What we can learn from Mexico

December 31st, 2012  
By Global Public Square staff


Earlier this month, the president told a newspaper the solution to partisanship is politics and more politics. That’s how you work toward the building of agreements.

Unfortunately, it wasn't Barack Obama. It was Mexico’s Enrique Pena Nieto. As Washington has been mired in gridlock this year, consider what’s happening just across the border. One of the first things Pena Nieto did after assuming office just weeks ago was to announce a pact for Mexico, an ambitious set of reforms to raise taxes, increase competition and take on the teachers’ unions.

Now, it is one thing to announce a plan, quite another to get support for it and President Pena Nieto's pact comes with endorsements from across the spectrum, the conservatives he ousted from office as well as the leftist Democrats.

While the world has gotten used to a torrent of images and news of drug-related violence from Mexico, another side of this country has been quietly developing.

Consider the facts: Mexico’s GDP is expected to grow by nearly 4 percent this year, twice as fast as Brazil or, for that matter, the United States. It is riding a manufacturing boom. Mexico is now the world’s fourth biggest producer of cars, according to the World Trade Atlas. Starting next year, new taxis in New York City will carry a “made in Mexico' label.” Mexico is also the world's top exporter of flat screen TVs. In fact, Mexico exports more manufactured products than all the other countries in Latin America combined.

Three main factors are in play: For one, geography. Sharing a border with the United States means heavy products are cheaper to transport across than if they were manufactured in, say, Asia.

A second factor is NAFTA, the North American Free Trade Agreement. Mexican products are subject to lower duties than those from other countries. In fact, The Economist points out that Mexico has trade deals with 44 countries, the most of any nation in the world.

The third factor is wages. As other manufacturing hubs become more expensive, Mexico has become more competitive. According to HSBC, in 2000 Mexican workers earned nearly five times the salary of their Chinese peers. But, by 2011, Mexican workers were only about a third more expensive than Chinese workers.

When you project all these advantages into the next few years, Mexico’s economic future looks robust. The National Intelligence Council released an important report called Global Trends 2030. One of the trends it looks at is how demographic changes will shape the world. Countries with younger, more dynamic populations will grow faster.

While the median age in Mexico will be 34 in 2030, the median Chinese or Russian age will be about ten years older. Japan’s median age will hit 52. America actually has an advantage here, at 39 our median age will only be five years older than that of Mexico's. Trends don't ensure particular outcomes, but it's clear that contrary to its global image, Mexico's economy has momentum. It will be among the world's top ten economies by the end of this decade.

Smart reforms can build it further. The irony is that one possible impediment to Mexico’s growth could be the very country that is its biggest asset – the United States. If we slow down, so will Mexico. But perhaps that can be avoided if Washington's polarized factions could agree on a way forward. Maybe we need to take some lessons from south of the border.

Post by: CNN's Jason Miks