April 27, 2001

Point

Mexico by the Numbers — Latin America's Powerhouse

by Louis Nevaer

MEXICO CITY — Leaders from the Western Hemisphere who came to Quebec City for the Third Summit of the Americas clearly wanted to meet new U.S. president George W. Bush, but many also looked forward to consulting with Mexico's Vicente Fox.

Less than seven years after the North American Free Trade Agreement (NAFTA), joining the United States, Canada and Mexico, it is Mexico that has emerged as the economic powerhouse of Latin America.

A widely-anticipated report from Mexico's Ministry of the Economy, issued 48 hours before the Summit opened, documented what everyone in Latin America has been whispering for almost two years: Mexico is the "leading commercial power" in Latin America.

It accounts for "46 percent of all exports from the region," the Ministry reported, reflecting an increase from` $41 billion in 1990 to over $166 billion last year.

Mexico now exports more than Brazil, Argentina, Chile and Venezuela combined. This is an incredible success story, given that in 1994 the peso collapsed days before NAFTA was implemented and in early 1995 an emergency $50 billion rescue package was necessary to bail out Mexico and prevent a default.

The Ministry credits NAFTA with this arresting turnaround, citing the 12,355 American companies that have expanded their business in Mexico — from McDonald's to IBM — and spent $43 billion dollars in setting up shop.

In addition, $84.9 billion has flowed into the economy in the form of investment capital during the same time. This in turn has contributed to internal economic growth that is so robust — and sustainable — that Mexico is expected to export over $200 billion to the U.S. in 2001.

On the border, the U.S. Immigration and Naturalization Service reports that the numbers of undocumented aliens crossing the border has dropped by more than 50% since 1998.

Jobs at home means fewer Mexicans leave for the U.S. And the Mexican Migration Project reports that Mexican workers in the U.S. are beginning to return to Mexico. "In the course of their working life, more than 80% of Mexicans who go to the United States to work, return to Mexico," Jorge Durand said.

The Mexican Migration Project reveals, in fact, that Mexicans go to the U.S. to work, save as much as they can, then return to open their own small businesses, with little desire to remain in the U.S. That Mexico's birth rate continues to fall means that the population level is expected to level off later this decade, at approximately 110 million people in Mexico (and 12-15 million Mexicans in the U.S.).

At a time when Brazil and Argentina are experiencing economic difficulties, the emergence of Mexico as an economic powerhouse of Latin America is the buzz of the Summit.

"There is a vital link between freedom of people and freedom of commerce," George W. Bush said before embarking to Canada. "Democratic freedoms cannot flourish unless our hemisphere also builds a prosperity whose benefits are widely shared. Open trade is an essential foundation for that prosperity and that possibility."

Mexico's Vicente Fox could not be in more agreement. "Economic integration throughout the hemisphere is the soundest way of avoiding misguided development policies that have held so many back," he said in a news conference shortly after meeting with Senator Jesse Helms. "That is our message that we will deliver in Quebec: Mexico is the role model."

Mexico is being scrutinized closely throughout the hemisphere. Chile, in particular, believes it will be the next nation granted hemispheric free trade status with the U.S., Canada and Mexico. Canadians, on the other hand, have mixed emotions. Foreign minister John Manley told reporters Mexico "could become the largest trading partner of the United States within this decade." Pointing out that Mexico had already displaced Japan, Manley conceded that Canada's "competitive advantage over Mexico for quality will diminish" as the decade proceeds. Including oil, Mexico's total trade with the U.S. in 2000 exceed $200 billion, compared with $350 billion between the U.S. and Canada.

Economics and politics go hand in hand, and many were shocked at the recent announcement from Foreign Affairs Minister Jorge Castaneda. Castaneda simply said Mexico sought a more "proactive role in world events," — not only increasing foreign aid to Latin American nations — including Cuba — but increasing its presence around the globe.

For the first time ever, Mexico announced it would send troops on United Nations peacekeeping missions. And some policymakers are contemplating Mexico in 2010, when the country is expected to experience a labor shortage.

The hemisphere's leaders may have gathered in Quebec City, but what's on their minds is Mexico City.

Louis Nevaer is a business consultant in Merida, Mexico.

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