Business
Yafte Santillan
23827
Mexico Crisis and Competitiveness
Why has Mexico grown so slowly since 2001?
Mexico’s slow growth of just 1.4%/year was triggered by several factors. First of all, due to its geographical proximity and its membership in the NAFTA, Mexico is closed tied to the US economy. In 2001, this was hit by a double dip recession affecting the Mexican economy in a negative way. China entered in 2001 the WTO, thereby being a direct competitor of Mexico’s exports to the US. Since Chinese companies could produce cheaper costs in a lot of sectors, Mexico lost comparative advantages and market share. Also, Mexican economy was weakened by the H1N1 virus, the greatest decrease of the oil price ever and a devastating drought. Due to the rising activity and power of organized crime, FDI was threatened and President Calderon spend billions of Dollars to fight the cartels. Moreover, responsible for such a slow growth was a bad educational system as well as a weak institutional framework that was not able to deal with antitrust in an efficient way. Another factor that really hit, and still hitting, Mexico’s economy is that is under monopolies and oligopolies in several key industries, thereby leading to inefficiencies in the market.
Does Mexico benefit or suffer from its propinquity to the United States?
The proximity to the US is a mix of advantages and disadvantages for Mexico. The Mexican economy depends on tourism and imports from the US. Due to its proximity, and the NAFTA agreement, Mexico is predestinated to be one of the greatest trading partners of the US, especially in key sectors like oil. However, this close link to the US economy put the Mexican economy in danger in the times of crisis in the US. The proximity to the US is responsible for the rise of the cartels, since the US are the biggest consumer of drugs worldwide; therefore drugs have to pass Mexico from South America in order to stimulate the demand and gain the highest profits. The
23827
Mexico Crisis and Competitiveness
Why has Mexico grown so slowly since 2001?
Mexico’s slow growth of just 1.4%/year was triggered by several factors. First of all, due to its geographical proximity and its membership in the NAFTA, Mexico is closed tied to the US economy. In 2001, this was hit by a double dip recession affecting the Mexican economy in a negative way. China entered in 2001 the WTO, thereby being a direct competitor of Mexico’s exports to the US. Since Chinese companies could produce cheaper costs in a lot of sectors, Mexico lost comparative advantages and market share. Also, Mexican economy was weakened by the H1N1 virus, the greatest decrease of the oil price ever and a devastating drought. Due to the rising activity and power of organized crime, FDI was threatened and President Calderon spend billions of Dollars to fight the cartels. Moreover, responsible for such a slow growth was a bad educational system as well as a weak institutional framework that was not able to deal with antitrust in an efficient way. Another factor that really hit, and still hitting, Mexico’s economy is that is under monopolies and oligopolies in several key industries, thereby leading to inefficiencies in the market.
Does Mexico benefit or suffer from its propinquity to the United States?
The proximity to the US is a mix of advantages and disadvantages for Mexico. The Mexican economy depends on tourism and imports from the US. Due to its proximity, and the NAFTA agreement, Mexico is predestinated to be one of the greatest trading partners of the US, especially in key sectors like oil. However, this close link to the US economy put the Mexican economy in danger in the times of crisis in the US. The proximity to the US is responsible for the rise of the cartels, since the US are the biggest consumer of drugs worldwide; therefore drugs have to pass Mexico from South America in order to stimulate the demand and gain the highest profits. The