Taxes & Spending

Mexico’s Economy on the Move? Maybe

Mexico is a country that is just brimming with economic possibilities, but they remain largely unrealized.

And looking at the unparalleled political crisis forced on the country by the losing presidential candidate Andres Manuel Lopez Obrador, one can see why.

As the pro-free market Mexican think tank Fundacion Idea points out:

Though Mexico currently has the twelfth largest economy in the world, there are considerable barriers that keep Mexicans from taking advantage of its potential benefits. Productivity levels are stagnant in most sectors, and innovation has been declining over the last two decades. Mexico ranks only 73 out of 155 nations in its ease of doing business – lower than many other emerging markets and other Latin American countries. As a result, quality job options are scarce in both urban and rural areas.

It gets worse. Alberto Saracho Martinez with Fundacion Idea points out that manufacturing productivity in Mexico grew 2.7 percent between 1987 and 2004. By contrast, it grew 183.3 percent in Chile.

Stagnant economic growth and huge unemployment—only 48% of the working-age poor have jobs—drive people to look for other opportunities. And the U.S. looks like a pretty good one. So does the underground economy—outside of the tax system.

“With good job prospects so scarce, workers in Mexico are turning to the informal [underground] sector in droves. An estimated 23-35 million people work in the informal economy in jobs that are generally low-paid and low quality,” according to Fundacion Idea.

These are big problems, and the winner of the Mexican presidential election, Felipe Calderon, is eager to step in and make the changes to get the economy moving. He has given every indication that he knows that limited government and economic growth are the solution.

Unfortunately, the same forces that have kept Mexico from realizing its potential in the past are once again trying to stifle its future.

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