Mexico in the News

by Andrés Martinez | Bloomberg Businessweek | May 01, 2013

Mexico: The Stranger Next Door

Not so long ago, if you believe what you

read in the papers and see on TV, Mexico

was the next Afghanistan. It was poor,

lawless, and plagued by drug violence, a

failed-state-in-the-making whose problems

and people would soon cascade over the

border. In early 2009 a U.S. Joint Forces

Command report speculated that, in the

next quarter-century, Pakistan and Mexico

could prove the most worrisome flash

points for American security. According to

a study by Roberto Newell for the Wilson

Center, more than 60 percent of all stories

about Mexico in major U.S. papers were

negative in 2007; that figure had risen to

more than 80 percent by 2010. A survey of

U.S. attitudes toward Mexico in 2012 found

only 14 percent of respondents called it a

“good neighbor.” Type “Why is Mexico so”

into Google (GOOG) and the first four

adjectives suggested are “dangerous,”

“violent,” “bad,” and “poor.”

In the last year, however, Mexico’s image

has witnessed a dramatic transformation.

In the eyes of U.S. media and policymak-

ing elites, the country’s gone from being

the next Afghanistan to the next China.

The new narrative crescendoed with the

swearing-in last December of President

Enrique Peña Nieto. Journalists covering

the event learned, among other things, that

years of effective economic policies and an

embrace of free trade are turning Mexico

into a solidly middle-class society. The

Financial Times called Mexico, whose

economy grew 3.9 percent in 2012, an

“Aztec tiger.”

In February came the ultimate confirmation

of Mexico as a foreign-policy darling:

Thomas Friedman wrote two columns

about it. “How Mexico Got Back in the

Game” read the headline of one column,

which must have come as news to Mexi-

cans who were unaware they’d ever left it.

Friedman opened by saying there was a

new answer to the question of whether

India or China would be the more dominant

economic power going forward: Mexico.

The absence of more nuance in the cover-

age of Mexico isn’t surprising. The country

remains surprisingly exotic to many worldly

Americans who’ve long obsessed over

other parts of the world—the Middle East,

the Soviet bloc, the Middle East, East Asia,

the Middle East—while paying little atten-

tion to, or even bothering to visit, our own

neck of the global woods. But no relation-

ship is of greater importance to the U.S.’s

well-being than that with Mexico. Two

decades since the signing of the North

American Free Trade Agreement, the

cross-border partnership has yet to reach

its true potential, even though manufactur-

ers already view the U.S. and Mexico as a

single market for production purposes.

Among the issues now on Washington’s

agenda, immigration is directly affected by

Mexico’s economic health, and Mexican

cooperation and sound governance will be

instrumental to the effectiveness of any

regulated temporary worker program such

as the ones currently being proposed in

the Senate. Yet Mexico is rarely mentioned

in congressional discussions on immigra-

tion reform.

President Obama can build on his May 2

visit to Mexico by acknowledging that

Nafta and centuries of intertwined histo-

ries, cultures, and peoples shouldn’t be

shrugged off like a one-night stand. The

president has often talked about the need

to “pivot” American attention and resourc-

es to Asia. But he can leave a greater

legacy by pivoting to North America and

giving Mexico the sustained, strategic

engagement it deserves.

Mexico, with all its challenges, represents

a success story in global terms. After the

1995 peso crisis roiled international

markets, Mexico started practicing what

Washington only preaches: living within its

means. The Organisation of Economic

Co-operation and Development now

classifies Mexico, the world’s 14th-largest

economy, as a majority middle-class

society. Average income has doubled in

the past 15 years; a quarter of the coun-

try’s homes were built within the past two

decades; and the average number of

school years Mexicans attend has doubled

in the past four decades. Mexico is the

world’s top per capita consumer of

Coca-Cola (KO) and has more Walmarts

(WMT) per person than the U.S. Mexico’s

consumer market is vital to large compa-

nies ranging from Citigroup (C) to Procter

& Gamble (PG) to Ford (F) and GM (GM).

Plenty of Americans may think Mexico is

dirt-poor, but our neighbor imports more

U.S. goods than any country besides

Canada, and more than Germany, France,

and the U.K. combined. It’s also the

third-largest provider of oil to the U.S.,

behind Canada and Saudi Arabia. It used

to rank second, but mismanagement of the

state-owned behemoth Petróleos Mexica-

nos (Pemex) has diminished Mexico’s oil

output. This may be a blessing in disguise

for the country’s overall economy, which

has diversified its export base to the point

where oil now only accounts for less than

20 percent of export revenue. For the

federal government, however, the failure to

expand production has been a disaster, as GRAPHIC BY BLOOMBERG BUSINESSWEEK DATA: PEW HISPANIC CENTER, WORLD BANK

Mexico in the News

Investigating Mexico ? We Can Help You With

Site Selection Mexico vs. Home Country Comparison Financing Mexico Operations Valuation

Leasing and Sales Construction and Construction Management Multi-Market Comparison Analysis of Cities in Mexico

Contact: gswedback@naimexico.com www.naimexico.com US Phone #: (619) 6903029

Pemex accounts for about 34 percent of the government’s budget.

That’s why Peña Nieto is eager to encourage foreign investment in

Mexico’s oil sector.

The Mexican president also wants to shift attention away from the

war on drug cartels—he’ll still prosecute it but would probably not

lose sleep over the cartels’ existence if the violence could be brought

under control—which has claimed more than 60,000 lives in the past

six years. Peña Nieto has been energetically taking on other powerful

interests in his attempt to prove he’s a man of reform. He’s impris-

oned the once-untouchable head of the powerful national teacher’s

union and advanced education reforms contrary to the union’s

interests; he proposed a new telecom law to open up the telephone

and cable-TV markets; and he’s pushing financial reform that pours

more credit into the economy.

A Gallup poll of public attitudes earlier this year reflected the country’s

buoyant mood. Asked whether they’d want to leave Mexico perma-

nently, only 11 percent said yes—the same percentage of Americans

who answered in the affirmative—down from 21 percent in 2007. Net

migration across the border has declined from nearly half a million a

year before the 2008 recession to almost zero, the result of reduced

demand for imported labor on this side of the border, tougher border

security, changing demographics as Mexico’s population ages, and

greater optimism about the country’s future.

As a rapidly modernizing nation whose economy is deeply enmeshed

with that of the U.S., Mexico continues to represent plenty of

untapped potential. But Americans have to realize that the story of

Mexico is neither all bad nor all good. It’s counterproductive to insist

on such a caricature. Mexico’s subpar education system is holding it

back, and the nation’s rule of law remains underdeveloped. Public

institutions are weak, and many local and state governments have

been far slower than their federal counterpart to embrace a demo-

cratic, transparent culture. The judiciary continues to be a disgrace.

Corruption is the cancer threatening the long-term viability of the

modern Mexico Friedman has discovered.

Just as the U.S. should appreciate Mexico’s progress, it shouldn’t

turn a blind eye to its neighbor’s problems, which pose a threat to

North America’s broader competitiveness. Mexicans need U.S.

support and engagement, and the emergence of a true North Ameri-

can common market, to help overcome a tradition of corruption and

impunity that benefits only the nation’s ruling elites. Mexico’s

economic stability stands atop a weak legal and political foundation;

it could all come undone again if that foundation isn’t shored up.

The Obama administration should embrace and proclaim Nafta as a

strategic cornerstone of both economic and foreign policy in the

coming years. The rest of us can also play a role in strengthening ties

with our indispensable partner: We can follow the president’s lead,

disregard the excessively alarmist coverage of the past, and head

south for a visit.