Effects of the current U.S. crisis on Mexico Carlos Yanez Matt Anzardo Econ. 465 Ramon A. Castillo.
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Transcript of Effects of the current U.S. crisis on Mexico Carlos Yanez Matt Anzardo Econ. 465 Ramon A. Castillo.
Effects of the current Effects of the current U.S. crisis on MexicoU.S. crisis on Mexico
Carlos YanezCarlos Yanez
Matt AnzardoMatt Anzardo
Econ. 465Econ. 465
Ramon A. CastilloRamon A. Castillo
SummarySummary
Relationship with U.S. economic Relationship with U.S. economic decline and Mexicodecline and Mexico
GDP: Investment, Trade, Consumption, GDP: Investment, Trade, Consumption, and Government Spendingand Government Spending
UnemploymentUnemployment
Consequences on; Consequences on; ImmigrationImmigration RemittancesRemittances PovertyPoverty
GDPGDPGDP Growth
-8.00%
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
2006 2007 2008 2009Mexico
United States
Mexico experienced the Largest decline in GDP growth in 2009 since the last 30 years.
InvestmentInvestment
US provides half of Mexico’s FDIUS provides half of Mexico’s FDI Almost 70% is in manufacturing Almost 70% is in manufacturing
and assembly plants. and assembly plants. US FDI into Mexico has US FDI into Mexico has
decreased by 16% in 2008 and decreased by 16% in 2008 and 23% in 200923% in 2009
Significant decline in Significant decline in manufacturing jobsmanufacturing jobs
TradeTrade
Over 80% of Mexico’s exports go to Over 80% of Mexico’s exports go to the USthe US
Current account deficitsCurrent account deficits The value of the peso decliningThe value of the peso declining Mexico relies on 35% of foodstuffs Mexico relies on 35% of foodstuffs
from imports, therefore more hunger from imports, therefore more hunger may result if their currency can not may result if their currency can not buy as much.buy as much.
Caused more job losses in MexicoCaused more job losses in Mexico
TradeTradeCurrent Account of Mexico
-18
-16
-14
-12
-10
-8
-6
-4
-2
0
2006 2007 2008 2009
mill
ion
Current Account of US
-1000
-900
-800
-700
-600
-500
-400
-300
-200
-100
0
2006 2007 2008 2009
Bill
ion
ConsumptionConsumption
Because of job losses, people are Because of job losses, people are cutting down on spendingcutting down on spending
Government hopes tourism will raise Government hopes tourism will raise consumption. consumption.
Swine fluSwine flu The value of bad credit card debt The value of bad credit card debt
shot up from $1.3 billion in shot up from $1.3 billion in November 2007 to more than $3 November 2007 to more than $3 billion in November 2008.billion in November 2008.
Government SpendingGovernment Spending
Cuts in public spending and Cuts in public spending and increased taxes on income and increased taxes on income and consumption.consumption.
Public officials and public sector. Public officials and public sector. New general consumption taxNew general consumption tax Still left with a 22.3 billion dollar Still left with a 22.3 billion dollar
deficitdeficit
UnemploymentUnemployment
Significant decline in manufacturing jobsSignificant decline in manufacturing jobs Many moved to informal sector such as street Many moved to informal sector such as street
vendingvending Since the beginning of the current economic Since the beginning of the current economic
crisis, Mexico’s unemployment rate has gone crisis, Mexico’s unemployment rate has gone from 3.7% to 5.67%, US has gone from 4.6% to from 3.7% to 5.67%, US has gone from 4.6% to 9.4%9.4%
Unemployment
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
2006 2007 2008 2009
Mexico
United States
United States: Unemployment United States: Unemployment Rate on Mexican ImmigrantsRate on Mexican Immigrants
RemittancesRemittances
Mexico’s largest source of incomeMexico’s largest source of income Reasons for the declineReasons for the decline
U.S. recessionU.S. recession Unemployment in the U.S.Unemployment in the U.S. Tighter security at bordersTighter security at borders
3.6% ($931m)in 2008 to $25bn.3.6% ($931m)in 2008 to $25bn. First decline in 13 yearsFirst decline in 13 years
RemittancesRemittances
RemittancesRemittances
• Michoacan, Mexico is where most remittances are sent to.Michoacan, Mexico is where most remittances are sent to.
• Baja California , $36mBaja California , $36m
ImmigrationImmigration
Higher cost of MigrationHigher cost of Migration Poor job prospects in the U.S. /Poor job prospects in the U.S. /
MexicoMexico Illegal aliens returned home Illegal aliens returned home
rose 20%rose 20% Mexico (NSEO) estimates that Mexico (NSEO) estimates that
433,000 Mexican migrants returned 433,000 Mexican migrants returned between (2008, 2009)between (2008, 2009)
Immigration LevelImmigration Level
Immigrants returning home could drive Immigrants returning home could drive down wages and put pressure on social down wages and put pressure on social services.services.
About 11% of everyone born in Mexico is About 11% of everyone born in Mexico is currently living in the U.S.currently living in the U.S.
PovertyPoverty
PovertyPoverty
44,700,000 Mexicans are now living 44,700,000 Mexicans are now living in poverty.in poverty.
14 million are considered living 14 million are considered living under extreme poverty.under extreme poverty.
Poverty levels are predicted to be Poverty levels are predicted to be similar to 1996.similar to 1996.
Poverty Poverty
http://www.youtube.com/watch?v=XjGXXOfoTek
ConclusionConclusion
As the result of the close As the result of the close relationship between Mexico and relationship between Mexico and the United States, Mexico will the United States, Mexico will continue to face all the factors continue to face all the factors mention above till the day Mexico mention above till the day Mexico dices to limit its relationship with dices to limit its relationship with the United Statesthe United States