This week the momentum for liberalizing the economy received a further global boost from Mexico. The President, Enrique Peña Nieto, announced his government will press ahead with energy overhaul and set a date for deep water oil block auctions while liberalising the gasoline market will be speeded up. This follows the shake up of energy policy in 2013 which after eight decades, opened oil exploration and production to private and foreign companies – and cleared the way for greater private involvement in the generation and sale of electricity.
However, although Mexico’s economy tells its own story, one of growth at steady pace in contrast to other major economies in the region, that growth is overshadowed by crime, drug wars and murder.
Mexico’s economy grew 2.3 per cent in 2015; for 2016-17 real GDP growth is projected to be in excess of 3 per cent – despite the price fall in oil one of its historic main exports. The country is helped by its geographic position. It is a neighbour to the United States (on whose growing economy it is more reliant than it is on that of China). It is also a member of the North Atlantic Free Trade Agreement (NAFTA), enjoys free trade agreements with 45 countries and links the Asian economies on the Pacific with the Atlantic. Attracting inward investment, especially for manufacturing, Mexico is now the 4th largest manufacturer of cars with Audi, Volkswagen and Japanese manufacturers building plants there. Foreign investment in Mexico’s car industries has doubled from $6bn in 2011 to $12bn in 2014.
By contrast, other countries in the region are stalling. Brazil’s manufacturing output has dropped, and the attempts by its Socialist government to stem inflation and recession are failing. Venezuela’s Chavista regime is driving the country into greater penury. Argentina expects a tough 2016 despite the new government’s attempts to normalising the economy and lower inflation.
Politically Mexico has become a relatively stable pluralist democratic republic. It is no longer a one party state sustained by electoral fraud, a pattern which emerged during the 71 year reign of the Mexican Institutional Revolutionary Party (PRI), after the 1910 revolution The structural economic reforms of President Enrique Pena Nieto who leads a reformed PRI since 2012 are important for success. He broke up the telecoms oligopolies, opened private investment in the energy industry and committed the economy to free trade. And, this week he has announced the deep water oil block auctions.
Yet continuing corruption and lawlessness have sapped at the government’s popularity. In the southern state of Guerrero, for example, 43 students disappeared at the hands of drug lords in 2014.
Last week Pope Francis’ Mexican itinerary focused on some of consequences of such instability. His visit targeted centres of social unrest and poverty and visited the indigenous communities in Chiapas, a southern state, where he denounced the historic exploitation of the people. At Morelia, home of the drug cartel ‘The Knights Templar’, he reached the heartland of the drug wars in which over 100,000 people and 40 Catholic priests have lost their lives in the past decade. Today Michoacan, a central state on the Pacific, lives under an uneasy truce as the government tolerates armed vigilantes who have taken control from the drug cartels after inaction from regular security forces.
Mexico therefore is still a divided country, economically, socially and by region. The north’s heavy industrialisation and connectivity compares to the south’s agrarian and rural communities. Economic progress has not ended the drug cartels and crime levels. Indeed as US officials observed this week discussing Joe Biden’s Mexico visit, economic questions can not be separated from ‘public security’ or the drug war. Without ending Mexico’s crime and lawlessness, progress to a better life will be hampered and illegal immigration to the US continue.