Mexico is the 10th most populous country in the world and the 14th in geographical size, but we are no longer among the 15 largest economies. Contrary to what is claimed, we do not have a growth problem. Our problem is that, having abundant evidence of what has worked in states that have grown at Asian rates, we are determined to make the conditions of southern states that have been stagnant for decades ubiquitous.

The signing of NAFTA changed the economic potential of Mexico and offered us a better route to develop ourselves. We became a power in three decades. We export more manufactures than the rest of Latin America combined. Unlike our region, we are moving away from an anachronistic model based on exporting raw materials, whose success depends on Chinese demand. Although it allowed accelerated growth during its industrialization phase, it will now deal with a slowdown in a heavily indebted economy, with a huge bubble in its housing market, and with an aging population that will soon begin to decline. According to the IMF, between 2013 and 2018, 28% of world growth came from China. That economy grew 10.4% on average in the first decade of the century, 7.7% in the second, and this year it could grow less than the United States. Many experts believe that by the end of this decade it will grow between 1% and 2% a year.

Against all odds, Mexico is today the main trading partner of the US; we overtook China and Canada. Our companies have proven to be competitive with Asian ones. As Luis de la Calle says, between 2012 and 2018 added value (the sum of payroll plus profits) increased in all sectors, except hydrocarbons (Pemex) and electricity generation (CFE); This was achieved by investing in machinery, equipment and technology; that even allowed for sustained growth in real wages.

10 years ago, many of us believed that the Energy Reform would trigger national and foreign private investment. First, because it would come to develop Mexico’s enormous potential in shale oil and gas, in deep-water oil exploration and extraction; it would develop our gas, and solve bottlenecks in storage, distribution and marketing. The generation of clean, abundant and cheap energy would be the catalyst to attract value chains that yearned for physical proximity to the United States. The dream of North American energy integration seemed viable, which would increase our access to the cheapest gas in the world, that of the United States, allowing us to develop the south of the country with new gas pipelines. All that was left behind and today we are experiencing the reverse threat. The nationalization of all energy activity – putting it in the hands of obsolete, inefficient companies, with archaic labor structures, without technology, undercapitalized and in debt – eliminates the possibility that Mexico will one day grow. I’m not exaggerating.

The environment will change 180 degrees. The world economy has enjoyed a very benign monetary policy all this century. In the US, reference interest rates went from 6.5% (March 2000) to 0%. The Fed’s balance sheet went from 890 billion dollars in January 2008 to 9 billion today. So much liquidity made credit cheaper, raised the prices of all assets – real estate, stocks, art -, increased savings accounts and encouraged consumption.

A complex scenario is coming, with little global growth, in which traditional companies and sectors will have enormous disadvantages competing for scarce resources with companies from the United States and Europe in disruptive sectors -technology, biotechnology, health sciences- in which Mexico could participate if accelerate its integration with North America, invest in modern infrastructure (not trains and refineries), abide by laws and contracts, and invest in education.

The waning phase of this administration will be volatile and difficult, both due to internal and external conditions. Improvisation and occurrences will be expensive for us. As Warren Buffet says, when the tide goes out we’ll see how many were swimming naked. It’s going down fast.


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