Destination Mexico
Alicia Dalton, Laurie Dressler
Stacey Hipp, Emily Lambright
and Shanna Hamilton
Demographics and Economic
Overview
Alicia Dalton
Mexico
• Independence Day -- September 16, 1810
• Consists of 31 states and 1 federal district
• Ethnic groups -- Mestizo, Amerindina, and
Caucasian
• Major Religion -- Roman Catholic (89%)
• Two military branches -- Army/Air Force,
Navy/Marines
The Land
• Less than three times the size of Texas --
764,000 square miles
• Terrain -- high, rugged mountains; low
coastal plains; plateaus; deserts
• Natural Resources -- Petroleum, silver,
copper, gold, lead, zinc, timber, natural gas
• Climate ranges from tropical to desert
• Part of the “Ring of Fire”
Current Issues
• Environmental Problems
– Natural water resources scarce and polluted
– Raw sewage and industrial effluents polluting
– Deforestation, Erosion, Desertification, Air
Pollution
• Natural Hazards
– Tsunamis
– Earthquakes
– Hurricanes
Mexican Government
• Constitution ratified -- February 5, 1917
• Executive Branch and Legislative Branch
(Bicameral National Congress)
– Cabinet is appointed by President
– Senate -- 128 seats, elected
– Chamber of Deputies -- 500 seats, elected
• 8 recognized political parties and countless
other “pressure groups”
Population Statistics
• Population ~ 92 million
• % Population Urban 70.8%
• Population growth rate 2.1% - 1990, 1.8% -1995
• Mexico City population 20 million (23%)
• Population Density 46 people/km2
• Life Expectancy 72 years
• Birth rate 25.1/1000
• Mortality rate 4.5/1000
Unique Facts
• Mexicans average work week = 44.5 hours
American average work week = 34.5 hours
• Of 18,174,000 houses in 1994
– 16,548,000 had electricity
– 12,309,000 has sewage
• Of 306,142 km of roadways
– Only 94,946 km were paved
Mexico -- Economy
• Economy ranks in the top 15 in the world
• Dominated by petroleum and tourism
• “Blessed Years” of rising GDP gave
Mexicans false hopes and buying power
• Despite increased industrialization,
membership in NAFTA, and reformed
fiscal policies, in 1993 a recession begins
• Now citizens are in tremendous debt
Factors Adding to Recession
• Stagnant domestic demands
• Declining industrial output
• Slow growth in international economy
• Rising interest rates
• Decline in value of petroleum products
• Severe inflation -- 7.1% in 1994
• Enormous foreign debt
• Mining privatization reduces employment
Annual GDP
1,400 1,000,000,000 pesos
1,350
1,300
1,250
1,200
1,150
1992 1993 1994 1995 1996 1997
Exchange Rate (Pesos/Dollar)
8
7
6
5
4
3
2
1
0
1992 1993 1994 1995 1996 1997
1998 Developments
• Profound economic reform
• Restrictive monetary and fiscal policy
• Stronger domestic demand
• Increased private consumption and
investment offset effect of fewer exports
• First half of year GDP growth = 5.4%
• Increased confidence results in increased
retail spending
Social and Environmental Issues
Laurie Dressler
Environmental Concerns
• Water resources are scarce, polluted or inaccessible
• Deforestation
• Widespread erosion
• Serious air pollution
Deforestation: A Vicious Cycle
Deforestation
Erosion
Pollution
Unproductive
Land
Migration
Mexico City
• The largest & fastest
growing city in the world
• 1/4 of Mexico’s
population lives in Mexico
Valley
• Faced with extremely high
levels of air pollution
• Pollution levels of the city
break the air quality
guidelines daily
• Water is contaminated &
of poor quality
U.S. - Mexico Border Facts
Border includes 4 U.S. and 6 Mexican states
U.S. Mexico
• California • Baja California Norte
• Arizona • Sonora
• New Mexico • Chihuahua
• Texas • Coahuila
• Nuevo Leon
• Tamaulipas
200 km border homes 10 million people
14 major sister city pairs along border
Eight Major Sister Cities
• Tijuana/San Diego
• Cuidad Juarez/El Paso
• Mexicali/El Centro
• Nogales/Nogales
• Nuevo Laredo/Laredo
• Matamoros/Brownsville
• Reynosa/McAllen
• Piedras Negras/Eagle Pass
• Cuidad Acuna/Del Rio
• San Luis Rio Colorado/Yuma
Pollution Prevention Strategies
• Develop air quality assessment & improvement programs
• Continue to build infrastructure & expertise in the border
region
• Encourage community involvement
• Develop economic incentive programs
Facts: Educational System
• Mexico spends 0.7% of GDP on education versus 2.4% in
the U.S.
