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Mexico: Crisis and Competitiveness
After being acquainted with the enclosed review, based on general information about Mexico as well as researches connected with causality of global economic crisis in Mexico of 2009, some issues attracting attention shall be emphasized, for providing solutions.
Therefore, in 2009 Mexico experienced the global economic crisis that affected all its branches. The best indicator for that was GDP, declined about 7% after several years of annual growth. There were many reasons for that: direct dependence on the United States; China’s competitive advantages; as well as more internal ones like sharp drop in oil production; national monopolizing of several heavy branches; activity of organized crime groups, environmental problems, etc. In my analysis, more information about these issues is given below.
So, I’d like to start with historical background of Mexico, because the history determines the current situation. The right way for the country to achieve prosperity and become an equal party to international business is to develop its economically strongest sides, relying on its own available resources or creating those in case of lack. Economic policy of Mexico from the second part of the twentieth century until nowadays has not changed drastically from president to president. Large loans were taken from the United States under increasing interest rates and from IMF.
As we can see according to the facts listed above, Mexico by means of taking loans consciously becomes more and more dependent on the United States. The culmination of this process is Mexico’s partnership in NAFTA. With all the advantages provided by this agreement, Mexico, in my opinion, nevertheless rejected the possibility of easily changing new economic policies. Moreover, while the United States feels free to find new and cheaper “allies”, Mexico loses its competiveness.
Now, directly to other important issues of Mexico’s economy. According to the statistics, the number of immigrants from Mexico to the United States increases annually (from 350.000 Mexicans in the 1990s to 485.000 in 2007). It results in large amount of remittances from emigrants sending money back to Mexico (totaled $25.1 billion in 2008). However, after the crisis thousands of emigrants returned to Mexico because of lack of job. Of course, another money reception, especially in dollar is positive for maintaining the Mexico economy, but this would not take place in case of appropriate wages and labor conditions inside the country.
Vice versa, the tourism is considered to be a very perspective direction in strengthening Mexico’s economy. In addition, tendency is that income increases (from $8.3 billion in 2001 to $13.2 billion in 2008).
But, unfortunately, mostly for the last 15 years Mexico is a country with serious problems related to drug trafficking and consumption. And without any doubts, when drug cartels and their armed clashes with a large number of murders take place it affects economic spheres, increase economic expenditures for handling this issue as well as decrease general living standards of the country’s population. And unlike other issues it’s almost impossible to stop or at least reduce level of drugs and crime activity using general or humane methods. To achieve real results, victims are inevitable.
The tendency is that after the entry of China into the World Trade Organization, Mexico lost its competitive advantage in tradable relations with the United States. Lots of sectors were not sustained in new terms because of different focuses of factors of production between China and Mexico. The ways to strengthen the competitiveness of Mexico’s economy are to occupy new niches in the production, refocus on other international markets and transform the pattern of trade.
Mexico has been always considered as monopolized nation; moreover, the manifestation of this fact can be stated virtually in all branches of production. Nowadays, the government of Mexico holds the main telephone company privatized, state-owned enterprises generate most of electricity of the country and control the field of distribution; therefore we cannot assert the effectiveness of the antitrust regulation. To eliminate existing problems Mexico has already made some steps like removing of barriers to entry for new businesses, improving legal system climbed ranks for “Doing business”.
Concerning the energy sector of Mexico, the problem is that the principal company of the country, Pemex, operates not like a firm, but like a politicized institution. In order to develop this branch of economy, following measures should be taken:
Although lots of measures have been taken by the government of Mexico, but today finance and credit sector in this country are still weak comparing with other nations. Therefore, the government should improve fiscal discipline, reduce the national debt, identify the insolvent financial institutions being taken under the control of the relevant institutions, and develop strategies against foreign banks, as foreign competition can help to revive the weakened financial system in Mexico.
Whereas Mexico is labor – intensive country, it must pay particular attention to labor regulation, because exactly inefficient use of human resources obstacles the improvement of the whole economy. The government should provide people with lots of sponsored programs, free health insurance, and then the desire of workers increases sharply and consequently the effectiveness of production grows.
The main problem of Mexicans, which causes the other ones, is serious flaws and omissions in the current system of education. The following ways are proposed to reorganize the education:
Summarizing the information written above, it should be noted, that without immediate and radical reforms, it is impossible for Mexico to become a developed and competitive country at the international market.
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