Problems for the Mexican Economy

Mexico’s economy has slowed down in the last few months.  Some believe it is due to slow production in the factory sector and the decrease in exports to the United States.  For Calderon who has promised economic growth in the next year as well as an increase in the number of jobs, it is going to be difficult to follow through with his promise.  According to economists, the United States economy is weakening which in turn affects the Mexican economy whose primary trading partner is the United States.  Mexico has rising inflation, decreasing oil production, and the auto industry has hit a slump.  Economic conditions in Mexico generally fuel the high migration numbers to the United States, but recently the amount of illegals crossing the border has lessened due to tighter border patrol.  This means that less money is flowing from the United States to Mexico from workers to their families. 

“Unemployment in Mexico has soared. Rising prices on basics including tortillas, milk and eggs have sparked street protests. Millions of families rely on the remittances sent home, which have become the nation’s second-largest source of foreign exchange behind oil revenue.”

Manufacturing has also slowed considerably since last year and exports have also declined.  But a major decline in remittances will have a deep effect on the Mexican economy.  This downturn will put an increase of pressure on Calderon to come up with some sort of immigration agreement with the United States.  But if the Mexican economy is to become stable as well as developed, it will have to rely less on remittances and oil wealth.  The Mexican economy has grown substantially over the years and the overall wealth has increased, but a truly developed economy cannot rely on money being sent from illegal workers in the United State back to their families in Mexico.  It is important that an immigration agreement is reached between the two countries, but Mexico needs to focus on internal growth and job creation.  In a time when jobs are being lost to Asian workers, exports to the United States are declining, and oil revenues are at a low, the challenges facing Mexico are great.  Solving the immigration issue is indeed important, but how to create more jobs and generate government revenue is also a huge consideration.   

Source:  LA Times February 17th, 2007

~ by dav1318 on February 25, 2007.