Wilson Center

Trade and Development in Mexico

April 17, 2018

Graciela Márquez

U.S. Mexico Studies Center, UCSD

y El Colegio de México

Mexico’s GDP per capita, 1921-2016

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

192

1

192

3

192

5

192

7

192

9

193

1

193

3

193

5

193

7

193

9

194

1

194

3

194

5

194

7

194

9

195

1

195

3

195

5

195

7

195

9

196

1

196

3

196

5

196

7

196

9

197

1

197

3

197

5

197

7

197

9

198

1

198

3

198

5

198

7

198

9

199

1

199

3

199

5

199

7

199

9

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

1932-1949: 3.03%

1949-1981: 3.21%

1981-2016: 0.54%

1921-1932:

-2.39

2

3

Nafta effects

• Substantial increase of trade and investment flows.

• Mixed effects in terms of wages, employment, and wellbeing.

• No wage convergence between Mexico and the USA.

4

Integration of economic cycles after 1994

Industrial Activity Index in Mexico and USA, 1980-2009 (Seasonal Adjusted Data, Mexico 1993=100, USA:1994=100)

60

80

100

120

140

160

180

1980/0

1

1981/0

1

1982/0

1

1983/0

1

1984/0

1

1985/0

1

1986/0

1

1987/0

1

1988/0

1

1989/0

1

1990/0

1

1991/0

1

1992/0

1

1993/0

1

1994/0

1

1995/0

1

1996/0

1

1997/0

1

1998/0

1

1999/0

1

2000/0

1

2001/0

1

2002/0

1

2003/0

1

2004/0

1

2005/0

1

2006/0

1

2007/0

1

2008/0

1

2009/0

1

México

USA

NAFTA

Sources: INEGI and Federal Reserve

5

Latin America and the Caribbean

GDP growth rates 2009

6

Percentage of population in poverty at levels of the 1990s

7

Mexico’s trade deficit

8

-100

-50

0

50

100

1993 1995 1997 1999 2001 2003 2005 2007 2009

Bill

ions o

f U

.S.

dolla

rs

Total

USA

Allnon-USA

Asia

It is China… not Mexico

9

Andrés Manuel López Obrador

Economic Platform

• Fiscal responsibility

• Investment in Infrastructure

• Public – Private partnership projects

• Social programs to vulnerable population

MAYOR OF MEXICO CITY

10

Andrés Manuel López Obrador

Economic Platform

• Fiscal responsibility

Prudent debt management

Public debt peaked in the current admistration: 53.7 of GDP.

No tax reform

Effective income tax rate similar to the U.S.(after 2017 tax reform)

More efficient expenditure (Budget control, adjustmentof bureaucreatic transparency)

11

Andrés Manuel López Obrador

Economic Platform

• Fiscal responsibility

Independence of Bank of Mexico

Constitutional mandate

Inflation control

Exchange rate flexibility regime

Shock impact

12

Andrés Manuel López Obrador

Economic Platform

• Investment in infrastructure

Public expenditure to incentive private investment

Roads, ports of entry, railroads.

Innovation hubs

Secondary education

13

Andrés Manuel López Obrador

Economic Platform

• NAFTA 2.0

Best agreement possible

Mexican negotiators have underscored the need to achieve the best agreement possible.

The Lopez Obrador economic team is prepared to continue negotiations beginning the new presidential term.

14

Andrés Manuel López Obrador

Economic Platform

• NAFTA 2.0“Poison Pills”

Regional content changes should preserve region’s competitiveness

Dispute resolution - Chapters 11, 19, 20

Need to provide certainty.

Sunset Clause

Uncertainty

15

Andrés Manuel López Obrador

Economic Platform

• Other Challenges

Informality remains high (57% employment)

Regulatory reform and use of digital technology.

Support to micro, small and medium firms.

Federal pension system (2% of GDP 2030)

16

Thanks / Gracias

17