Mexico Confronts the Challenges of Global Competition

Diana Villiers NegroponteThe Brookings Institution

July 8, 2013

Ancient CivilizationOlmec – oldest people to inhabit the Gulf

CoastMayan – civilization dominated by the arts

and trade.Zapotec – Use of metals in Oaxaca.Aztec empire – warriors for one hundred

years; capital city, Tenochtitlan, is modern day Mexico City

Spanish Colonial Period 1452-182115th Century arrival of the SpaniardsPower of the Catholic churchDominance of the Spanish conquistas and

later their familiesMarriage to Spanish family, but not to

indigenous. Mestizaje is slowPatriarchal families – jobs based on

allegiance to patriarch

Revolution & Nationalism1910 Revolution against the old order of

President Porfirio Diaz – landed class, church property;

Decade long civil war – heroes;Pancho Villa’s incursion into Colombus, AZ;1917 Resistance to General Pershing’s

incursion and 1917 Constitution1938 Nationalization of the petroleum

reserves and enshrinement in Article 27 of the Mexican Constitution;

Post Revolutionary Mexico 1928 –2000Emergence of the Partido Revolucionario

Institucional (PRI); Appointed President for 6 years; Corporatist government:

ArmyCampesinos (peasants)Trade UnionsBusiness leaders

• Controlled press – cooption of critics• Communal ownership of land

The Modernization of Mexico1982 – President Miguel del a Madrid applies to

join GATT;1989 – President Carlos Salinas de Gortari

proposes a North American Free Trade Agreement;

1993 – PRI candidate killed on campaign trail and succeeded by Dr. Ernesto Zedillo, Min. of Education – allows the PAN to win mid-term elections;

2000 – PRI looses to the Partido de Acción Nacional (PAN).

Early Signs of Democratic ChangeElections freer;Press no longer tied to the government;Corporations less committed to one party;Alternation in power;Slow growth of civil society, particularly

environmental movementsBUT: PEMEX untouched, role of Church

untouched. Corporatist parties still hold allegiance to the PRI

TODAYCongress independent, critical, but struggles

to achieve consensus;Business privatized, but still highly

concentrated; Trade Unions remain strong and sometimes

destructive – particularly electricity and education;

Energy – Cantarell field has diminished source of oil – what next?

Challenges facing Mexico TodayEducation: bottom of PISA scores; average

length of school day, number of days in school; teachers who don’t show up;

Energy: increasing imports of natural gas from the U.S. to provide necessary energy;

Productivity: measured by per capita income;

Growth = sluggishThe Informal Sector

Priority of EducationCountries with the Highest Productivity are Countries

where Education Levels have grown consistently; 3 stages of educational development: expand coverage of

basic education (1-6) extend to middle & higher levels; access to all with capacity to participate then quality of ed.

Mexico 4.5 years until 1970. Now 8.5 years. Need to reach 13 years like Canada, Russia;

Each additional year in school = 10% more earning power; Person with High School degree has 34% higher income than someone who finished Junior High (secundaria).

Energy ChallengesProduction from Cantarell: 2004=2.136 mbd.

2008=1.047 mbd. 2012=400,000 mbd.National Energy Strategy goal for 2012-2016 =

3.354 mbd – from where? Underlying problems: corruption, failure to

invest in finding new reserves, production sharing with private firms prohibited by constitution;

Transboundary Oil Agreement to explore and extract from deep waters on the Mexican/US border.

Optimism or Pessimism?New President, Enrique Peña Nieto with

expert team in economy, energy and foreign affairs;

Willingness to confront the concentrated wealth of the communications, telephone barons;

Committed to opening all market sectors through TPP and Alliance of the Pacific

BUT – insecurity remains a deep problem.

Thank you for your attention!