April 26, 2016

A LIGHT UNTO THE NATIONS:

Open for business : In difficult times Mexico and its firms retain their faith in globalisation (Schumpeter, Mar 12th 2016, The Economist)

[T]here is at least some light in the darkness. Mexico, for instance, continues to carry a torch for globalisation. President Enrique Peña Nieto's administration boasts about the country's 44 trade deals, more than any other country, and its 11 reform initiatives. The World Bank calculates that Mexico is one of the most open large economies in the world: exports plus imports are equivalent to 66% of GDP, compared with 26% for Brazil and 42% for China. The Boston Consulting Group finds in a survey that its people take a positive view of the future: 77% of Mexicans say they are optimistic, and only 6% that they are very pessimistic. Mexicans see the likes of Donald Trump as being cut from the same cloth as the old-fashioned Latin American strongmen who ruined the region through protectionism and gesture politics.  

When the North American Free Trade Area (NAFTA) was created in 1994 it was as controversial in Mexico as it was in the United States: a Yanqui conspiracy, according to those on the left, designed to turn their country into a colony of El Norte. Today the Mexican elite speaks with one voice on the subject. Mexico is now one of the world's top 15 manufacturing economies and one of its top five car producers. The output of the ten largest car plants rose from 1.1m vehicles in 1994 to 2.9m in 2012. Mexican consumers now have access to a huge range of multinational brands: marketers refer to young, middle-class Mexicans as the "children of NAFTA", because their taste is so cosmopolitan.

Free trade has helped to produce a corps of elite Mexican companies that are capable of going head-to-head with the best in the world. Bimbo is the world's largest baker, thanks in part to its ambitious expansion into America with the purchase of Sara Lee's bakery business. Gruma is the world's biggest maker of tortillas, with more than 100 plants in 20 countries. Free trade has been a double blessing for such companies. First, it has encouraged those that have reached the limit of the Mexican market to go global. They have the huge advantages of speaking one of the world's most popular languages, and sharing a 1,900-mile (3,100km) border with America. Second, now that they are more vulnerable to competition and takeovers, they have been forced to shake off a long-standing tendency for successful Mexican companies to become flabby. When AB InBev, a global brewer, bought Grupo Modelo, a Mexican beer firm, in 2013, it quickly eliminated around $1 billion in annual costs.

Mexicans have more economic courage than the Trumpettes and Bernidettes.

Posted by at April 26, 2016 5:21 PM

  

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