Monday, August 18, 2003
Baja California —
Mexico’s great northern hope
By Carlos Luken
For the past year economic
news in Mexico has been less than encouraging.
Confident economic growth of
7%, abundant job opportunity predictions and plans by then campaigning candidate Vicente Fox where brusquely met by a US economic
slowdown and by the consequences of 9/11.
Official Mexican economy growth
estimates are 1.3% during the Fox administration, while some analysts estimate an expansion of only 0.2% in 2003 if at all.
Mexico’s central band and the Treasury have revised this year’s estimates, now reduced from 3% to 2%. Most private
analysts see these as hopeful speculations.
The manufacturing sector has
been one of the hardest hit, with a negative 4.5%, while agricultural growth has risen 4.9% and the service sector has gained
a modest 1.3%.
With Mexican exports amounting
to US$161 billion in 2002, and with 85% of all manufacturing output delivered to the US, Mexican expectations rose following
last month’s announcement of US growth estimates at 2.4% and yearend predictions of 3%. But hopes were dashed when the
US growth rate was attributed to military and computer industry spending, two sectors in which Mexico’s input is negligible,
and in recognizing that with an estimated 80% in US industrial installed capacity there would be little likelihood of quick
advantage to Mexico.
As a result, unemployment figures
have also been pessimistic. Official estimates in June were 3.4%, compared to 2.1% when Fox took office, estimates that are
the administration’s highest and reveal a loss of approximately 400,000 jobs, with the manufacturing sector taking the
largest portion.
For the past 3 years essential
reforms in energy, labor and fiscal legislation have been stalled due to partisan politics, and even though the administration’s
willingness to negotiate with the new lower house of congress is being well received, changes are expected to be stalled for
at least 12 months.
So why is everybody smiling?
President Fox was seen as upbeat
and positive during this week’s visit to Baja California.
Baja California appears to
be Mexico’s El Dorado. Fox praised Governor Eugenio Elorduy’s administration for being one of the few to suppress
the unemployment trend and create new jobs by executing definite strategies and implementing structural plans to curtail the
industrial flow to China and other regions.
The situation was perfect for
the occasion. Toyota Motors North America had not only started construction of a new plant 3 months earlier, its president
Tag Taguchi was already announcing expansion plans and scheduling the opening six months early. With the revised estimates,
Toyota will open its facility at the end of 2004 and manufacture 30,000 Tacoma model pick-up trucks (up 50% from the 20,000
initially projected) and 180,000 pick-up beds. New job estimates grew from an original projection of 460 to 700.
During his speech president
Fox announced US$2.4 billion investment plans in the automotive industry, but he did not give specifics. Because of the probable
signing of a free trade agreement with Japan (expected during Fox’s October visit), many feel that Baja California’s
geographic location and approach may encourage fresh awareness and generate new manufacturing and supplier plants.
The Baja California presidential
visit also included meetings with private tourist sector investors. Accompanied
by governor Elorduy and Tourism Secretary Rodolfo Elizondo, Fox was shown projects ranging from a Tijuana convention center
to a number of development ventures that will more effectively bring in benefits from the millions of tourist who already
visit the area.
With resources attained in
part from the North American Development Bank, Fox supervised the launching of several important state government infrastructure
ventures in water management, road building and environmental projects.
In addition, in what have been
widely publicized ventures, three giant energy conglomerates have been studying Baja California’s coastline as an appealing
springboard into the Mexican and US energy markets. Marathon Oil, Royal Dutch Shell and Sempra Energy have planned projects
to transport liquefied natural gas from other regions to re-gasify in Baja California, and then pipe to US or Mexican electricity
generators. The Federal Regulatory Commission has approved the plans and they have the governor’s support.
The recent preliminary opening
of two natural gas fueled electricity plants in Mexicali will provide local and export electricity as soon as the end of 2003.
Given the state’s advantages,
not the least of which is the execution of successful programs by the receptive government and legislature, it would appear
that President Fox well may have the best launching platform for Mexico’s economic advancement right here in Baja California.
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Carlos Luken, a Mexicali, Baja California, based businessman, is the principal in I.L.C.
Corporate Real Estate, a project development firm, and I.L.C. Corporate Services, a consulting practice that provides business
management, consultancy and lobbying services to global corporations and government agencies. He can be reached via e-mail
at ilc@computec.com.mx
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