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So much for the old “When the US sneezes, Mexico catches pneumona

29 October 2022

Reworked from Enrique Galvan Ochoa’s “Dinero” column of 27 October (2022):

Nationaly and internationaly, the outlook for economic growth is bleak: the pandemic, inflation, high interest rates, war in Ukraine, oil market disorder. In the political field there is a tough struggle between political parties and factions going into the 2024 presidential elction. Clashes in Congress over issues such as militarization and the excessives cost of elections and the [National Elections Commission]. Any of these factors could be a valid justification for the Mexican economy to stagnate or fall into recession. However, the latest Inegi [National Institute for Economic and Geografical Infaormation] report reveals that it grew spectacularly (and unexpectedly) 4.7 percent at an annual rate. In addition, it’s inflation rate has dropped, from 8.7% in September, to 8.5 % today. Compared with OECD countries, it scores well between Turkey’s fearsome 83.5 percent and Japan’s 3. The United States is 8.2. The icing on the cake is the exchange rate: on the northern border, the street value to the dollar fell to 19.35 pesos [from it’s more usual 20.something to the dollar]. The opposite of, in the calculations of the [present administration’s opponents], should have been the worst crisis this country has faced .

What is the reason for the spectacular economic growth reported by the Inegi? In my opinion there are six reasons:

  1. Politics has not contaminated the recovery. Politicians are falling to pieces – over the “Gacamoya leaks” (hacked military documents leaked to the media), “jaguars” (a state governor’s audio recordings of her predecessor from an opposition party presumably exhibiting his corrupt practives), corcholatas (literally “can-openers”, figuatively, the presumptive candidates for the ruling party), party switchers – but there is no negative effect on the real economy.
  2. 2) Employement has more than recovered from pre-pandemic levels. IMSS [Mexican Social Security] reports more than 21 million Mexicans with benefits who go out every day to earn their chops.
  3. 3) Despite high inflation, with gasoline reaching 6.50 dollars a barrel in the United States, our countrymen have not forgotten their roots and have not stopped sending dollars, and this year they will again exceed the record of one trillion (1, pesos (about 5 billion US dollars).
  4. 4) Public investment in infrastructure, especially in the south-southeast of the Republic.
  5. 5) The millions of dollars that arrive at the northern border through nearshoring, the warehouses are exhausted, the recently arrived companies cannot find a place to settle; The United States and Mexico agreed to open a third port of entry in Tijuana, because those in San Ysidro and Otay are saturated.
  6. 6) the government pension program. Note that growth is not based on exports, but on domestic consumption as well. Money that was previously stolen is reaching families. With a pinch of generosity, credit should go to the Secretary of the Treasury, Rogelio Ramírez de la O; Foreign Minister Marcelo Ebrard, for the good tone with which he conducts the relationship with the White House; and former Secretary of Economy Tatiana Clouthier, who prevented open confrontation between the public and private sectors at the beginning of the present administration.
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