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The Real Story of Mexico’s Economy

11 February, 2017

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Although the current administration’s inflammatory rhetoric might have some people assuming that the United States doesn’t really need to have a good relationship with Mexico, reality couldn’t be farther from the truth. In fact, according to an article by Latin America Economic Growth Initiative Director Jason Marczak that was published on the Huffington Post, Mexico is the second largest export destination for the U.S. and is directly responsible for creating upwards of six million U.S. jobs.

Marczak – who also works for the Adrienne Arsht Latin America Center and the Atlantic Council – reports that Mexico accounts for nearly 16 percent of worldwide sales. In an interview with Wisconsin Governor Scott Walking in 2016, the two men discussed the close economic relationship between Mexico and the United States at length.

“Trade ties between Wisconsin and Mexico are strong, but we want to make them stronger,” Walker said.

Walker spent a week south of the border visiting Mexico last June to cement ties, following nearly $3 billion in exports from Wisconsin to Mexico in 2015. In addition, Walker said in his state alone at least 117,000 jobs depend directly on trade with Mexico.

Strong trade relationships between individual states and Mexico have been facilitated in part by the North American Free Trade Agreement (NAFTA), which was signed more than 20 years ago and remains a hallmark of U.S. economic policy, creating a regional market of 480 million people and permitting the United States to become a better competitor against manufacturing superpowers like China. Conversely, when it comes to making money in Mexico, the Harvard Business Review found in late 2016 that Mexico’s economy is not nearly as dependent on the whims of this U.S. president.

“As the United States has had to compete in an increasingly globalized world, and in particular with rising Chinese exports, North American integration has been critical in maintaining the U.S. edge,” wrote Marczak. “Given this positive record, it is disconcerting that the U.S. Mexico commercial relationship is under attack.”

Long touted one of the world’s best countries for expats and best places to retire abroad, Mexico has also developed strong relationships worldwide and any break in trade would destroy countless jobs in the United States – not create new ones.

“It is time to recognize what our close friendship means for [the U.S.] economy, culture and national security,” Marczak wrote.

Over the last few decades, the Mexican economy has grown to become the 15th largest in the world and is poised to overtake Brazil as the largest economy in Latin America. Solid macroeconomic policy and an enormous influx of direct foreign investment has also helped Mexico to become successfully incorporated into the day-to-day operations and long-term plans of many U.S. industries.

“Of these, automotive and electronic equipment have been remarkably successful; parts for goods in these industries are likely to cross the Rio Grande multiple times before the final product is put on the market,” Marczak shared.

Considering all this, it’s easy to see how closely Mexico’s economic and social well-being is linked to that of the United States. In fact, with nearly 2,000 miles of shared border and a large influence among other Latin American countries, Mexico is one of the most critical allies for national security in the U.S. and visiting Mexico remains a favorite pastime of Americans on vacation.

“The goal of my visit was two-fold,” shared Gov. Walker. “We want to attract new investment from Mexico into Wisconsin, while also encouraging Mexican companies with a presence in Wisconsin to maintain or expand their investments in the state.”

In today’s increasingly globalized world, the United States no longer stands alone as the only economic power in North America. The U.S. is also increasingly dependent on Mexico for more than just cheap labor, including influx of capital and private investment. Of course, the cultural influence between the two countries has gone in both directions and is also impossible to ignore, with at least one million Americans living in Mexico either full or part time.

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Topics: Economy Mexico

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