Last week, as part of its reporting on the debate on immigration legislation and Mexican President Vicente Fox’s visit to the USA, the San Francisco Chronicle pointed out to estimates that “roughly 10 percent of Mexico’s population of about 107 million is now living in the United States.” Clearly, there aren’t enough appealing jobs in Mexico to contain this emigration.
Over the last two decades, the economy of Mexico became increasingly dependent on that of the United States, especially since the free trade agreement (NAFTA) came into effect in 1994. Given its proximity to USA, the northern region of Mexico became a huge manufacturing base, exporting a substantial portion of output to the USA.
The slowdown in the US economy between 2000 and 2003 coupled with the relocation of labour-intensive industries to China and the attractiveness of Asia as a recipient of foreign investments had a significant impact on the Mexican industry.
Mexico is expected to have a general election within a few weeks. The new government can embrace liberalization by focusing on improving the country’s infrastructure and education and by providing incentives for growth and investments across Mexico.
As Newsweek points out, Mexico can explore its geographic advantage to attract industries that need quicker responses and industries where transportation costs on bulky products can cancel out relatively lower production costs in Asia. The government can explore additional export destinations in Europe and South America.
Further, American corporations are focused largely on the booming the consumer markets in India, China and elsewhere in Asia. Appropriate incentives and an improved economy can attract attention to the consumer market in Mexico. The resulting surge in industry and domestic economy could easily contain this emigration.