Mexico’s New Boom: Why the World Should Tone Down the Hype

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Henry Romero / Reuters

Pilgrims hold images of the Virgin of Guadalupe outside Basilica's square before attending a mass during a pilgrimage to the Basilica of the Virgin of Guadalupe in Mexico City February 21, 2013.

I couldn’t be happier that Mexico’s economy is rebounding. After barely 2% average annual growth between 2000 and 2010, the country’s GDP expanded almost 4% in 2011 and 2012. Investment is booming and the middle class is enlarging. Mexico’s manufacturing exports lead Latin America, and its trade as a share of GDP tops China’s. Its No. 53 spot on the World Bank’s ease-of-doing-business rankings far outshines the No. 126 grade of its main regional rival, Brazil; it has signed more free trade agreements (44) than any other country, and it’s enrolling more engineering students than any south of the Rio Grande. As I noted a year ago, it’s a trend well worth applauding.

But I emphasize: it’s a trend. It’s not the miracle, the economic version of the appearance of Our Lady of Guadalupe, that so many Mexico cheerleaders from government officials to foreign investors to embassy diplomats are insisting we call it. Yes, good news from Mexico is more than welcome after a decade overshadowed by horrific narco-violence; a more positive conversation about the country is a relief. But no matter how loudly the enthusiasts scold the media for dwelling on Mexico’s mayhem, the cartel killing hasn’t stopped, and many of the socio-economic ills that help breed the brutality persist. The media didn’t just make up the 60,000 gangland murders of the past seven years, or the relentless massacres and beheadings, or reports like the one released last week by Human Rights Watch about the 27,000 Mexicans who have disappeared during the drug war.

(PHOTOS: Auto Defensa: Rough Justice in Mexico’s Lawless Mountains)

So as someone who has covered the country for almost 25 years, I tend to be wary when I see the blood-soaked headlines yielding all of a sudden to rose-colored banners hailing Mexico as “the Aztec Tiger” or “the New China.” Or when eminent columnists like the New York Times‘ Thomas Friedman rather hastily assert that Mexico will become a “more dominant economic power in the 21st century” than China. To his credit, Friedman points out that “crime syndicates, government corruption and weak rule of law hobble the nation.” But I worry about the emergence of an overweening boosterism that forgets what happened two decades ago—when belief in another Mexican miracle helped lead to one of the worst financial disasters in the country’s history.

This latest episode of It’s Always Sunny in Mexico evokes a familiar pattern. Because Mexico is attached to our southern border, it’s the only Latin American country that Washington and Wall Street feel they actually have to engage. Even so, they engage it grudgingly, and they get irritated when the media focus on its dysfunction—as was the case in the 1980s, Mexico’s Lost Decade of epic debt crisis. After Harvard-educated President Carlos Salinas de Gortari took office in 1988 and called for capitalist reforms that included a North American Free Trade Agreement, or NAFTA, word came down to us Mexico-based journalists from U.S. officials and business executives: All is transformed south of the border. Get with the program.

(MORE: Mexico Goes After the Narcos — Before They Join the Gangs)

Salinas and his Armani-clad technocrats sold that bogus Mexican Miracle of overnight development remarkably well. So effectively, in fact, that few in the U.S. took notice when Mexico’s Potemkin façade, cracked by an indigenous uprising and a spate of political assassinations, started collapsing in 1994, culminating in a calamitous peso crash that required a $50 billion U.S. bailout. So forgive some of us if, almost 20 years later, we’re a bit reluctant to declare another fast-track Mexican Miracle and set aside our concerns about Mexico’s lingering dysfunction. Not just the mafia bloodletting, but the nagging failure to modernize a corrupt and incompetent judicial system. Not just the social inequality, which is still too vast, but the shameless business monopolies that exacerbate it by choking off competition and inflating prices.

And we’re sorry if a lot of the new Mexican Miracle math doesn’t add up for us, either. The World Bank says 95% of Mexicans today are either in the middle or upper class. Really? Last I saw, Mexico’s official poverty rate was 45%. No wonder Mexicans themselves tend to chuckle when they hear these claims, as Puerto Vallarta construction worker Efraín Sánchez did last spring when I suggested that, according to World Economic Forum leaders visiting his city, he should consider himself part of the middle class. “Mexico’s definition of ‘middle class,’” I was told by Sánchez, 35, who was putting off marriage because he feared he still couldn’t afford a family, “is exaggerated these days.”

