Monday, December 8, 2008
Calderon after Two Years and the Mexican
Auto Industry
By Allan
Wall
On December 1st, 2008, Felipe
Calderon completed his second year as President of Mexico, having taken office on December 1st of 2006.
It’s been an eventful two
years for Calderon and for Mexico. Despite the odds against him, the Mexican
president has racked up a few accomplishments.
Under Calderon, reforms have
been legislated in the areas of pensions, taxes, justice and energy. Most of
these reforms were rather modest, but in the current Mexican political climate their passage took some doing. Furthermore, Calderon has shown effective leadership skills and an ability to keep his administration focused
on a few major issues.
Nevertheless, President Calderon
faces great challenges in the next four years. The struggle with the Mexican
narco-cartels is raging hotter than ever, and the U.S. financial crisis threatens Mexico’s economy.
Calderon’s own administration
has been harmed by the accidental death of the Interior Secretary, Juan Camilo Mouriņo, killed in an airplane accident, coincidentally,
on U.S. Election Day. Calderon later named Fernando Gomez Mont as Mouriņo’s
replacement.
Mexico’s mid-term
congressional elections are scheduled for the summer of 2009. How will the three
major political parties, the PAN (National Action Party), PRI (Institutional Revolutionary Party) and PRD (Party of the Democratic
Revolution) fare, how will they divide up Congress, and how will this affect the second half of Calderon’s six-year
term?
As in every country with
elections, the perceived success or failure of the executive branch can be expected to affect the political fortunes of the
party that holds it. In other words, the electoral fortunes of the National Action Party are closely tied to Calderon’s
approval ratings come next summer.
Of course, many of the problems
which beset Calderon are to a certain extent out of his hands. A prime example is the international financial crisis.
It’s oft been said that
“when Uncle Sam sneezes, Mexico catches a cold.” Mexico’s economy has become closely tied to that of the U.S. For one thing, 80% of Mexico’s exports go to its northern neighbor.
It’s obvious that U.S. financial problems are affecting Mexico.
Mexico’s Central Bank predicts
that Mexico’s growth rate in 2009 may be as low as 0.5 percent. Merrill
Lynch, the biggest U.S. investment bank, has predicted that Mexico will enter into recession in 2009, forecasting a growth
rate of 0.4 percent.
(The Latin American regional
average is predicted to be 2.1 percent.)
Of particular interest now is
the plight of Detroit’s Big Three automakers – Ford, General Motors, and Chrysler.
Since Detroit is in trouble, so is Mexico.
Mexico has, after all, become
a major auto manufacturer. The industry accounts for about 20% of all Mexican exports. It employs over half a million workers,
who enjoy some of the country’s best-paid jobs in the manufacturing sector.
But the cars manufactured in
Mexico are produced by foreign companies. Besides the Detroit Big Three (Ford,
GM and Chrysler), which among them have about a dozen Mexican factories, there are plants operated by Volkswagen, Honda, Toyota and Nissan.
Several years back, my
wife and I bought (on credit) a brand new Mexican-made Nissan Sentra in Mexico, a very good car by the way.
Soon after getting it, we drove
it to the United States for Christmas vacation. While there we stopped in a Nissan
dealer to check on something. One of the employees there did a double take when he saw our car. That model hadn’t been
exported to the U.S. yet and he’d
never seen one.
All the foreign auto investment
in Mexico is both an advantage and a disadvantage. It’s great because of all the investment money flowing in, but the
downside is that problems in other countries can adversely impact Mexico’s
economy as well.
A GM factory in Silao, Mexico
has already had to quit producing the Suburban and has had to lay off workers. Needless
to say, in Silao they are watching with interest the Washington bailout negotiations for
U.S. automakers.
Bear in mind too that if a car
factory in Mexico is shut down, not only does it affect the workers in that plant. Those workers are also consumers in the
local economy. And the factory has its suppliers which could lose business. And so on.
That means that policies
enacted in the White House and on Capitol Hill have a big effect far away from Washington, D.C., and not only in Mexico.
——————————
Allan
Wall resides in Mexico and teaches
at a university. His website is located at www.allanwall.net.
