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Mexico: The Quest for Economic Change

Mexico: The Quest for Economic Change

            Mexico is a large country with a big population and a developing economy. The country houses the second largest population in Latin America and it supports such population with its abundant industrial resources such as natural gas and petroleum. The petroleum reserves of the country is among the top ten highest in the world and Mexico remains to be one of the top producers and exporter of silver, and crude oil.

            Among the borders of Mexico are the Pacific Ocean in the West, the United States in the North, Guatemala and Belize on the south and the Caribbean Sea and the Gulf of Mexico on the east.

            Mexico is so near the United States, in fact it is only separated by the Rio Grande. The proximity between the countries has affected their economic and migration patterns. The United States is the major trading partner of Mexico and the same goes for the United States. This close relation has led to the development of the North American Free Trade Agreement (NAFTA), a formal economic link between the two countries. Many Mexicans are also migrating to the highly developed country, USA. Such migration has caused the fusion of both cultures and the flourishment of communities along the border (Microsoft Encarta Online Encyclopedia, 2008).

            Mexico is rich history, culture and arts. Mexicans are the product of the intermarriage and racial fusion of Native Americans and Spaniards that occurred when the Spaniards conquered the Aztec empire. Before the conquest, the region was mainly occupied by Native Americans but after the conquest, mestizos, who are the result of the racial fusion of the Spanish and Native American descents, began to flourish. To date, sixty percent of Mexico’s population is made up of mestizos (Microsoft Encarta Online Encyclopedia, 2008).

            The art of Mexicans also reflect their rich culture. Many of the artists created murals that reflected the beliefs of the people and the social issues that are affecting the country. The fusion of cultures also led to the development of distinct musical styles, cuisine and folk art.

            The country has a very diverse climate and topography and it is surrounded by the mountain chains of Sierra Madre Oriental and Sierra Madre Occidental. The plateau that is located between the mountain ranges has a historical mark for it is where a large part of Mexico’s population flourished. Aside from mountains, the country also houses tropical rain forests, volcanic peaks, beaches and snow-capped mountains. The country has a moderate climate and is usually subjected to hurricanes that cause extensive damage to the country.

Economically, the country has a lot of achievements however; these achievements are counter battled by the series of obstacles that the country has to face. Among these difficulties are the political instability and social upheavals that erupted. The Mexican Revolution is one of the social upheavals which delayed the country’s economic expansion. After the Second World War, the country shifted from having an agrarian-based economy to a manufacturing and export based economy.

In the verge of the economic crisis that the world is facing, Mexico is one of the countries that is trying to survive with the aid of all its resources. Through the years, the country has been trying to modernize and develop its economy thus it has grown to be among the fifteenth largest in the world. However, Mexico’s economic growth cannot fully grow root because of the various economic set backs that it has. Among the factors that are hampering the growth of the country’s economy are its growing population, rugged terrain, limited farm land and the series of economic crises that the country has been facing in the past years.

            Many of the state owned enterprises have been privatized by the Zedillo administration. From 1,000 the figures of state owned enterprises dropped to 200. This giant economic change generated more competition for telecommunications, electricity, railroads, distribution of gas and airports. However, the change did not bring much economic benefits for the country; instead it experienced an economic decline which was compensated by strengthening the export sector. The export sector served as the economic cushion for the country to recover from the decline. In 1998, the country again experienced economic growth. The main driver for such growth is the increase in private consumption. The other contributing factors are the increase in employment and wages (Baja quest, n.d.).

            One of the main sources of jobs comes from industries producing the industrial resources and agriculture.  Among the goods that are being manufactured by industries are steel, petrochemicals, machinery and consumer goods.

The economy of Mexico is based on finance, trade, insurance, production of textiles and automotive parts, construction, mining, engineering, biotechnology and agricultural production. Thirty-three percent of the economy of the country is generated from Mexico City, the heart of the financial sector. The city houses the most of the banks, industries and the center of stock exchange. One fifth of the countries population lives in the capital and the immediate vicinity thereof because it is the center of almost everything.

            However, aside from living in the city, a great number of Mexicans also reside in the rural areas. Most of the people either engage in agriculture or industry work in order to sustain their families. However, only a small percentage of the country’s gross domestic product comes from agriculture. Farming provides sufficient jobs but not necessarily sufficient earnings. Lands in the country are not fertile. They are usually dry and irrigation is required to cultivate plants. Aside from irrigation, farmers also do not have sufficient modern equipments that would generate greater production. Compared to the United States, Mexico’s produce is twenty times less than the former’s produce. Better equipments and farm technology would yield to more and better produce. Another problem with agriculture sector is the battles with farmlands. There are unresolved issues as to the ownership of these lands and such issues are affecting the drive of the farmers to better cultivate the farmlands.