• The average level of education in 1995 was 3 years of
grammar school
• Of those that finish grammar school only 88% continue on
to a secondary school
• Only 5% of students attend institutions of higher learning
• Only 12% of Mexicans in the border states are enrolled in
higher education compared to 88% in the U.S.
• Grammar school teachers now have to have a college
degree
• Middle school is now mandatory for children
“80 children under the age of one die
each day in Mexico due to
malnutrition”
The Mexican Debt Crisis
Repairing Mexico’s Banking System
Stacey Hipp
The Debt Crisis
• Between 1987-93, Mexico attempted a vast program of economic and
structural reform.
• The strategies used such as price and trade liberalization, privatization,
financial sector liberalization, deregulation, and tax reform were implemented
in the hope of promoting greater and more efficient private and international
investment.
• In the beginning, the reforms appeared to be working.
– Inflation decreased by 8%
– Large fiscal deficits were eliminated
– GDP increased from 0% in 1982-88 to 4% in 89-91
– Capital inflows increased
• However, these reforms were proven unsuccessful in helping to decrease and
restructure the country’s enormous external debt.
The Debt Crisis
• The Current Account deficit grew from 3% to 7% from 1989-90 to
1992-94.
• After 1991, GDP growth slowed.
• The capital inflow growth was utilized through consumption rather
than saving.
• By 1995, past due amount on bank loans had risen to 18% of the loans.
• At year end of 1995, overdue loans had also risen to account for 1/3 of
total bank loans.
• Problems within the banking system were compounded by the
instability of the financial market.
• The Mexican Crisis was further upset by its susceptibility to the
fluctuations of foreign markets such as the United States system.
The Debt Crisis
• Other problems in Mexico also contributed to the debt crisis and
following turmoil.
– The prime candidate for president was assassinated.
– There were continuous uprisings in the state of Chiapas.
– The election year lended even further uncertainty.
– Foreign investors were reassessing their desires and plans for
investment within the country.
• In addition to these, some unwise policy decisions were also being
made.
– The replacement of the devalued peso debt by securities lead to
further instability on the part of Mexico in being able handle the
following exchange rate fluctuations.
– Foreign countries became less willing to loan to Mexico because
they could not pay on their previous debts.
Repairing the Damage
• While some, such as Milton Friedman, opposed the pegging of the
exchange rates from the beginning by claiming that the only way to
sustain the monetary rate was to set it free, others feel that Mexico was
simply trying to help itself out of a bad situation.
• Because many international lenders were unwilling to continue to bail
Mexico out of its situation without being repaid, the IMF was forced to
act.
• Though the debt crisis was often referred to as the Mexican Crisis, the
monetary problems were not limited to Mexico. Much of Latin
America and some Asian countries were also affected by the debt
crisis.
• Developing countries worldwide were experiencing devaluation
problems and were left with few places to turn.
IMF Contributions
• Opponents argue that the amount of funding given to Mexico to recover from
its crisis was extreme and certainly more than what should have been provided
for them in light of the fact that they had been unsuccessful in paying off the
debts that they had incurred in the past.
• In an address delivered to the Zurich Economics Society, Michel Camdessus,
Managing Director of the IMF had the following to say:
– While economic conditions may remain somewhat undetermined, the
relative stability of Mexico’s public finances have been restored.
– Even though the funding provided for Mexico was the largest to ever be
approved, the actions taken were necessary and certainly justified.
– Mexico has been taking responsibility for its debt and attempting to
recover and pay for its debts.
– The seriousness of the crisis called for such interventionist measures in
order to secure financial order and prosperity for the future.
