Economic Perspective: Strategy to Counter U.S. Slowdown

While President Fox was promising that Mexico would become the world's next economic success story at last week's World Economic Forum, Mexico's economic future is being shaded by the slowdown of the U.S. economy. Mexico's December trade deficit hit its highest level since the days of the peso crisis in 1994. The trade deficit for all of 2000 was $8.02 billion, a 44% hike from 1999. This figure is inflated by both the $2.2 billion decline in oil revenues and the decline in growth of exports to the U.S. Direct foreign investment in Mexico is expected to fall to $11 billion this year from $13 billion in 2000 due to U.S. slowdown. While 2000 brought a healthy 7% economic growth in Mexico, growth is expected to slow to 3% - 4% in 2001. The declining demand in the U.S. has forced companies like DaimlerChrysler and Ford to temporarily shut Mexican plants.

In the light of those pessimistic numbers, Fox hopes that increased trade flows with Europe will support the Mexican economy. Fox stresses the importance of its trade relations with Europe and expects successful outcomes from the year-old Mexican-European Union trade agreement. At the same time, Fox is trying to push forward NAFTA to include Latin American countries and hopes to conclude a trade pact with South America's biggest countries. Fox expects to discuss the extension of NAFTA to other Latin American countries with Bush at their meeting on 16 February and then, at the Summit of the Americas in Quebec in April.

Faced with a strong economic dependence on its northern neighbor, Mexico's strategy to reach out to other markets such as Europe and Latin America is to its benefit. Mexico's efforts to extend its trade agreements show once again Mexico's radical, although oftentimes uneven, transformation to a more open and internationally oriented economy. As scholars Hector Aguilar Camin and Lorenzo Meyer wrote, Mexico has exchanged "the labyrinth of solitude for the supermarket of world integration." Mexico's economic strategy may be aggressive, but also necessary in order for the country not to be left out from the globalization race.