The Economy of Mexico, an Introduction

This is an introduction, specifically to Latinos in America, of Mexico as an Economy. We will approach Mexico by asking the questions that come naturally to us Americans when we think of the country Mexico.

We will talk about the poverty, income dynamics, environmental economics, and international trade of Mexico. And after we do we will come away with a general sense of what Economic faith Mexico practices.

The best way to approach our starting to understand Mexico on its own economic terms, is by considering first the most basic questions that might come to an English language person’s mind about what Mexico is all about economically. The information I will use comes from Prof. Roderic Ai Camp’s book, Mexico: What Everyone Needs to Know.

Essential Questions About Mexico

Ai Camp’s questions can be distilled to the following 11 essential questions (18-32):

Poverty Questions

  1. How poor is Mexico?
  2. What is Mexico doing about its poverty problem?

Trade Questions

  1. What is Mexico’s and the U.S’s. economic relationship?
  2. How is Mexico impacted by its international trade agreement (NAFTA)?

The Broad Economy Questions

  1. What is the state of Mexico’s economy today (book published 2011)?
  2. How is Mexico’s economic model structured, and how closely does Mexico’s behavior follow its model?
  3. Since Mexico is a developing country, how has its economic model succeeded and failed in terms of the broad goal of developing a poor economy and citizenry?

Environmental Economics Questions

  1. Why is Mexico City densely polluted?
  2. Can the pollution in Mexico City be improved?
  3. Has and does Mexico make an effort to address its domestic environmental issues?
  4. Can and does Mexico address the environmental issues it causes across its borders?

Answers to Essential Questions

Here is a brief summary of Ai Camp’s answers to these questions that do well to draw for us a basic outline of Mexico on economic terms:

Answers on the Topic of Mexico’s Poverty

 

  1. How Poor is Mexico?

Mexico’s poverty problem is its most serious problem. Also its problem has improved since 1950. By one minimum measure of three different poverty measurements (food, capabilities, and assets), 60%, 70%, and 90% of Mexicans were poor in 1950. As of 2006 only 14%, 21%, and 53% of Mexicans are poor by those same three standards correlatively (18-19).

  1. What is Mexico Doing About its Poverty Problem?

Mexico has been improving on its poverty problem over the last 50 years; however, the improvements are disproportionately spread over the last 50 years. The reason why is because of the conflicting agendas of governments that have succeeded one and other in the past; this has resulted in the unwinding of the improvements of predecessor regimes by successor regimes. For example, 100% of the progress could have been achieved within 20 of the last 50 years, while the other 30 years of the past Mexico could be stagnant economically because of poor or corrupt leadership (20).

Answers on the Topic of Trade

 

  1. What is the Economic Relationship between Mexico and the USA?

Mexico and the U.S.A have been connected economically for 200 years. The economic relationship is comprised of trade, and the U.S.A investing in Mexico. Mexico and America are each other’s number one trading partner, but Mexico is far more reliant on what trade with the U.S.A contributes to its economy than the U.S.A is impacted by what Mexico contributes to the U.S.A through trade (21-22).

  1. How is Mexico’s Economy Impacted by NAFTA?

Because Mexico was denied entrance into the European Union, after years of negotiation Mexico helped to craft, and is a member of, The North American Free Trade Agreement (NAFTA), along with Canada and the U.S.A. Issues that have arisen in Mexico as a result of NAFTA include labor rights and environmental issues. Benefits include the Mexican government democratizing their governing more, and improve labor standards in order to meet demands of NAFTA trade partners (23-24).

Answers on the Topic of the Broad Economy of Mexico

 

  1. “What is the State of Mexico’s economy today?”

Mexico is the 12th largest economy in the world by Gross Domestic Product (GDP); however, Mexico is 60th ranked in GDP per capita meaning wealth is extremely concentrated in the hands of few people. In terms of corruption, Transparency International ranks Mexico the 98th most corrupt country out of 180. The uneven distribution of income (severe income inequality) is attributed to Mexico’s lack of investment in educating its population. These issues that have arise can be attributed to, or at least linked to, government economic policies that practically outlaw business competition and that allow for Economy damaging monopolies, for Example Telemex owning 85% of the Mexican telecommunications market, and the Mexican government facilitating and protecting these monopolies (24-26).

  1. “What kind of economic model does Mexico follow?”

The history of Mexico’s modern economy has its roots in a Modified Capitalist Model that would be used, according to implications from its 1917 constitution. Subsoil resources (petroleum, minerals, etc.) were claimed by the state in the document, with the claim that resources belonged to Mexican citizens. Economic expansion is limited by the government management of the above mentioned resources, and the government’s overreach of controlling non-subsoil resources; for example, the government has reached beyond the constitution by taking over control of non-subsoil industries at various times such as the restaurant, hotel, banking, and insurance markets, amounting to an estimated 85% control of the economy at one point (26). Since 1982, from that turmoil, Mexico’s economy has progressed into reduced government control over markets, labor, and firms, and increased international trade; however, when polled the sentiment of the Mexican citizenry is of the opinion that the Mexican government still possesses the level of control close to what it did at its height.

