With the global economic crisis still dominating headlines following inconclusive results from Davos, I’d like to focus on two effects on Mexico’s economy.
One indicator is remittances. Worldwide, remittances bring in several times more money than foriegn aid. In Mexico, these bring in the second-largest amount of foreign money after oil. In 2008, remittances slowed 3.6% to $25 billion (BBC World News).
Second is trade. With reduced US consumption, Mexican exports are declining. Interestingly, NAFTA’s duty-free access to the US market caused the Big Three Auto makers to move production to Mexico. Consequently, exports over the last decade have moved up the value-added chain, with automobiles and textiles being the two largest gainers. Since the American auto industry has been granted a temporary lifeline by the US government, this will keep the auto industry in the border regions above the water.
To be honest, few know the scale of the crisis. But Mexico’s coupling to the US market will ensure that most movements in the American market will affect the Mexican market. Fortunately, the country is in a much better position than during the 90’s, but will nevertheless feel the effects of the current downturn.
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