            The low income generated from farming and the proliferation of unskilled labor is one of the reasons for the sharp increase of wage inequality in Mexico from 1980 until the mid-1990s. The inequality has remained consistent until today. Many researchers believe that with the removal of the trade barriers, the wage difference between the skilled and the unskilled should have been resolved; however the result is otherwise because of technological change. Researchers believe that due to the innovations and improvements introduced in the field of technology, the wage differences continued to widen (Esquivel, 2003, pp. 562-563).

            Mexico is facing a lot of domestic problems due to the challenges posed on the stability of the government and democracy and the social inequalities. The change in Presidents has also caused drastic changes in way the economy and politics of the country are run. These setbacks are stopping the country from gaining full economic development globally.

            The development of the NAFTA was a giant economic leap for Mexico as it tripled the country’s gross domestic product from 11 percent to 31.9 percent. The NAFTA increased the international exposure of the country and opened more possibilities for foreign trade (Tulchin & Espach, 2001, p.141). However, although this economic link exposed Mexico to foreign trade, it does not mean that the economy of the country will experience an instant increase too. Mexico is still largely dependent on the economy of the United States of America because it is its major trading partner. The country, despite increase in exports, has not really gotten away from the shadows of the American economy thus, if the latter experiences a downward move in its economy, Mexico’s economy will also experience the same two fold or three fold. Mexico’s economy suffers more that economy of the United States if there are economic difficulties experienced by the latter (Media Contact Resources, 2007).

            Aside from the economic dependence of the country to the United States, Hanna (2006) discussed in her article that Mexico needs to settle the domestic problems that it is facing such as the political turmoil, the low levels of taxation and foreign investment. The country has no sufficient funds to invest and this is problematic for any developing country.

            Mexico, despite the good trading relations that it has developed with the United States, has been trying to break away from their dependence the country. Free Trade Agreements were made with various countries in order to generate a wider market for their products. The trade opportunities have prompted Mexican companies to become more competitive.

            Companies are now looking for ways to increase their productivity and be able to compete in the open market. In order to generate more profits, the companies need to invest in technology, machinery and access to working capital. The United States and other countries have been supporting large companies so that they can expand their market and earn more profits (Hansen, 2004).

            While the increase in the production of the company may bring economic benefits for the country, it may also cause environmental problems. The emissions from the factories may contribute to the global warming that is felt world wide. The global warming may cause climate changes in the country and the development of various diseases.

            Mexico can improve its global economy if only, the right strings are pulled. Reform must start domestically so that the country can move is a smoother flow globally. If the country fails to improve the political situation and counter the social upheavals then it might find difficulty in improving its economic image.

References

Esquivel, G. & Lopez, J. (2003). Technology, trade and wage inequality in Mexico before and

after NAFTA. Journal of Development Economics. 72, 543-565.

Hanna, Julia. (2006). “Political Turmoil and Mexico’s Economy. Harvard Business

School”.Retrieved 3 September 2008, from http://hbswk.hbs.edu/item/5458.html

Hansen, Fay. (2004). “Mexico in the World Economy”. Retrieved 3 September 2008 from

http://209.85.175.104/search?q=cache:U9NllK34dtgJ:secure.nacm.org/library/bcmag/bcarchives/2004/nov_dec/intl1_nov_dec_04.html+global+economy+of+mexico&hl=tl&ct=clnk&cd=11&gl=ph&client=firefox-a

“Mexico”. (2008). Microsoft Encarta Online Encyclopedia. Retrieved 3 September 2008

from http://encarta.msn.com/encyclopedia_761576758_2/Mexico.html

“The Economy”. (n.d.). Baja Quest. Retrieved 3 September 2008 from

http://www.bajaquest.com/faq/economy.htm

“Mexico’s Economy Caught in Global Slowdown”. (2007). Media Contact Resources.

Retrieved 3 September 2008 from http://www.entrepreneur.com/tradejournals/article/177072028.html

Tulchin, J.S. & Espach, R. (2001). Latin America in the new international system. Boulder,

Colorado: Lynne Rienner Publishers