  1. ­ What does Mexico’s Economic Model Teach Us About Development?

The strategy of industrialization drove the Mexican economy for two decades in the middle of the 20th century. For what reason the expansion was sought, and the reason for the strategy used, was to remove Mexico from dependence on trade with other countries; incidentally, this caused the Mexican government to adopt protectionist policies of its domestic businesses and industries. Protectionist strategy tends to lead to lack of competitiveness on an international trade level, of a nation’s industries, caused by a lack of development of domestic industries from natural competition. And thus the internal growth of Mexico’s domestic markets becomes unsatisfactory because Mexico will not have developed a competitive advantage over other countries in trade. In addition to lacking relative value in international trade, the tariffs and quotas shut out other countries products and ideas from the protectionist nation, in this case––Mexico. New leaders have since employed a new strategy that is not protectionist in nature, and instead employ reduced tariffs, quotas, and includes joining NAFTA; and though Mexico has again seen more economic growth as a result of the new strategy, the distribution of wealth and improvement of income per capita in Mexico fosters inequality and higher than needed poverty levels (29-30).

Answers on the Topic of Mexico’s Environmental Economics

 

  1. Why is Mexico City so Polluted? Can the Pollution Be Altered?

In 1992 Mexico City was ranked the most polluted city in the world, while also being ranked number one as the most dangerous city in the world for children. Ai Camp succinctly points out that Mexico’s cities high altitude and being a valley have exacerbated effects of man-made pollutants by first burning fuels inefficiently, and second citizens of the city naturally breathing deeper in general because of the thinness of the air due to natural geography. Ai Camp points to perhaps the key factor of the pollution, in order to point out the kind of progress Mexico is making. The populations of 21 million people drive 4 million automobiles daily and the emissions from them account for the majority of pollutants in the city. Mexico has made great progress in the success of combating the above mentioned pollution problems, by doings things such as limiting the amount of cars driven on a given day, in addition to eliminating 95% of lead pollution, and 86% of the sulfur dioxide pollution. This progress is exemplary, even though much progress is still needed (30-31).

  1. How Has Mexico Addressed Domestic and Cross-Border Environment Issues?

Though Mexico has a long fight against environmental problems throughout its country ahead of it, progress has been, and continues to be made. Non-government environmental organizations have arisen in Mexico, and have raised awareness of the pollution problems and have had a major impact on improving the environment in Mexico (PVEM for example). The sentiment of the Mexican people in surveys show that the majority of Mexican citizens are aware of the environmental issues plaguing their country and the world, and are willing to have the government take steps in combating these worldwide. Mexico invests in developing renewable energies, and improving the state of waste treatment plant effectiveness, pollution, hazardous waste, chemical contamination, and reducing the negative effects of mismanaged pesticides.

Final Reflection

Let’s think again about what we just went over together, and sum it up in simpler terms: Mexico is the twelfth wealthiest nation in the world, but the poor are very poor and the Mexican government perpetuates the poverty of its citizens, although it must be noted that the poverty conditions are better than they were 60 years ago; Mexico ‘s economic model is not too different than the U.S.A.’s, or any other Western nation, though it is still distinct; Mexico is the U.S.A’s number one trade partner; Mexico has a pollution problem, but Mexican citizens are more aware and active about combating pollution than Americans are.

Let’s reflect and analyze a little bit on what Roderic Ai Camp did for us. Ai Camp’s approach seems to have its wisdom because Ai Camp is acknowledging that English language readers have assumptions, pre-conceived notions, and news stories in mind when we hear the word Mexico. Ai Camp, knowing what we Americans have been exposed to, knows Americans have developed misassumptions, that we harbor baseless notions, and that Americans believe whole-heartedly in the misconceptions we have about Mexico. It is for the above reasons that Ai Camp took up the most obvious questions about Mexico as an Economy, because it is the foundation of our understanding about Mexico. So then we must ask ourselves, so we make assumptions about Mexico, so what?

Every aspect of Mexico is transmitted with non-verbal implications to Americans, so that Mexico is presented to us only in relative terms. That is to say, all things reported on the U.S. news report that the U.S. is economically better off than Mexico. What Ai Camp’s book gives us the most basic information and facts about Mexico’s economy that if we do already know is redundant, but if we don’t know can completely change how we perceive Mexico. Learning about what misinformation we believed previously, will allow us Americans to re-orient ourselves and understand Mexico on its own terms, instead of how U.S. media portrays Mexico to us.

 

­­­­––Latino Economist

Works Cited

 

Ai Camp, Roderic. Mexico: What Everyone Needs to Know. Oxford University Press. 18-32. NY, NY. 2011. Print. http://www.amazon.com/Mexico-What-Everyone-Needs-Know%C2%AE/dp/0199773874