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Page 20 of 82
What to Make of Mexico in 2009
December 31, 2008
Every year, this column tries to separate the wheat from the chaff in order to figure out where we stand. This year there is an even more formidable amount of flotsam (defined as voluntary refuse) and jetsam (involuntary) that has clogged up all media. The global financial crunch has spawned schadenfreude-mongers, I-told-you-so grandstanders, and the usual flock of busybodies to remind us that "the end is nigh". Their negativity dovetails with horrific reporting on Mexico. Journalistic Cassandras are, today, more toxic than sub-prime debt.
These pages have decried Wall Street thievery and the criminal negligence of the authorities that allowed it. But the notion that everyone got their economic comeuppance is nasty and wrong. This globalized economy has created the most amount of physical and human capital in history. And those who have been a part of the very real success story through hard, honest, work, do not deserve to be lumped together with the Bernie Madoffs of the world.
The good, the bad, and the stagnant
In this global recessionary environment, Mexico's economic performance is neither stellar, nor tragic. Its lack of star power, which tempered expectations, will most probably keep it from major social upheaval, something that is currently menacing perennially overperforming China. This does not mean that Mexico should be proud of itself as it follows the world into recession, but it does mean that many self-styled experts on Mexico who consistently (and incessantly) proclaim the Apocalypse, need to get a grip. They and their predecessors really need to be more sanguine after 27 years of prognosticating "The End of Mexico" (starting in September, 1981, our first debt crisis). It's time for intelligent analysis to supercede the fire-and-brimstone silliness of 90% of reporting (and conversing) on Mexico.
With respect to this past year, 367 days ago this column identified the pitfalls that would affect the Mexican economy. It highlighted that the sub-prime mortgage mess would reduce the amount of money available for beach-side second homes for Americans. It also said that Mexico's domestic property boom was not based on frothy economics, but on pent-up effective demand meeting economically-stable real supply, so collapse was not imminent. "Happy 2008… like 2007", it ended.
As it happens, Mexico's 2008 was made up of 7 months of more of the same and 5 months of riding the world's economic downturn. Violence, which was already at alarming rates in 2007, ended up getting worse. Politics remained equally corrupt, but generally democratic. The warning regarding the fall in the purchasing power of the American second-home buyer was prescient, but the scale of the downturn was bigger. In fact, with the collapse of the stock market, the hallowed Baby Boomer dollar has shrunk dramatically, which means that previous bets regarding record levels of spending are off.
But the basic premise held: real criminal, economic and political challenges, but no imminent collapse. As was noted in one of the first editions of this article in October 2007 (speaking of AMLO's failed challenge to the country's institutions and stability): "the center held". With respect to the American second-home buyer, there is now even a theory that we could see further immigration, as more people seek the comfort of cheaper quality of life and, now, a peso that is 30% cheaper.
Overall, we should not feel smug about the underperformance of this member of the "rich world" OECD. Growth that was not achieved during the boom of the last few years will be even more difficult to achieve in the current bust. Domestically, noxious interest groups are too powerful and the political establishment has yet to fathom the destructive power of the social blackmail we suffer every day.
The sky is not falling
But, for a country with a fresh memory of the 1994/95 debacle (the "tequila" crisis), the vicissitudes of the availability of international credit should not roil. Remittances will be down and unemployment will rise, but to channel Chicken Little every time we pick up a pen, a microphone, or a conversational megaphone, is ridiculous.
This is one of the largest countries in the world. It is a liberal and generally democratic haven; a culturally vibrant and tolerant navel on an often obscurantist planet. On the flip side, it lacks the will to make difficult decisions. In December 2007, this column read: "At the end of the day, for Mexico the difference between 3.5% growth and sustained 8%+ growth lies not in details, like the privatization of PEMEX, but in the big questions regarding the Rule of Law." No matter how painful the global downturn turns out to be, this remains the crux of the problem - nothing more, nothing less. So, happy 2009... like 2008.
For the latest thought-provoking article by Agustin Barrios Gomez please go to our Opinion Column page
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