Mexico's Big Growth, Biggest Issue

There is a second renaissance in Mexican manufacturing underway, and this has the signs of stability that the first one lacked. Much has changed, and Mexican has shown an ability to learn from the Chinese and others in Asia.

There have also been some significant changes in the underlying economic drivers of manufacturing that favor Mexico and, this time, these will not be so easily matched by competitors in Asia or other parts of the world. There are three important reasons for the present Mexican growth: training in the manufacturing community, growing expense in production in China/other Asian nations and infrastructure superiority.

But the good news in Mexico is always tempered by the concerns that many have regarding the drug violence in the country. This is a very serious issue, but there is also an element of the overblown. In the last five years, there have been 50,000 deaths attributed to the drug violence, That gives Mexico a murder rate of 18.1 per 100,000 people. In contrast, the U.S. has a rate of 5.1, and China posts a 1.1 rate. The gang violence is primarily directed at rival gangs as the turf wars dominate the drug trade, though there are plenty of innocent victims in all this. From a development point of view, the issue is that Mexico has a reputation as dangerous, thus limiting the level of investment from the US and elsewhere.

Analysis: As with violence in most parts of the world, the worst of it is limited to select cities and parts of communities. Mexico has been promoting the fact that most of the industrial community remains immune to the attacks. That has helped somewhat, but the local and international press are quite focused on the violence, which has become for Mexico to overcome. The new government looks set to go back to old tactics that involve a focus on reducing the violence as opposed to dealing with the drug trade itself. The basic problem from the Mexican point of view is that the U.S. is such an immense market in said area. Until and unless the U.S. reduces that lure, there will be those in Mexico that seek to exploit the opportunity.

-Chris Kuehl, PhD, NACM economist

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