Archive for category Economy
09/21/12 (written by lquezada) – On September 18, 2012, the Trans-Border Institute and the Center for Peace and Commerce hosted a border breakfast roundtable titled, “The United States-Mexico Border Economy in 2012,” featuring Dr. Alejandro Diaz-Bautista, PhD., and panelists Dr. Stephen J. Conroy, PhD., Director of the Center for Peace and Commerce, and Dr. David Shirk, PhD., Director of the Trans-Border Institute. The presentation focused on the issues that affect the economic relationship between the United States and Mexico.
Diaz-Bautista’s presentation highlighted the fact that Mexico’s top trading partner is the United States, while Mexico is the United States’ third major trading partner, emphasizing how closely linked the two countries are in economic terms. He noted that, given the border between the two countries is the largest in the world, it fosters a unique economic zone. Diaz-Bautista pointed out that frequent border crossings for shopping, tourism, and work result in 350 million crossings and $450 billion in trade each year; with shopping accounting for 42% of the such crossings. Diaz-Bautista also highlighted that both countries share similar economic trends due to their intensely close relationship, and provided the examples of mirrored unemployment rates and GDP growth rate patterns, the latter, which the World Bank has documented, have been similar for the past 13 years.
Stephen Conroy, director of the Center for Peace and Commerce, explained that the perception that U.S. citizens have of the danger and insecurities in Mexico is exaggerated and it is affecting the tourist segment of the economy in Tijuana. After being questioned on how the misperception of Mexico’s insecurity is fostered, where it comes from, and its effect, Conroy pointed out that indeed violence does occur in Mexico, but that it should not prevent people from crossing given how targeted the violence is, how unlikely U.S. citizens are to be victims of such violence, and how much violence in Tijuana specifically has decreased the past few years. David Shirk, Director of Trans-Border Institute, shared the same sentiments as Conroy in expressing that people should be encouraged to visit Baja California to change the negative perception many have of Mexico.
To view Diaz-Bautista’s power point presentation, please click here.
In Mexico City, authorities are considering a law to end bullfighting, as Mexican public opinion seems to be divided. The arguments for not pursuing the ban are that bullfighting has a long tradition in Mexico and is considered an art form. It is also argued that the ban could hurt the local economy. It is true that bullfighting has been a long tradition in Mexico; it dates back some 500 years back to when back to when Spain colonized the country. It is also said Mexico is the second most important bastion for bullfighting in the world, but with over 9,000 bulls killed a year and other countries outlawing bullfighting (Barcelona, Chile and Argentina) it is can be seen why the movement has progressed.
Some even argue that there seems to be a culture of violence coming from the drug war and that bullfighting contributes to it. The petition circulating on change.org states, “There is no art or culture when a sentient animal is mobbed by a gang of men, confused and terrified, repeatedly stabbed with spears, harpoons and a sword, exhausted and dying from his wounds and blood loss.” About 1,000 animal rights activist staged a demonstration for the proposed law in front of City hall in Mexico City this past Sunday. They showed up partially clothed, dripped in fake blood and imbedded with imitation barbed darts to represent the killing of bulls that takes place during a bullfight. The bill is to be heard by the general assembly in the third session which ends the 30th of April. The demonstration took place simultaneously with other states states in Mexico; many bullfighters fear the law expanding across the country. Colombia, Peru and Ecuador also have deep rooted traditions of bullfighting.
Mexico’s lower chamber has recently passed legislation that could make Mexico the second nation in the world to pass comprehensive national climate change legislation. On Wednesday the lower house passed the “General Law on Climate Change”. This could have major benefits for the economy of Mexico and could bring new hope to a country who’s largest export commodity comes from it national oil company PEMEX. The bill must be passed before the congressional session adjourns at the end of the month and to be passed must have senate and presidential approval. This seems likely in the Senate considering they passed their version of the bill in December.
In effect the bill:
-Will require the whole country to reduce its carbon emissions 30% by 2020 and 50% by 2050.
- Establish goals for increasing electricity generation from renewable sources, with a goal of 35% of electricity generation coming from renewable sources by 2024.