Banking in Mexico
• Banking in Mexico has increasing similarities to banking in the United
States.
• Improvements have been made in the communications industry which
have made banking in Mexico more efficient and convenient.
• Many banks with home offices in the United States have broadened
their markets by expanding into many countries in Latin America.
– NationsBank
– Citibank
– Bank One
• The ease and familiarity of banks have helped to increase foreign
investment within Mexico. Since the debt crisis, these types of
congruencies are what have stimulated some of the investment in
Mexico.
Mexico’s Political System
Introduction to Political Candidates
PAN Candidate-Vicente Fox PRD Candidate-Cuauhtemoc
Cardenas
Voting
• The recent election was seen as the most democratic and fair in the nations
history. President Zedillo took great measures to ensure the authenticity and
fairness of the elections.
• More money was spent to ensure the fairness of this election than has been
spent on elections in the United States.
• Voting in Mexico is ritualistic in nature.
– Elections are most frequently held on Sundays with day being declared a national
holiday.
– The holiday is a time for family gatherings and trips to one’s hometown.
– Candidates parade through the streets of Mexico City in caravans.
Results of 1997 Election
PARTY % VOTE SEATS
(n=500)
PRI 38.9 239
PRD 27 125
PAN 25.6 122
*based on 87% of polling places
Party System in Mexico
• Historically, Mexico has had a one party monopolistic system, the PRI
• During the 1980’s Mexico allowed the first unhampered opposition in
the national political race. While there were some oppositionist
victories, the PRI was able to maintain its power. Instead of
maintaining one party power, however, Mexico’s party system became
known as a 1 1/2 party system, giving it the appearance of democracy.
• The PRI dominated the political power in Mexico for over 50 years.
• Only recently, in the July 7, 1997 election, was the power of the PRI
substantially challenged. The PRD and PAN were very close in the
race to overcome the PRI in the mid-term, but the PRD was
determined the winner.
• What this victory holds in store for the 2000 election will surely prove
to be a substantial and influential part of the Mexican political system.
Other Political Powers
Interest Groups
• The Armed Forces • Government Workers
• Economic Elite's • Peasants
• The Catholic Church • Women
• The Rising Middle Class • Indigenous Groups
• Trade Unions – “the noble savage”
• University Educated • International Influence
Students
NAFTA and Trade Relations
Emily Lambright
NAFTA and Trade Relations
• How has NAFTA influenced the economies of the Unites
States and Mexico?
• What changes have occurred in certain industries: textiles
and apparel, assembly plants, and manufacturing plants?
• What has been the affect of NAFTA on employment?
• How has NAFTA affected the politics of Mexico and the
U.S.?
• What are future predictions for NAFTA?
Trade Relations
• By 1996, Mexico became the U.S.’s third largest trading
partner
• Within the first year after NAFTA was enacted, Trade was
increased by 24%.
• Mexican imports to the U.S. went from $27 billion in 1990
to $48 billion in 1995.
• From 1994 to 1998, trade has multiplied 21/2 times from
$80 billion to 200 billion.
Industries: Textiles and Apparel
• Since NAFTA, the Mexican textile and apparel industry
has grown considerably.
• There has been an increase in the number of alliances and
joint ventures between American and Mexican companies.
• U.S. owned plants are being built in Mexico.
Industries: Assembly Plants or Maquiladoras
• Maquiladoras are assembly plants that are mostly foreign
owned. They are found predominantly along the northern
border of Mexico.
• Between 1994 to 1995 over 300 new maquiladora
programs were started.
• In 1998 the industry employees 1 million people.
• Just in the one year following NAFTA the money that
Mexico received from the assembly plants makes up 15%
of the country’s GDP.
Industries: Manufacturing
• NAFTA stipulates that by the year 2001 all components of
manufactured goods that are sold in the U.S., Canada, or
Mexico must be built in one of those three countries to
qualify for the tariff exemption.
• For Asian producers to qualify for the tariff exemption,
their plants will likely have to be moved to Mexico.
• New plants mean increased employment in Mexico.
Mexican Employment
• New textile and apparel plants have increased employment in that sector.