(MORE: Mexico Takes Deserved Bows (and Some Boos) at the World Economic Forum in Puerto Vallarta)

Miami Herald columnist Andres Oppenheimer heard much the same skepticism in Mexico recently. In his March 2 column, “Everybody Is Upbeat on Mexico—Except Mexicans,” Oppenheimer cites a new survey by the Mexico City polling firm BGC that finds 66% of Mexicans feel their country’s economic situation is either “regular” or “bad.” “If Mexicans are not convinced,” he concludes, “Mexico’s moment will not last long.”

Oppenheimer also points out that much of the It’s-Morning-Again-In-Mexico wave is a Newtonian consequence of the It’s-Twilight-Now-In-Brazil consensus—the feeling that it’s time to knock the South American giant down a notch after a 2000s boom that made it the world’s sixth largest economy. Brazil is indeed faltering; its growth came in under 1% last year, and it has its own glaring structural flaws yet to fix, from lame infrastructure to onerous taxes. But Boom Brazil won global kudos in large part because it started tackling many of the core development challenges that Mexico keeps avoiding, such as steering credit and capital not to monopolies but to small- and medium-sized businesses that employ most of the workforce.

Brazil, at least under President Dilma Rousseff, likewise looks more serious about battling corruption. Mexico’s new President, Enrique Peña Nieto, sought to signal his own anti-graft bona fides last week when his government arrested the head of Mexico’s quasi-omnipotent teachers union, Elba Esther Gordillo, for allegedly embezzling some $200 million. It certainly adds to Mexico’s positive trend. But it hardly constitutes a miracle.

MORE: Peña Nieto Tells TIME: I Want to Make Mexico an Emerging Power Again

34 comments
Skosgardus
Skosgardus

This is a scam running by Salinas and CO. New new party of treacherous getting ready to run away with everything.

JoseAngelFlores
JoseAngelFlores

Tim,

Salinas did not sell anything, he brought a host of important reforms to the country liberalizing what was a closed, socialized and state-run economy, he privatize banks and thousands of companies, including telmex, by end of his terms, our Supreme Court had gained it´s independence from the executive branch, our Central Bank had become independent too and our electoral system was now being run by citizens. The country´s economy crash because of many reasons, the last one being a silly and irrelevant uprising in the most southern and forgotten state of the country, with absolutely no bearing or influence in the lives and politics of a hundred million mexicans. 

But that was the last devaluation, the last time Mexicans had to suffer high inflation and high interest rates and ever since immigration to the US has steadily declined to reach almost zero now. 

Our country´s economic growth has been slow, but steady, and most importantly, based on industrial output, not on commodities, in 1990 for example, oil exports accounted for more than 30 or 40 percent of all exports, today it´s less than 6%, our main exports are cars, electronic equipment, cellulars, televisions, aircraft parts, etc. 

I don´t any hype about México, but I see the investor community recognizing what many economists and important financial publications such as The Economist, Financial Times and Bloomberg have been pointing out: that Mexico´s economy is strong and important, that our financial authorities have exercised fiscal responsibility, that our country has become more competitive vs China and South Corea and other industrial and manufacturing world competitors. 




JorgeSalcedo
JorgeSalcedo

I just want to say " CONGRATULATIONS" to TIM PADGETT for his accurately analyst in this text. Mexico is not as good as the MEXICAN media and other ones want to set it. We still have mayor rooted issues to fix and there is not sign of willingness to face them .

rcarlossj
rcarlossj

Yes, we have to be cautiously optimistic about boosting Mexico too much. Don't count your chickens before they've hatched. However, the author fails to understand, and what other others seem to realize, is that you cannot compare the Mexico and PRI of the 90's vs. today's'. The main reason for the 94 crash, according to Economists from the International Institute for Economics,  was that Salinas went on a spending spree in 94 financed with Tesobonos. Investors became wary and began selling bonds. The selling pace accelerated with the Zapatista violence and the murder of Colosio. The PRI doesn't have the complete control of the entire country it once did. All of Mexico's crashes, caused by overspending which causes investors to flee. The peso was also overvalued. It has been floating since 94'. There is much more flexibility in the economy. 