-Establish the National Institute of Ecology as the National Institute of Ecology and Climate Change.
-Establish a climate fund and request the Ministry of Finance, among others to develop a system of incentives that favors renewable energy by 2020
-Establishes a national emissions registry and mandatory emissions reporting
Though the bill does not mandate the creation of a domestic greenhouse-gas emissions trading system it does enable it. This essentially is the idea government would provide economic incentives for achieving reductions in the emissions of pollutants. The Environmental Defense Fund (EDF) predicts if were to do so Mexico would achieve its goals at low cost and significant profit and attract international investment. The EDF says it would be able to do so if the system were to include an absolute carbon cap set near their current target and allow trading both domestically and in international markets. Mexico’s National Institute of Ecology have found that smart mitigation action could trigger a 5 percent incremental GDP growth, and create 3 million additional jobs, distributed among the poorest sectors of the population.
Mexico is the 11th largest emitter of global greenhouse gases and hosted the latest summit on Climate Change in 2010 in Cancun, Mexico. The summit in Cancun and previously in Copenhagen seemed to have produced few and loose results. The biggest challenge to global progression into the green economy is its lack of profit compared to those of large emission emitter economies. If Mexico can induce a profitable green economy it may act as a model for other developing nations or produce competitive investment into green technology from other nations.
Mexico’s candidates officially began their presidential campaigns this past Friday (03/30/12). The candidates have 3 months till the July 1st votes are cast and the next six year term President of Mexico in elected. With the population tired of the drug war (nearly 50,000 dead as of 2006) and Mexico/Latin America’s largest corporation, state owned oil company PEMEX reporting a quarter drop in production since 2004, triple the number of graduates within the last three decades and a growing middle class having less children, this is an election for the world to watch. Read about the candidates and watch their campaign commericals below:
Candidate: Peña Nieto
Ratings in the Polls: 36%
Party: Institutional Revolutionary Party (PRI)
-The PRI is a member of the Socialist International
-The PRI had governed Mexico for 70 year before 2000 (mostly due to false elections).
On the Issues:
-Has proposed replacing the military combating the drug war with a better organized police force, as well as creating a national division to combat kidnapping and extortion
-For the state owned energy industry PEMEX, Nieto would like to increase foreign investment from foreign capital markets to raise exploration, production and refining capacity
-On jobs and fiscal policy Nieto has proposed expanding the public budget to double the spending for infrustructure projects
-On education Nieto proposes giving teachers incentives based on student performance
-Nieto’s foreign policy is to consist of working with the United States to ease Mexican’s conerns over the treatment of undocumented workers as well as ease concerns over emerging market rivals such as China.
Candidate: Josefina Vázquez Mota
Rating in the Polls: 26%
Party: National Action Party (PAN)
-Came to power 2000 with the election of current President of Mexico, Felipe Calderon
On the Issues:
-On the drug war Mota promotes maintaining the same agenda as Calderon, deploying the army and marines to combat the drug problem.
-On Mexico’s state owned oil company PEMEX, she has raised the possibility of listing it on the stock exchange.
-Mota’s fiscal policy consist of liberalizing the labor market, very similar to Nieto’s proposal
-Mota had served as Calderon’s Education Minister, helping to pass education reform that established the first national teacher performance test, as well as mandating that raises and hiring of teacher be subject to more rigorous evaluations
-Mota’s foreign policy consists of strengthening ties with Latin America; she has recently toured the region.
Candidate: López Obrador
Rating in the Polls: 18%
Party: Party of the Democratic Revolution (PRD)
-Established 1989, never held a presidential position
-The PRD is a member of Socialist International
On the Issues:
-Has proposed withdrawing troops from combating the drug war in the streets and refocusing resources on job creation in poor neighborhoods where kids are more prone to enter join gangs.
-On the state owned energy monopoly PEMEX, Obrador hopes to expand it refinery construction to lessen Mexico’s need for foreign oil.
-Obrador’s fiscal policy calls for shifting taxes from individual to corporations.
