.
This article mentions the Mexico Institute’s new project Growing Together: Economic Ties between the United States and Mexico. Check out the project.
Mexico’s economic growth will quicken as the government increases spending in the second half of the year, Finance Minister Luis Videgaray said. The economy grew at the slowest pace in more than three years in the first quarter after spending was contained after a new government took over in December, Videgaray said in an interview in London. President Enrique Pena Nieto took office on Dec. 1.
Investor confidence in Mexico has waned after the economy expanded less than analysts expected in the first quarter and government plans to overhaul the state-controlled oil industry were held up. Capital flows also have slowed on signs the U.S. Federal Reserve could scale back asset purchases as economic growth strengthens. “We expect much more accelerated spending in the second semester,” Videgaray said. “The budget is there and the revenue is there.” Mexico’s government spending fell about 7 percent in real terms to 1.16 trillion pesos, or $90 billion, in the first four months of 2013 compared to the year-earlier period, according to data from the central bank.
Mexico’s sharp first-quarter slowdown isn’t entirely surprising. While the country has made considerable economic advances in recent years, its growth is closely tied to that of its northern neighbor, and the U.S. economy stalled at year-end. Some Mexico indicators, such as industrial production, have been flat since mid-2012. The lackluster performance, although a cause for concern, gives impetus to the efforts of Mexico’s new president, Enrique Peña Nieto, who in his first months has worked with the nation’s major political parties to achieve labor, education and telecommunications reforms. Judicial, banking and energy industry changes are in the works.
The Pact for Mexico represents the latest attempt over a three-decade span to achieve reforms and propel the nation forward. The challenges Mexico confronts as it seeks to become a leader among emerging economies were considered at a Federal Reserve Bank of Dallas conference, “México: How to Tap Progress,” last fall in Houston. The meeting explored why economic expansion in Mexico has barely kept up with population growth and why the nation’s per capita income growth has trailed that of emerging-market economies such as Brazil and Chile.
With all the hype Mexico’s “booming” economy has been garnering over the past, it may have come like a dousing of iced water to see GDP growth screech to a halt during the first quarter of the year, the first full quarter under the administration of Enrique Peña Nieto. At first glance, the figures looked grim: year on year growth was a meagre 0.8%, the weakest since the 2009 recession, and far below the 3-5% rates Mexico watchers had been accustomed to over the past three years. Fortunately, behind this number was a statistical anomaly in that the Easter break fell in March rather than April, thereby knocking off a few days of activity when making the year on year comparison. However, a calendar adjustment showed that growth was still sluggish at 2.2%, a number which looked more fitting for the gloomy past decade than in the roaring era of the “Aztec tiger.”
Since then, there’s been a slight reversal in the tone about Mexico. After a smooth ride since 2010, it has now dawned on many of the formerly excited observers that there are some bumps on the road to prosperity. For all these recent jitters, it certainly doesn’t appear like the fiesta is over. There are still questions, however, over just how bombastic it will turn out.
As the Congress debates immigration reform legislation, millions of tourists and billions of dollars continue to cross the U.S.-Mexico border in both directions. A study released earlier this month by NDN, a center-left think-tank based in Washington, D.C., shows trade and tourism between the two countries is at an all-time high. Trade between the two nations in 2012 was estimated at $535 billion. That number is up from $300 billion in 2009, a number that’s projected to double by this year, said Simon Rosenberg, the president of NDN.
Texas leads all states with almost $200 billion in imports and exports with Mexico. Trade with Mexico sustains almost 6 million U.S. jobs, the NDN study said. In the Rio Grande Valley, tourists provide the biggest Mexican boost to the economy. “We really rely heavily on the Mexican market,” said Nancy Millar, the director of the McAllen Chamber of Commerce’s Convention and Visitors Bureau.
The majority of foreign and domestic companies in Mexico say security has either improved or remained unchanged from last year, and almost half expect more improvement within five years, according to a survey released on Tuesday. In the survey conducted by the American Chamber of Commerce of Mexico, 42 percent of the 531 respondents said the security situation had improved. “We attribute this mainly to the actions of the federal authorities and the measures undertaken by the companies themselves,” said Thomas Gillen, president of the chamber’s security committee, who presented the findings.
Forty-two percent of respondents said the security situation had not changed and 13 percent said security had deteriorated. More than half of the latter group cited corruption as the cause of the deterioration. Foreign investment in Mexico rose to a six-year high in the first quarter of this year, Mexico’s Economy Ministry said earlier this month, with foreigners pouring $4.99 billion into Latin America’s No. 2 economy as they tried to gain a foothold in its booming manufacturing sector.