Mexico’s Dichotomy

By: Larry Zhang, Senior Editor

 

 

Mexico. It’s a country full of surprisingly more similarities to the U.S. than what one would initially expect, yet it’s marked by many internal differences that differentiate the nation from its northern neighbor. When looking at Mexico’s economy, these similarities and differences become much clearer. Mexico is what many consider the undisputed industrial heartland of Latin America, and with good reason. Its economy is tied to America’s rather than China’s, leading it to export more to the largest consumer market in the world in one week than it does to China in one year. A major part of these exports are cars, where it stands 4th in most cars exported by any country. As a result of the burgeoning economic scene in Mexico’s own industrial heartland, a sustained middle class has finally emerged along the manufacturing corridor from the U.S. to Mexico City. However, they are the minority.

Elsewhere, the majority of Mexico continues to live in poverty, with the number at roughly 50%. In contrast to the aforementioned minority that has benefited largely from the effects of globalization, the approximately 60 million Mexicans that make up the majority are the same ones who have been most stifled by an annual average per capita income growth rate of just 1%, even after Mexico joined the NAFTA agreement in 1994. The traditional scapegoat? Corruption, which isn’t wrong, at least not entirely. Corruption within Mexico’s government, police forces, and other sectors is one area where the government’s Economic Productivity Unit attributes blame to in regards to the depressing lack of output.

The better answer involves focused efforts aimed at developing long-term infrastructure. Though it may already seem obvious, cities are the undisputed nuclei of growth. But without proper infrastructure, including energy and transportation, as well as security and sanitation, cities will not provide the maximum output that Mexico’s emerging economy is largely capable of. For starters, the government should focus its efforts in the barrios of Mexico, of which are largely hindered by drug-related crimes and peeling slums. These slums, however, are also the same places where the majority of Mexicans are employed.

Another perspective, however, turns to sociological factors. In 1926, Robert Redfield, an anthropologist from the University of Chicago, journeyed to Mexico himself in order to study the spatial and social implications of the wealth divide. He introduced the notion of a gap between “los correctos,” the local elite who adopted “city” ways, and “los tontos,” or people who chose to stick with more traditional practices. This divide indeed manifested itself spatially. After observing Tepoztlan, a town south of Mexico City, Redfield found that the town’s center had the most business activity that allowed for competitive merchants and artisans to grow economically, but outside the “city center,” traditional jobs stagnated.

Current spatial divides exist today, but on a greater scale. In the northern state of Puebla, Mexico, Audi has plans of building a new 1.3 billion dollar factory complex. In the also-northern state of Nuevo Leon, not far from the American border, industrial sites produce everything from cars to planes to electronics, which account for roughly 2/3 of Mexico’s manufacturing exports, or 18% of total GDP. What has allowed such growth? Important to know is that the 70% of Mexico’s 120 million in the north and central regions benefit largely from the aforementioned developments in infrastructure. Gas pipelines, roads, and railroads in these regions are quickly allowing Mexico (or at least part of it) to emerge as a model of free trade. Mexico’s “elite” is now, in many ways, no different from many Americans: They can afford vacations and consume the latest American-made goods. But again, the rest of the country, especially the south, is much worse.

President Enrique Pena Nieto talked about “backwardness and poverty” himself in his inaugural speech back in 2012, referring largely to the “illegitimate” businesses that abound in Mexico. These underworld businesses nonetheless serve a purpose. While they restrict attempts at greater opportunities, Mom-and-pop ventures, black markets, informal shops and carts, cash-only stands, and other unregistered, local businesses provide most of the current employment for Mexico’s labor force. Returning to Mexico’s Economic Productivity Unit, the agency blames the lack of large-scale ventures and formal businesses on lack of capital, excessive informality, crime, excessive regulations, and of course, corruption. David Robichaux of Mexico’s Iberoamerican University also suggests that mestizo (mixed-race) Mexicans have largely different values than their fellow citizens, such as a greater emphasis on the family and community. Thus, they run small, family firms to sustain their economic livelihood. Many others do not, or rather, cannot, expand businesses because of insufficient worker training.

In order to bring south Mexico to the north’s level of economic growth, the government needs to redirect efforts to ensuring better infrastructural development. It needs to focus on utilizing Mexico’s unique geographical position as a strength, that of a crossroads between two oceans and two continents. And lastly, it should, according to Dr. Gerardo Esquivel Hernandez, a Harvard economist and expert of wealth inequality, focus more on unbalanced income distribution. He attributes income inequality largely to dismal economic growth, lack of wage increases, and poverty, but also recognizes that “the fortune of a mere few is still expanding.” According to a recent Oxfam report of his, 64.4% of wealth is held by just 10% of the population, with the top 1% holding 21% of national income. It’s estimated that Carlos Slim, Mexico’s richest man and telecom tycoon, and three fellow billionaires make as much as Mexico’s poorest 20 million. If these numbers are to change, growth needs to start with rapid changes in infrastructure, and it needs to start now.