-On education Orbrador has said the country must reach an annual economic growth of 6% annually to pay for school and jobs for seven million youth within a six-month time frame. He would also like to provide more scholarships for low-income students
-Orbrador’s foreign policy stronger economic ties with the United States and not so much military cooperation
03/26/2012- For the second consecutive business day, the Mexican peso has strengthened compared to the U.S. dollar. This is the first time the peso has made consecutive gains since the period ended March 9, 2012. The peso rose 0.6 percent today, to 12.6688 per U.S. dollar from 12.7474 on Friday, March 23. According to Brown Brothers Harriman (BBH), “The peso has been among the strongest, liquid currencies thus far this year, appreciating almost 9.6%.” (WSJOnline)
Mexico is currently Latin America’s second biggest economy, and there is speculation that as U.S. growth outlook improves, so will Mexico’s economy. According to the Wall Street Journal’s MarketWatch, “Improvement in U.S. conditions is important for Latin American companies that export goods to the world’s largest economy. Mexico has particularly close ties with the U.S. as it sends roughly 80% of its products to its neighbor.” (MarketWatch)
Central Bank Governor Agustin Carstens stated in an interview, in terms of overall economic expansion, there will be “probably a rate of growth closer to 4 percent.” (Bloomberg Businessweek) This expected growth he said is based on the information that they have today, and that this rate of growth, similar to last year’s 3.9% growth rate, will help to subdue inflation.
(03/08/12) On March 8-9, 2012, the Trans-Border Institute participated in a forum on public policy at the state level in Mexico hosted by the United Nations Development Program and the Centro de Investigación y Docencia Económicas (CIDE) in Mexico City. The conference was organized by CIDE professor and former-TBI project coordinator Alejandra Rios Cázares as part of a longer-term project to provide objective information and analysis on “Mexico’s States” (Mexico Estatal). The conference coincided with the launch of a new report and a related database with over 1,300 variables related to state governance and accountability.
CIDE has been a leading center for the study of decentralization in Mexico, a topic of considerable discussion and debate in Mexico. Over the last thirty years, the Mexican federal government has gradually decentralized both fiscal and decision-making autonomy to state governments. Decentralization brings with it the advantages of greater flexibility and proximity of service to local constituencies, as well as the possibility of policy innovation and experimentation across different states. At the same time, in a country with enormous inequalities, as well as very varied governmental capacity, decentralization also runs the risk of leaving the weakest states to fall behind even as the most advanced prosper.
The “México Estatal” conference explored these issues on Thursday with panel discussions on a range of issues, including accountability, education, and public health challenges at the state level. The Friday panels will include a discussion of public security issues at the state level with TBI Director David Shirk, Mexico Evalua Director Edna Jaime, and international consultant Eduardo Guerrero, as well as a concluding panel on state-level efforts to promote economic development.
The Mexico Estatal project maintains a website (http://www.mexicoestatal.cide.edu), generates objective indicators and analysis, and hosts forums on public policy and accountability issues confronting Mexico in four key areas at the state-level (education, economic development, health and safety).
(03/02/12) The National Chamber of Tequila Industry (NCTI) proposed a ban that would restrict distillers outside of the five-state boundary from using the word “agave” to market their drinks. This can be seen in similar light to when Mexico claimed exclusive right to the term “tequila.” They did so because they said it was considered to be a geographical appellation of Mexico. Mexico gained exclusive right to the word because they signed onto several treaties to protect their products in international organizations such as the World Trade Organization (WTO), the Paris Convention for the Protection of Industrial Property, NAFTA, etc. Now the Mexican Government owns the name “tequila.” New producers who want to use “tequila” to market their drink must obtain permission from the Mexican Institute of Industrial Property (IMPI). The IMPI has given their support to the NCTI for to ban the use of the word agave now.
Unlike tequila though, “agave” is the name of a plant and not a product. Tequila is the only alcoholic beverage made with Blue Agave, grown in the officially demarcated area within Mexico and is banned to five of the 31 states in Mexico. Agave is a plant. Distillers complain though that distillers outside of the tequila region are interfering in their market by using the word agave. They are in a sense saying the trending market of “100% agave” used as a sign to mean quality is bringing competition and “in-authenticating” tequila with cheap knock offs. This is increasingly problematic since “gringos” have become bigger consumers of tequila than Mexican’s and cannot typically tell the difference.
