Wednesday, June 20, 2012

Mexican Economy on the Upswing?

Originally, my plan was to write about Hurricane Carlotta, which struck Puerto Escondido on Friday, and brought a great deal of rain to the city of Oaxaca. However, an article in the New York Times regarding Mexico's economy turned my mind in another direction.

Photo Credit: Mexico Today
This past Monday and Tuesday, President Filipe CaderĂ³n, in Los Cabos, hosted the G-20 countries. Seventeen years of macroeconomic stability, low inflation, manageable debt and an open economy, so it was reported, helped Mexico move ahead of Brazil to become Latin America's fastest growing economy.

In recent years, Brazil was portrayed as a nation headed for greatness, while Mexico appeared trapped in its bloody war on drugs. One would tend to believe Brazil safer. However, Brazil's homicide rate tops Mexico's. The particularly brutal killings and the involvement of the army draws attention to Mexico's plight.

Mexico competes with China, meaning it is an exporter of manufactured goods, such as computers, televisions, and automobiles, exporting 78 percent into the United States. Its an economy that welcomes foreign investment, which more often than not means United States companies moving their plants south in search of cheaper labor.

Although I'm delighted that Mexico is doing well, it’s the same old story. Multi-nationals move their production plants to where labor is cheaper, and export the products made to affluent parts of the world, which of course means, more often than not, the United States.

If Mexico progresses, collects more taxes to create a sounder infrastructure, improves labor laws and unions succeed in ensuring the people receive a fair deal, will the economy fare so well? Should the economy depend so heavily on exports to the United States? How long can American consumer continue to buy products when they no longer have jobs and their credit has run out?

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