Mexico’s economic resurgence is attracting widespread attention and optimism, with the Financial Times recently dubbing the country the “Aztec Tiger.” The change in focus and tone is a welcome one, and has allowed a more balanced and accurate portrayal of Mexico to emerge. Mexico’s prospects look better now than they have in decades.
President Enrique Peña Nieto has been in office just three months, yet there is a sense of urgency attached to his ambitious agenda. Substantial challenges loom, and surmounting them will require his administration’s full complement of skills: from political deal-making and legislative maneuvering to strategic communications and diplomacy.
There is some trepidation on the domestic front given the scope of change and the sectors it will touch, but there is also optimism. I see five reasons Mexico should be able to maintain its new momentum and transition to a higher-profile global leadership role.
An Open Economy. Mexico’s economy ranks among the world’s most open and competitive. Trade makes up a bigger proportion of Mexico’s GDP — 63 percent — than of any other large country’s, including the U.S. and China. Mexico’s annual exports of manufactured goods are roughly equal to the value of all exports by the rest of Latin America put together, according to the Economist.
Mexico’s 12 free trade agreements already secure it preferential access to 44 countries, more than any other country, and last year Mexico joined negotiations for the proposed Trans-Pacific Partnership (TPP), the multilateral FTA that the U.S. considers central to its “Asia Pivot.” Mexico views the TPP as an opportunity both to “update” NAFTA and to build a more strategic approach to hemispheric trade relations.
Shared Democratic Values. In contrast to other Latin American countries, Mexico’s pursuit of trade alliances has been driven not by ideology but by a pragmatic focus on economic policy and geopolitical interests.
With NAFTA, Mexico became a pioneer of economic integration and trade liberalization among emerging markets. The agreement provided an institutional framework on which the country has built a global presence while developing closer connections with the world’s largest and most dynamic economy.
But NAFTA also facilitated meaningful change in Mexican society. The country is now majority middle class, bolstered by the 17 percent of Mexicans that joined the middle class from 2000 to 2010, according to the World Bank. This new middle class is younger, more educated, wealthier and healthier. And its rise signifies not only the possibility of greater economic development as its members continue making gains, but also a more stable democracy as they seek to protect those gains and a more accountable one as their demand for transparency grows.
Today, as Europe and Asia look to build stronger ties with Latin America, Mexico is a priority because of its core values and its strong record of promoting trade and investment along with growth and effective institutions.
Solid Economic Fundamentals. Few countries, particularly within Latin America, have an economic record as impressive as Mexico’s: more than 17 years of macroeconomic stability, low inflation and interest rates, manageable debt, record-high international reserves, economic openness and increasing competitiveness.
Though Mexico suffered the deepest recession in Latin America during the global financial crisis — its economy shrank by 6.6 percent in 2009 — it has clawed its way back. GDP growth has been in the 4 percent range for three years running, making the country a top performer regionally. And Mexico has supplanted Brazil as the main focus for economic optimism in the region: Over the first nine months of 2012, Mexico’s stock market received five times as much investment as Brazil’s.
Pragmatic Leadership. Recent global economic turmoil has made it clear that economic growth requires leaders who understand and can implement the reforms required for growth. It is far too early in the Peña Nieto administration to declare success, but the president and his team have been highly effective thus far.
The labor, accounting and education reform measures that were passed during the transition were substantive accomplishments and signaled a break from years of inaction and gridlock. The “Pacto por México,” announced within hours of the inauguration, saw the three main political parties presenting a unified front for the first time in decades. Their pledge to work together to construct a law-based society; promote economic growth, employment and competitiveness; improve security and justice; enhance transparency; and further democratic governance is symbolically important, but also demonstrates an administration rapidly taking charge, focused on results and steering the country in a new direction.
Expectations for congressional action are high, and Peña Nieto’s PRI party has adept political operators at the helm in both houses. Fiscal and energy reform are top priorities, as both are essential if the country is to accelerate growth and improve its competitiveness. The mere fact that a PRI government is willing to tackle both underscores the generational shift within the party and growing acceptance of the need for change in how the country manages its economic affairs.
A Favorable Convergence of Issues. The stiff headwinds that have battered Mexico in recent years appear to be shifting. Positive developments include a recovering U.S. economy; growing global demand for U.S. and Mexican manufactures; a likely reform of U.S. immigration policies; the rising costs of doing business in China; and trans-Atlantic interest in deepening trade and investment ties with Latin America, to name a few.
Mexico’s new leadership meanwhile appears committed to taking necessary steps to encourage growth, enact reforms and improve competitiveness. It is an economic plan of action that is long overdue. But to fully realize the promise of what Peña Nieto termed “Mexico’s moment” in his inaugural address, the administration must do more than ensure progress on the economic front. It must also modernize institutions, strengthen its commitment to good governance, assert the rule of law, support human rights, enforce accountability, lead on the environment and promote greater inclusiveness.
Mexico has set its sights high. By aiming even higher, it just might find itself not only growing, but leading in Latin America and transitioning into a real leadership role in the world.
Antonio Garza Served as U.S. Ambassador to Mexico from 2002 to 2009. Garza is now counsel in the Mexico City office of White & Case and Chairman of Vianovo Ventures, the cross-border business development unit of Vianovo, LP. He can be found online at: www.tonygarza.com