Monterrey Institute of Technology and Higher Education

Mexican economy bouces back

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Here is a link to my latest article on AQBlog, titled “Mexican economy bounces back” http://americasquarterly.org/node/2275 and published on March 1st, 2011. Please feel free to visit and comment.

Here is a copy of it:

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Amidst growing national concern and international coverage of the violence in Mexico, a bit of news on the macroeconomic scale talks wonders of our country’s capabilities to overcome even the biggest obstacles.

Last week, Bloomberg ran a story on Mexico being the second economy in Latin America to bounce back from the 2009 recession with the highest pace of growth in the last decade. Our economy expanded by 5.5 percent in 2010.

Granted, it is not China’s double digit performance. But for a country that is largely dependent on an economic relationship with the our neighbor to the north—80.5 percent of our trade is with the United States—and is still facing important trade challenges, the GDP expansion at a 0.2 percent rate larger than expected for the fourth quarter of 2010 is excellent news. In a way, it is also good news for the United States. It shows that consumer spending is recovering in spite of the housing situation and the still present issue of unemployment (9 percent in January).

There are obvious advantages of being one of the United States’ most important trading partners. But it doesn’t take a genius to also see that dependence of over 80 percent of our trade with this partner also puts Mexico at a vulnerable state. This is even more worrying when we’re competing for this trade position with economies such as China.  Since the early 1990s, Mexico has been constantly promoting an open policy on trade. We currently hold 11 trade agreements with 41 countries. But we still need to act on them and actually reap the benefits of spreading our risk by diversifying commercial relations.

Mexico also needs to urgently focus on investing in and then maximizing the returns on innovation. We need to understand that wealth today is based on knowledge and ownership of that knowledge (patents). If we are able to tap into this, then our future will look even more promising than what we were able to do in 2010. I may be overoptimistic but continuing on this track would provide the first steps toward bridging the gap between our poorest and richest. This could go a long way toward reducing the crime that is partly a result of this present divide.

*Arjan Shahani is a contributing blogger to AQ Online. He lives in Monterrey, Mexico, and is an MBA graduate from Thunderbird University and Tecnológico de Monterrey and a member of the International Advisory Board of Global Majority—an international non-profit organization dedicated to the promotion of non-violent conflict resolution.

Mexico’s respectable ranking in globalization report

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Here’s a link to my most recent article on AQBlog, titled “Mexico’s respectable ranking in globalization report” http://www.americasquarterly.org/node/2219

Date published: Feb 2nd, 2011 I hope you find it interesting. Please feel free to comment.

Here’s a copy of it:

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The auditing firm Ernst & Young recently surprised all of Mexico (and possibly the world) with the results published in their “Winning in a polycentric world” report, which ranks economies based on their level of globalization.

In this ranking, which EY coordinates with the Economist Intelligence Unit (EIU) think tank, Mexico is placed in a very respectable #36, surpassing China (39) Japan (42) and Brazil (46) among others as “most globalized.” Hong Kong, Ireland and Singapore rank at the top of the index. The United States does not fare are well as one would expect, placed as #28, only 8 slots from its neighbor to the south.

Why does the Ernst & Young report throw out these unexpected figures and why is it so important? Granted, there are many types of studies and rankings that provide different lists. However, what makes “Winning in a polycentric world” a very relevant report and an important piece to further study, is the fact that this is one of the few reports that measures globalization in relative terms, linked to the size of the economy measured by GDP.  This is done to some extent, in order to level the playing field.

The report has 20 indicators grouped under five broad categories: movement of goods and services, movement of capital and finance, exchange of technology and ideas, movement of labor and cultural integration. Thanks mostly to strengthened economic ties (mostly fueled by NAFTA) and improvements in our financial and banking systems, Mexico gets high points for trade and movement of capital. If these were the only variables to analyze, the report would paint a profitable future for Mexico. However, the category in which the country gets its lowest grades is technology and innovation and that is very bad news.

In the book As the Future Catches You, Juan Enriquez Cabot makes a strong case for the importance of innovation and harvesting ideas as opposed to relying on commodities and primary resources to boost an economy.  He looks at where most of the added value in the supply chain lies in answering the question “how can countries rich in natural resources get so poor during this century?”. Enriquez wrote the book more than 10 years ago but we can prove he was right when we see Hong Kong, Ireland and Singapore at the top of Ernst & Young’s rankings mostly due to their ability to turn a profit without large natural resources.

Though our relative to GDP quantity of exchanged goods and capital allows us to rank higher than China and Japan, this should not cast a shadow on the fact that Mexico’s long-term relative decline may very well rest on the fact that we are lagging behind in terms of improving education systems, creating new ideas and investing in technology. As Enriquez wrote, “in a borderless world, those who do not educate and keep their citizens will lose most intellectual wars.” 

The Globalization Index rankings cannot be considered a promise of long-term growth or wealth accumulation for Mexico.  Number 36 makes a nice headline, especially when most of what we are hearing these days about the country has to do with grim pictures of violence and a failing state.  But the challenge of producing knowledge in-country and in favor of Mexicans still stands. In a globalized world, the most valued currency is and will be effective brain matter put to value-creating use.

Special thanks to Diego Del Pozzo from Ernst & Young and Salvador Treviño from Tec de Monterrey for providing the sources for this post.

*Arjan Shahani is a contributing blogger to AmericasQuarterly.org. He lives in Monterrey, Mexico, and is an MBA graduate from Thunderbird University and Tecnológico de Monterrey and a member of the International Advisory Board of Global Majority—an international non-profit organization dedicated to the promotion of non-violent conflict resolution.