Not really, but you HAVE to pay attention.

A snapshot via Economic Indicators

• Mexico= Solid middle class nation

• Conclusions from chart A– CPA has gone up– Debt has risen– Inflation has been controlled

Continue…

• Chart B– Poverty has decreased in general – Gini coefficient=Mexico is less unequal but

it needs to improve.

Continue II…

• Chart C– Exchange compared to the world– Third line=accumulation of foreign funds

into the country net of outflow.– Deposit rate= a fee, paid on borrowed

capital

Organization of the Economy and Government Policy

• Member of the OECD• Predicts Mexican population=105

million 2005• 76.5% of population was urban in

2005, in 2000, 74.6% population was urban

No Taxes = Po’ Mexicans

• Less than 20% of the labor force is registered with tax authorities.

–OECD predicts over 43% of jobs

Employment

• Big Companies<Small Companies

• But more people work in big companies.

• Shift from agricultural work to manufacturing

Dirty Rich Man!

• Carlos Slim, example of economic extremes.

Financial Organization and Monetary and Foreign Exchange

Policy• Mexican financial system reflects

economic booms and busts from the past

• Financial liberalization was gained by diminishing direct role of government institutions, but these institutions gained a new role.

Center of Mexican Moolah

• Bank of Mexico• A.K.A. Banco de Mexico or Banxico• Independent since 1993• Manages monetary, foreign exchange policy• Wants= minimize inflation, maximize macroeconomic

stability• -Lowering inflation is the skinny jeans of

economists• Banxico and Financial Ministry work to set value of peso• Supply and demand for peso affects its value• -Banxico not so independent from the government

Look at all the failure!

• CNBV, the Insurance Commission, the Pension Funds commission

• still not stable, but working on it since the 1994/1995 crisis

• dependent on the Financial Ministry

• Mexican banks nationalized in 1982, privatized in 1991

Continuation…

• Mexican Stock Exchange=Bolsa. • Medium business=hard to find

financing• Microenterprises= microcredit

institutions (small loans) are different from banks.

• Government tries to be as transparent as possible to gain trust=more developed market in future.

Mexico Loves Foreigners

• FDI (foreign direct investing)= foreign nations bring technology, money, jobs, econ activity to Mexico.

• Brings $18 billion to Mexico, 16,000 foreign firms, and $210 billion in stocks.

People use MoneyGram, in case you don’t know.

• Remittances= money sent to Mexico from a foreign land to citizens.

• IADB (Inter-American Development Bank) estimated in 2006, remittance to Mexico= $23 billion.

• CONTROVERSY!

Trading Partners and Trade Policies

• NAFTA= developed b/c of close relations Mexico & USA had for years.

• Boomed FDI

• Secret economy abolished, everything became transparent and known.

Continued…

• ALADI / LAIA (Latin American Integration Association) more trade in Central America

• EU= negotiated free trade with Mexico.– Mexico is in two of the biggest markets in

the world.– China becomes a threat after joining the

WTO

Fiscal Policy

• Fiscal Policy= government spending/revenues, needs reforms

• Should be counter cyclical (economy) economists say – Spend money/cut taxes in bad times– decrease gov. spending when economy is

good b/c of the private sector.

Continued…

• Income tax and value added sales tax and Pemex (Petroleos Mexicanos) revenues=gov. revenue– Mexico is subject to Pemex’s ups and

downs since most revenue comes from it, though not a lot.

– informal economy=weak tax system

Continued II…

• Mexico’s president, Felipe Calderon, wants to but cannot privatize oil b/c it is protected in the Mexican constitution.

• Lack of oil=lack of money

Mexico’s New Econ Policies

• Budgetary stabilized plan= revenues from high oil prices are saved for future counter spending cycles.– Used to stimulate economy in hard times– It is working for Mexico and economy is

getting better

Continued…

• Oportunidades or Progresa– Money is spent on needy if they follow

rules ex. Immunizing children, taking them to school

Just Small Details

• Immigration in the North

• NAFTA

• Pollution

YOU ARE FREE FROM THE

ECONOMICS MONSTER!

For now…