1.5 million acres for developing oil and gas reserve are to be leased in the Gulf of Mexico under the Trans-Boundary Agreement
The United States and Mexico agreed on Monday to co-regulate the exploration and development of oil and gas reserves along their maritime border in the Gulf of Mexico. It will allow for 1.5 million acres of offshore territory claimed by the United States open for lease. Now American and Mexican energy companies can partner to jointly tap cross-border reservoirs and the two governments will share in oversight of the sites regarding compliance with environmental and safety standards. It also opens up an area that was previously off limits to both nations due to a moratorium set to expire in 2014.
The area is the size of Delaware and is said to contain 172 million barrels of oil and 304 billion dollars in cubic feet of natural gas. The discussion for this agreement has been going on since 2010 between President Obama and Calderon, the same year of the largest marine oil spill in the history of the petroleum industry in the Gulf of Mexico. The agreement also comes at a time when oil prices have reached 105$ a barrel after Iran announced it would halt oil exports to Britain and France.
The United States interior secretary Ken Salazar has stated that, “The most significant part of the agreement, is that we’re moving forward jointly with Mexico to ensure we have a common set of safety protocols.” The agreement also benefits Mexico’s growing middle class demand for energy and increases their production output, which has been slowing for the past decade.
The Organization for Economic Cooperation and Development (OECD) released a study stating that inequality in Mexico rose during President Calderón’s presidency. Calderón however rejected this study, stating, “The OECD said that inequality rose and yes it is true, but one must read the fine print that says it rose between 1984 and 1998, and also, I can say with the OECD data that inequality in Mexico decreased from 2000 and 2008 and still more in 2010. Yes it rose, but it rose from 1984 to 1998, terribly. Why? Because we suffered three crises, in 82, in 87, and in 94, and a terrible inflation in the 80s that pulverized the income of the poorest, because of this inequality rose in the last decade.”The president went on to say that during the economic crisis of 2008 Mexicans with higher incomes suffered more and the poor “did not lose anything.”
The OECD report released data showing that Mexico was one of the most unequal countries out of all OECD participants with the income of the 10% richest population to be 26 times higher than the 10% poorest population. Mexico ranks in the top three most unequal countries along with Turkey and Chile, and is closely followed by the United States. Julio Boltvinik, academic at the College of Mexico, explained that the inequality in Mexico is due to lack of jobs, low wages, rising informality in the country, tax policies that favor the wealthy, and limited social spending. The OECD stated that employment is the most promising means to confront inequality.
Those affected by the El Paso border economy are holding their breath during the shaky U.S. economic recovery. If the United States falls back into another recession and the European Union remains in trouble, the local economy in El Paso, and throughout Mexico, is at extreme risk.
In the past four months, the peso has depreciated by twenty percent. Peso exchange rates have been volatile over the past few weeks, ranging from 14.25 to 18 pesos to the dollar. The economic failure of Western Europe is making border investments risky, causing a downturn in the border economies and depreciating the currency. Sergio Kurczyn, an analyst for Grupo Mexico, reported in a recent study “Review of Mexico’s Economic Situation” that instability in European financial markets will continue to put pressure on the peso.
This volatility in the money market and devaluation of the peso is hurting those who rely on stable price exchanges, generally the low-income. “Devaluations are good for people who deal in dollars, but not for those of us who receive salaries or microbusiness income in pesos,” said Gina Gutierrez, a Juarez resident. While a depreciated peso is hurting small business owners and low-income Mexicans who sell goods in pesos, it is benefiting large maquiladoras and export manufacturers who are experiencing lower costs but still sell their goods in dollars. Locals at the border are hoping that the peso will soon appreciate against the dollar once again due to increased investment, causing a boost in the border economy. While the future of the peso is uncertain, one thing economists know for sure is that the peso-dollar relationship will be one to watch in the coming months.