The biggest challenge for Mexico is not economic meltdowns, even given the violence, its simply lack of growth. Mexicans are finally starting to wake-up and realize what they need to do if they want a much better Mexico. As a Mexican American with most of my family in Mexico, he see it, I know. The PRI and PAN know exactly what needs be done, but will they be able to make the changes? 

ShannonKlein
ShannonKlein

Thanks NAFTA. Mexico and Canada are two of the very few economies in the world that are growing. I wonder why. Mr. Obama I voted for you because you said that you would repeal NAFTA and bring our jobs home but it seems the only campaign promise you kept was to Canada when you told them not to worry about losing jobs.

citizentobe
citizentobe

Talking about corruption......Why hasn't anybody impeached Mr. Obama?

citizentobe
citizentobe

LogicalPosition: Undoubtely you are a bigot. Why do you call Mexicans "animals".

LogicalPosition
LogicalPosition

Who doesn't enjoy Mexican food? 

Having worked side by side with Mexicans, they appear to be the hardest working animal on the planet when well supervised.

JohnnyMedina
JohnnyMedina

So, you were 13 when you first started covering Mexico?

coyotejazz
coyotejazz

Excellent article.  The continuing drumbeat of boosterism that you describe so well is nothing short of surreal.  Friedman et al as practitioners of magical realism?? Thanks so much for your work.

luciusjumanux42
luciusjumanux42

i think its a bluff by certain political enteties,to lure outside investment and the can do what ever the us lets or tells them they can do...if it was that good in mexico ,folks would not be risking their loives and a hefty ransom to get to the land of the milk n honey...the city of santa Ana has a better economy the cops killing Mexicans ratio s about even with mexicos

AndrewPaxman
AndrewPaxman

Good piece, Tim, thank you.  As a historian I much appreciate think pieces written with an eye to history.  One quibble: I'm not sure about EPN's "anti-corruption bona fides".  When Salinas jailed La Quina and removed Carlos Jonguitud in 1989, it seemed to signal the start of an anti-corruption drive that never really arrived.  EPN will have to do more than lock up La Maestra for the cameras to show he has the strength for a real fight.  After all, Gordllo was really low-hanging fruit.

paco89146
paco89146

Good article Tim, congrats ...Like most any Mexican I'm fiercely nationalist and permanently in deep love with my home country but do not fail to recognize our very special makeup ... Yes, in Mexico we live with corruption as a way of life ... It's ingrained in our heritage dating back to the Conquest ... Yes in Mexico we ARE violent as our history's many bloodbaths prove. As to the the drug related violence and problems I think not enough emphasis is given to the fact that most of it has to do with the insatiable demand from the Gringos ...  I might be wrong but I think it was Benito Juarez who said ... "Poor Mexico, sooo far away from God and sooo close to the US!" Mayhap now that weed is being legalized in the US the Mexican-Us drug problem will abate somewhat ... Not totally obviously since there will still be all the other trafficked items coming AND going both ways; guns, people, consumer goods, money, etc. What to do? We’re way too far away from becoming Denmark or Sweden-like so I guess all Mexicans will keep on doing what they’ve always done ... Keep at it, keep trying, Si Se Puede!... Meanwhile, if not, then there’s always La Virgen De Guadalupe to pray to and/or the $500 pesos I can get from “facilitating” this applicant’s driver’s license ...

DeweySayenoff
DeweySayenoff

U.S. will believe that Mexico is an economic powerhouse when there are more Americans working in Mexico illegally than there are Mexicans working illegally in the United States.

