Mexico’s trade active; problems remain

Thanks in large part to more exports to the United States, Mexico seems to have surmounted some of its economic woes. Yet many financial problems remain.

Among them are issues stemming from low real wages, underemployment, inequitable income distribution and few advancement opportunities, especially among the Amerindian population in the impoverished southern states, according to the CIA World Fact Book.

But lower wages and higher poverty are not limited to one group of people or one region of Mexico.

“In Mexico, large trade surpluses with the United States have not been enough to overcome even larger trade deficits with the rest of the world,” according to Carlos Salas, author of “The Working State of Mexico” and an economist at the Colegio de Mexico. “Wages and incomes in Mexico fell between 1991 and 1998, and with NAFTA, inequality has grown and job quality has deteriorated for most workers.”

But despite Mexico’s 1994–95 tumultuous time of peso devaluation and its worst recession in half a century, it did experience recovery, especially from 1996 to 1999.

In more urbanized areas of Mexico, mostly in the central and northern regions of the country, trade activity with the United States and Canada has nearly doubled since NAFTA was implemented in 1994. Mexico also received considerable foreign direct investment, estimated at more than $12 billion since 1994. The U.S. Chamber of Commerce ranks Mexico as one of the five most attractive countries to invest in, based on information from A.T. Kearney Consultants.

The A.T. Kearney report concludes that despite issues such as “poverty, small business credit availability, crime rate and judicial uncertainty,” a general optimism exists among business people in Mexico. Still Mexico has a long way to go to achieve effective changes that will benefit all of its population.

However, steps have been taken to transform Mexico’s economy to one that is viable on the world’s economic stage.

Miguel Diaz, in a United States-Mexico Chamber of Commerce’s NAFTA Forum series, said, “In essence, the negotiation of free trade agreements was the mechanism that Mexico chose at the start of the era of globalization to assert that it would not turn back on its decision to open itself to the world.”