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01/10/2004 Archived Entry: "Mexico/USA: a Happy Marriage?"

Happy New Year! Despite the best efforts from the weather and American Airlines to keep me in Washington D.C., I'm back under the blazing sun of Mexico City (it's cold and rainy today, I feel like in Scotland, minus the (...)

Mexican demography is like a tidal wave flooding the North American continent. According to an INS report, in January 2000 there was no less than an estimated 4.8 million illegal residents from Mexico in the USA. In addition, over 8 million Mexican-born citizen were legally resident in the USA in 2000. Between 2000 and 2002 alone, 219380 immigrants coming from Mexico were admitted in the USA, out of a total of 1063732 people (see INS source). More Mexicans settle in the USA than Chinese and Indians combined!

I see in these statistics as a major migratory flow from Mexico to the USA, fuelled by Mexico's rampant poverty and America's need for low-paid labour in agriculture, services, etc. Is this bad? Certainly not for Mexico, as Mexicans working in the USA send over US$2 billion back to their family every quarter (see source). I suspect that entire villages in Michoacan survive essentially thanks to that foreign income. The question of mass immigration (legal or not) from Mexico is a hot topic in the USA where many believe it poses a threat to American unskilled workers (see this report from the CIS) amongst other things (many more supposed reasons why Mexican immigration is bad for America can be found on the Web site of this advocacy group).

Let's ignore the polemical aspects of this topic: remains the fact that many Mexican families depend on income from the USA to improve their daily life in Mexico. Generally speaking, as The Economist "The World in 2004" puts it "Mexico's growth prospects are uncomfortably dependent on those of the United States". As evidence of this, 87% of Mexico's exports go to the USA (source: The Economist). There is little doubt that Mexico has suffered from the recession in the USA, and will probably endure more pains as the US economy streamlines itself in an increasingly globalized economy.

The Mexican maquiladora (assembly plants) industry is declining as a result of the relocation of US companies to China. According to The Economist "Mexico has lost market share in 47 of the 152 main US import categories, while China has gained market share at Mexico's expense in 35 of those 47".

In conclusion, I believe that Mexico's economic future is tied to its Northern neighbour at multiple levels, from immigration to exports. It is facing serious threats like more restrictive new immigration laws and foreign competition from more dynamic nations like China. There is a hard task of lobbying and economic planning ahead for President Fox to keep Mexico's marriage with the USA a prosperous one.

However, putting all your eggs in the same basket is rarely a good strategy and Mexico should work at reducing its dependency to the US economy's health. This could be achieved through more active commerce with Europe, a more fertile environment for the creation and growth of SME's in Mexico, a strong focus in improving education to compete worldwide at a higher level of skills, etc. I doubt that booming natality, low value-add businesses and unimaginative export strategies will take Mexico anywhere in 2004 and beyond.

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