Pavetl
Pavetl

Finally an article that is more realist in contrast with the recent Mexican hype. I think these are interesting times, and there is defenetly a lot to do here in Mexico. Personally, I'm skeptical on recent Mexican hype. As noted by Gge.Ga, Mexico is thriving in the export sector, but lets point out that Mexico's exports are concentrated in no more than 1% of stablished companies throughout the country. These companies are giants, the ones responsible of making Mexico reach the top 5 charts. However, 80% or more of jobs are created not by these giants, but by small and medium companies (the so called PyMEs).  And of course, these exports are 78% sold to the USA...so, while we try to diversify our export markets, the only thing we can do is to hope USA does well  (or develop internal consumers, which depends on creating more quality jobs, which also depends on big reforms to eliminate monopolic practices). So yes, there are some nice numbers our there, but they are really fragile. There is much to be done, and it has to be done at the core (sinking Elba is a good start), not superficial and mid-changes.

Gge.Ga
Gge.Ga

So as the title of this propaganda states, Why (should) the world (USA) tone down the hype? Because both north of the USA in Canada and south of the USA in Mexico business is booming, the middle class is expanding, medicine is cheap, doctors are a fraction of the cost in the USA and people are happy.  Where as in the USA it is the opposite in every regard. Tone it down, as the author (and the politicians) declare. Keep the masses uninformed and misinformed.  

Gge.Ga
Gge.Ga

The Mexico middle class IS growing and the USA middle class IS shrinking. Face the facts., Mexico is exporting autos at a rate the USA never saw in the history of auto manufacturing.. Nearly every expert in the Automobile investment business worldwide agrees that Mexico is set to become the world´s largest exported of autos in the next 5 to 7 years.  Next let us look at the aerospace industry, who are building factories in Mexico as fast as they can. Mexico is already the world´s largest exported of refrigerators, has a huge electronics industry that everyone from the USA to Japan to China use to manufacturer goods for export. These are all Middle Income wages.  Homes being built, cars being bought, mega malls being visited.  

Gge.Ga
Gge.Ga

The Mexico drug war was bought and paid for by the USA and a product of the Calderon Presidency who accepted billions of US dollars to fight a failed war on drugs that the USA refuses to this day to fight on their home turf.  For some reason it is always someone else´s  fault that cocaine and herion enters the USA instead of admitting the fact it is their problem and to fix it on their soil.  The USA is known  as being the world´s largest consumer of drugs in the world but always point the finger at someone else. Fix your own problem and stop blaming everyone else like a grade school student. Man Up.


Gge.Ga
Gge.Ga

Why not take this section by section? The Mexican GDP is projected, by almost all world´s experts, to be in the 3.8% increase where as the USA will never see a 2% increase in GDP in this year or the next few at least due to huge debt....something that Mexico does not have.


AlmaMaderoB
AlmaMaderoB

Key word in: "Last time I saw..." is "I". Enough bias for me.

Robin_Reyes
Robin_Reyes

Good counterarguments to Mexico's boom in TIME. While the writer highlights that there are still many improvements to be made, he doesn't contextualize these. For example, he brings up Mexico's violence - true - but he doesn't mention the murder rate in Brazil is still higher. He brings up socio/economic challenges in Mexico, but he doesn't contrast these against human rights violations and social challenges in China.


In other words, he's saying this and that hasn't been fixed yet in Mexico so don't get too excited, but he fails to point out that Mexico's economic rivals face those same challenges (even perhaps to a larger degree).

Skosgardus
Skosgardus

@JoseAngelFlores That is a foolish thing to say. Salinas did "give" Telmex to Slim, Southwestern Bell and France Telecom. Actually, since Salinas was in office, Mexico turn in a crappy country. Now, we do have in Mexico new politicos who don't know crap about technology trying to privatize everything (wrong and corrupt step to take) Peña Nieto might be Salinas Pawn and we might face another Salinas scam period. Liberalizing? Are you serious? You probably are very close to these guys.  Liberal economy does not work unless you don't want regulations. And where regulations don't exist, corruption thrives. 

Unemployment grew 7 points between 2006 and 2010 (thanks to those PAN fanatic extremists) PAN left a total disaster, it will take time to recover. The Private sector had the nuts to propose a green tax to Mexican fuels? Who and what rights does this group have to intervene in a State own industry? 