• In the assembly plants 89,000 new jobs were created between 1994 and 1995,
and a total of 400,000 new jobs have been created in the past five years.
• It is predicted that there will be thousands of new jobs in new manufacturing
plants.
U.S. Employment
• Despite U.S. textile producers’ claims, some Americans feel that they are
losing jobs when U.S. owned plants are being opened in Mexico.
• A 1998 analysis of the four most industrialized states (Illinois, Michigan, New
York, and Ohio) shows that there has been no net loss of jobs.
• There was actually a net increase of 80,000 jobs since 1994.
Political Thoughts on NAFTA
• Not all Americans are convinced that NAFTA was a positive political step.
• The week of September 21, 1998, the U.S. House of Representatives voted
down a measure (243 to 180) that would allow the president more power to
negotiate free-trade deals.
• In Mexico, NAFTA has been seen as a positive political step because it has
generally expanded trade and increased employment.
• President Ernesto Zedillo seems to be more of a proponent of NAFTA than his
predecessor, Carlos Salinas.
Future Predictions
• Employment, especially in Mexico will continue to rise because new facilities
are being built.
• The assembly plant industry is expected to become the leading source of
revenue for Mexico because of the decline of oil prices on the international
market.
• The manufacturing industry looks to grow significantly within the next few
years because of the NAFTA tariff stipulations.
• Employment in the U.S. has grown in the manufacturing industry, but there is
still the fear that U.S. jobs will Mexican jobs.
What does the future hold for
Mexico???
Mexico future is optimistic, but
there are some real concerns!!
Shanna Hamilton
Mexico is a third world country as
such there are some inherent barriers
to advancement
• Unstable Economy
• Political Instability
– Corruption
• Lack of technological advancements
• Large populations
– Poor
– Crime
Mexico’s Economy
• The future of Mexico’s economy is uncertain,
although they have made substantial
improvements with the help of the US, IMF and
NAFTA. None of that may be enough to prepare
them for:
– Continued lower oil prices
– Decreases in exported goods
– Higher deficits in external accounts that will put
pressure on the currency
From whence they’ve come:
• 1994 Statistics • 1998 Statistics
– Exchange rate of the – Exchange rate of the
Peso was 3.12 Peso is 8.18
– GDP was 1,256.2 – GDP is 1,385.4 trillion
trillion – Current value of
– Exports reached an all Exports is $110 billion
time low of 51 billion – Current value of
– Imports reached an all Imports $109 billion
time low of 66 billion
Public Opinion
• 47% of the companies participating in the
councils late January poll expect Mexico's
business climate to improve during the first
ten months of this year, 37 % expect that it
will remain unchanged and 17 % expect to
worsen.
Mexican Politics
• Mexico is moving toward a Free Choice
System which has captured the interest of
the Unites States
• It is now being run by a multi-party
Congress
• It’s increasing political stability encourages
foreign investment, trade relations and
intra-country morale
‘2000 the ELECTIONS
• Party of the Democratic Revolution(PRD) is
expected to lead during the presidential
election
• Cardenas leader of the PRD is seen as the
most likely candidate. The popularity of the
Institutional Revolutionary Party (PRI) is
falling.
• The election PRD party can be attributed to
the growing influence of the United States
Corruption
• Drugs Trafficking, Crooked Political Figures and
a Debauched Judicial System make Mexico one of
the largest suppliers of drugs in the US
• Mexico is the second-largest supplier of heroin to
the US and is used as the principal route for
cocaine crossing the border
• There are many high level officials in the PRI who
were to be involved in drug trafficking
Lack of Technological
Development
• Like any third world country, lack of money inhibits
original technological advancements.
• This decreases the opportunity for Mexico to enter into the
global competitive global market
• However, Mexico is making attempts to improve it’s rate
of college graduates in technical fields, by encouraging
enrollment in Monterrey Tech
– Monterrey Tech
– Currently Mexico has a college graduation rate of 8%
Solutions
• The US is working closely with Mexico to
help them devise a drug trafficking control
program
• US is installing strict regulation regarding
immigration
• Increasing the stringency of customs to
discourage drug trafficking
• Actually beginning to enforce the judicial
system by punishing offenders