Mexico's economy on right path

www.mysanantonio.com
Friday, April 13, 2012

The business sections of the San Antonio Express-News and the Houston Chronicle last year collaborated on a series of in-depth articles on Mexico's expanding economy, especially its manufacturing and exporting sectors — a story less told than Mexico's drug-smuggling and organized crime wars.

The economic expansion continues in Mexico in ways the United States should notice and even admire. That was the message Friday morning when former Trinity University economics professor Jorge Gonzalez delivered an update on the Mexican economy to the Latin America Caribbean Forum monthly breakfast.

Mexico is an economy with a growing middle class, a manageable government debt and a strong currency. A growing threat to the Mexican economic well-being is, believe it or not, the uneven U.S. economic recovery and its rising federal debt.

That's because the Mexican and U.S. economies have been intertwined since the North American Free Trade Agreement took effect in 1994, said Gonzalez, now dean and vice president of academic affairs at Occidental College in California.

Back then, Mexico's poverty rate hovered at around 50 percent. It has since shrunk to 35 percent. The middle class now accounts for about 55 percent of the population.

The larger Mexican middle class is significant for this year's Mexico presidential election. A larger middle class is less likely to vote for an extremist candidate, Gonzalez said.

Mexican migration has slowed to a trickle. The best statistics, Gonzalez said, show that net migration to the United States last year was close to zero. A falling birth rate in Mexico also reduces pressure on the Mexican government to generate jobs, he added.

So many economic measures are going the right way in Mexico. Inflation in 2011 was 3.82 percent. In 1995 it was 51.97 percent.

Foreign direct investments, which is foreign companies building factories in Mexico, totaled a strong $19.4 billion in 2011, up from $16 billion in 2009. “Imagine what it would be if we didn't have to fight the drug dealers,” Gonzalez said.

The money Mexican workers in the United States sent to their families in Mexico totaled $22.7 billion in 2011. Many Mexican workers in the United States earn between $20,000 and $25,000 yearly and send half to their families.

Mexico's central bank holds a record $142.5 billion in reserve, a sum ready to tackle any financial crisis. Mexico's exports and imports are in near perfect balance, Gonzalez said.

Mexico still needs to address its rule-of-law issues, its poverty rate and reforms in the fields of labor law and energy investment, Gonzalez said. But the biggest threat to Mexico is the next U.S. economic downturn, whenever that happens.

“Ninety-nine percent of Mexicans are going to work and school every day, making the economy stronger,” Gonzalez said.

“This is a cautionary tale for what is happening in the United States now,” said lawyer Rob Barnett of San Antonio's Cacheaux, Cavazos & Newton law firm that does a large volume of business in Mexico.
“Jorge's presentation was full of irony,” Barnett said. “The United States once talked to Mexico almost like a parent to a child. Now the tables have turned.”