Mexico’s missing prosperity

The subtext for the United States' immigration debate is Mexico. Why doesn't its economy grow faster, creating more jobs and higher living standards? A more prosperous country would not be sending so many of its poorest citizens north. Since 1990 about 20 to 25 per cent of U.S. immigrants have come from Mexico, says Robert J. Samuelson of the Washington Post.

Here is an illuminating comparison:

In 1970 average incomes in South Korea were about half those in Mexico. By 2004 Korean incomes were more than twice Mexico's.

During those decades, reports the Organisation for Economic Co-operation and Development (OECD), average Mexican incomes rose 57 per cent, to $9,178 (expressed in constant "2000 dollars"); the comparable Korean gain was 574 per cent, to $19,148.

It's not that Mexico has made no progress. Its economy was once crisis-prone, inflation-ridden and heavily insulated from foreign trade:

Now it has quelled inflation (about 4 per cent, down from 17 per cent in the late 1990s), controlled government spending and opened up to trade.

Before adoption of the North American Free Trade Agreement in 1994, tariffs on covered imports averaged 12 per cent (and were much higher in the 1980s); by 2001 they were 2 per cent.

The last financial crisis – a collapsing currency, an outflow of money – occurred in 1994 and 1995. In recent years its economy has grown almost 4 per cent annually.

But that growth – fine for an advanced country such as the United States – doesn't suffice for a poor country whose population is increasing (as is Mexico's) by more than 1 per cent a year. In China, economic growth averages 9 to 10 per cent annually; in India, about 6 to 8 per cent. Mexico isn't in the same league, says Samuelson, because it has failed to adopt better technologies and business methods.

Source: Robert J. Samuelson, Mexico's Missing Prosperity, Washington Post, June 28, 2006.

For text (subscription required): http://www.washingtonpost.com/wp-dyn/content/article/2006/06/27/AR2006062701544.html

For more on International: http://www.ncpa.org/pi/internat/intdex1.html

FMF Policy Bulletin/ 04 July 2006