Mexico’s Underappreciated Economic Transition: the future is bright for the ‘Aztec Tiger’

Enrique Pena Nieto has spent his first year in government passing a number of fiscal, political and social reforms aimed at re-energizing Mexico’s economy, allowing it to compete more with the developing Asian states for foreign investment and the patronage of multinational corporations.

Pena Nieto has brought an energetic proactivity to the presidency
Pena Nieto has brought an energetic proactivity to the presidency

Whilst economic growth for 2013 was only around the 1%mark, some analysts see Pena Nieto’s reforms as a potential foundation stone for much faster growth in the coming years. As the global economy continues to revive and Mexico finalizes its entry into an expanded Trans-Pacific Partnership (TPP) free trade zone, the prospects are bright. That said, many within and outside Mexico’s borders remain concerned that economic growth is stagnating and that the reforms enacted by Pena Nieto may not be sufficient to transform the country’s fortunes.

What is often not taken into account (and this applies to many other developing countries) is the already-rapid economic changes that have taken place in Mexico over the past half-century.

In 1958, the Banco Nacional de Mexico published a pessimistic economic review bemoaning the country’s demographic conundrum. A high national birth rate and declining death rates had led to population growth of between 3 and 4% throughout the decade. Not only could the Mexican economy not absorb the increasing numbers into its limited workforce, but basic services for the citizenry could not be provided.

Mexican migrants in 1940s Oregon: job opportunities at home were limited
Mexican migrants in 1940s Oregon: job opportunities at home were limited

Compounding the problem was the ‘predominantly agricultural’ nature of the economy. Industrialization, the report argued, was not occurring fast enough, only noticeable in Mexico City. The capital was, consequently, becoming overpopulated as the unemployed sought out the few industrial jobs available.

The population was concentrated in just a few discreet areas of the country for, as the report emphasized:

Agriculture is directly dependent on the rains, so it is very logical that the distribution of the population is intimately connected with the pattern of distribution of the rains. Therefore, the people traditionally concentrate where the rains are most regular and abundant, and where the climate and the means of livelihood are most favourable.

This was not simply an economy based on agriculture but primitive agriculture. The comments in 1958 were not too dissimilar to the observations of the first Spanish conquistadors who noted the synchronization between population movements and rainfalls. Prospects for modernization were alarmingly bleak.

When read today, it is astonishing how far Mexico has come. Not only does agriculture make up only 4% of national GDP but a number or regional economic hubs have large, vibrant populations employed in the growing manufacturing and services sectors.

Monterrey, the commercial centre of the north, is home to several large corporations. Mexico has moved to address its unequal population distribution in recent years
Monterrey, the commercial centre of the north, is home to several large corporations. Mexico has moved to address its unequal population distribution in recent years

There are undoubtedly pressing issues to be tackled. One of the most significant is narco-crime and the political corruption it is associated with. This not only siphons money from the regular economy but detracts foreign investment because of the horrendous violence brought by Mexico’s drug wars.

Another problem is the national infrastructure, which remains weak. Sophisticated and extensive road networks were one of the marvels of pre-Columbian Mesoamerica and yet it is as if nothing has changed since. Communications and trade networks are inadequate for a modern economy and need to be addressed.

That said, the doomsayers would do well to consider Mexico’s economic plight half-a-century ago. Progress does not happen overnight but as long as positive reforms are being undertaken the future can be approached with optimism.

(National Archive Reference: FO 371/132219 – ‘Economy in Mexico’)

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Author: Stefan Lang

An interested observer of current affairs, researcher and writer

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