Thread: Mexico's economic dilemma

http://www.shns.com/shns/g_index2.cfm?a ... A-05-10-06

Mexico's economic dilemma

By JOSE DE LA ISLA
Scripps Howard News Service
10-MAY-06

MEXICO CITY -- Pablo Ruiz Napoles _ a handsome guy with long hair that curls at the ends, and rimless glasses _ looks like a director in Mexico's film industry more than the economist he is. Professor Ruiz is one of Mexico's experts on how the North American Free Trade Agreement, NAFTA, has affected his country.

He works at the Facultad Latinoamericana de Ciencias Sociales en Mexico, known as FLACSO, a post-graduate teaching and research center. It's a wireless, state-of-the-art, idyllic campus in the southern part of Mexico City.

He talks about Mexico's jobs dilemma, not from charts and econometric equations, but from having been to North Carolina.

There, the textile industry has declined from 250,000 jobs to 100,000 since NAFTA was signed in 1992. He saw how low-wage Mexican immigrants have increased in number, checking accounts can be scarcer there than birth certificates, and some immigrants are shaken down by authorities, giving rise to unreported corruption.

Ruiz thinks better economic policy can fix some of these issues. But first, Mexico needs to focus on a dilemma.

Ten years before the NAFTA agreement was signed, Mexico shifted from government-led national development and protectionism to a policy decreasing regulations and privatizing public enterprises.

The Mexican domestic markets were opened up to foreign competition and investment. Presidents Miguel de la Madrid, Carlos Salinas, Ernesto Zedillo, and Vicente Fox, all known as neoliberals, linked their country to this modernizing trend. Yet their efforts were unable to create enough jobs.

Each year, Mexico needs one million more jobs but falls short by a half-million. Consequently, thousands enter the informal economy and others go wherever they can find work, hence, the source of so much illegal immigration.

Usually, we stop listening to Mexican economic issues at this point, but there is more to know that's important. For instance, NAFTA did help, and Mexico went from No. 7 in the world in non-oil export growth (1984-94) to No. 2 between 1996 and 2001.

But the exports were mainly in the maquiladoras, the in-bond segment, where raw materials are imported (mostly from the United States, creating U.S. jobs), then exported as finished goods. To have benefited more from NAFTA, Mexico needed to have both provided more raw materials and the finished goods' assembly.

Also, only about 300 Mexican companies, linked to multinationals, are believed responsible for the bulk of the exports.

Mexico's economic dilemma, like that of North Carolina, stems from not yet having favorable export production and not growing fast enough to generate enough work to keep its people employed at home. In fact, the Mexican economy only grew at one-third the annual rate it had before the 1950 to 1980 ramp up to NAFTA. Meanwhile, the middle class segment has been devastated.

Mexico, just like the United States, now has to create a better-trained population for skilled jobs to remain globally competitive.

For that, a once-in-a-lifetime opportunity is coming up by providing professional training for its fast-growing 18-to-24-year-old demographic segment, Ruiz tells me.

After leaving FLACSO, I headed to Santa Fe, a new section of Mexico City with an elegant high-end mall, a dozen skyscrapers under construction, with major university campuses locating there. The taxi driver, steering an Atos, a Hyundai Motor Company product marketed by Dodge, bragged about how the "smart" buildings there are computer run.

"Pretty soon," he said, "we won't need the regular type of mechanic to fix this car or maintain that building. They will all be engineers."

He's right, and it seems intellectuals like Pablo Ruiz Napoles and the cabdriver are both concerned about the same thing. It's not just about the knowledge-based economy or where the new skilled workers and professional managers will come from.

The near future cannot be a replay of the last 20 years. That's why the candidate in the July presidential election who understands that has the most to offer.


(Houston-based Jose de la Isla writes a weekly column for Hispanic Link News Service. E-mail at joseisla3(at)yahoo.com.)



(Distributed by Scripps Howard News Service, http://www.shns.com)

sounds like NAFTA is the root of all our problems