Mexico it'll turn into a great state once your PAN fanatic extremists and the PRI opus dei lovers go away. PAN left high unemployment. PRI does not know how to govern or impose a Democratic government for these two parties have never experience Democracy. Salinas is right behind this scam. Everything you say, lacks of credibility. Here's a graph for you buddy

http://contralinea.info/archivo-revista/wp-content/uploads/2013/04/combate-pobreza-800.jpg

Just because you live comfortable behind a APPLE computer does not change reality.

Skosgardus
Skosgardus

@rcarlossj And who do you think is behind Peña nieto? PAN and PRI do not know what needs to be done. PAN are hole yunquistas who sleep with the church, and Peña Nieto is starting to jump into this little orgy. 

Gge.Ga
Gge.Ga

@LogicalPosition 

 You may have worked side by side  with Mexicans but just wait ....they will be your supervisor soon and remember your bigoted demeanor.  Hope you have a good retirement plan.

Gge.Ga
Gge.Ga

@coyotejazz 

At least the author has two friends to write in and back up a poor article. He does owe you dinner you know.

Gge.Ga
Gge.Ga

@luciusjumanux42 

  Yes it is quite a bluff.  Not only has Mexico bluffed General Motors, Volkswagen  Ford, Mercedes Benz, Toyota, Nissan, Navastar to build factories in Mexico, They also can claim to Hitachi, Nestle, Toshiba,  and General Electric among hundreds of other companies ..  Building to export, a great way to build an economy as opposed to importing everything except arms.  Building and manufacturing goods was what made the USA strong and grow its economy. Now most everything is made out of country.    You can say what you wish but the facts are available for everyone to see, Mexico is growing, International companies are investing billions and life is good in Mexico.

rcarlossj
rcarlossj

@AndrewPaxman Gordillo was not low hanging fruit, just because she was easily available for arrest doesn't mean it was a no-brain move. She always said that she had the power to destabilize the entire country by sending her teachers out to the streets. Everyone knew what she was doing, but nobody wanted to stop her. EPN deserves some credit. 

Gge.Ga
Gge.Ga

@AndrewPaxman 

Gordillo was low hanging fruit? The President (for life mind you) of the largest union in Latin America caught stealing 2.6 billion pesos from the union is low hanging? Among charges of evading taxes there is also charges of money laundering and organized crime hanging over her head. Ponder me this historian, when was the last time anyone in the investment system / banking system who was a key player in the world wide recession and the outright destruction of a few countries arrested and brought to trial?

 This article is a fine piece of propaganda for the US readership, although far from being accurate and even farther from being fair. Like most propaganda the meaning is ::: sure your life sucks but it suck even more some where else. ----  

timtimemiami
timtimemiami

@AndrewPaxman 

Wonderful to hear from you after all these years, Andrew! Your quibble is a valid one, thanks, and you're right that I should have added the La Quina context when I said EPN is seeking to signal his anti-corruption bona fides. Here's to hoping EPN's intentions are a bit less cynical. In any case, thanks for adding another corroborating voice from the '90s. Best regards -Tim

rcarlossj
rcarlossj

@DeweySayenoff China is now a powerhouse but are there more Americans working in China than in the U.S. This is pretty stupid and rather prejudiced reasoning.

paco89146
paco89146

@DeweySayenoff 

We'll soon see, in just a matter of a few decades, nothing really as time goes, that the US WILL become Mexican! ...  a country populated mainly by citizens of Mexican origin ... You could say it's deservedly divine payback  brought about by natural reproduction .... We Mexicans loove sex, reproduction and large, united families. Mexico lost half its territory to the US Manifest Destiny but in doing so the Mexican Trojan Horse Version got set in place :) You could say it's going to be the most succesful and beautiful take-over by one nation of another  

LogicalPosition
LogicalPosition

I never witnessed a Mexican who was an upper level supervisor in the Houston construction trades in the 60's, 70's. However I did have a few "lead men" who were Mexican, and they handled their responsibilities well in terms of supervising other Mexicans.

As far as the bigioted charges you levied against me, these "lead men" could call their charges putos, pendehos, etc, whereas I could never have been so insulting as a gringo. I enjoyed working with them, actually, since since I found them to be hardworking, family oriented, respectful, God fearing, quick learners and they took pride in their work.

I am retired.