MEXICAN ECONOMICS 101 ON THE BORDER
Mexico’s economy is inexorably tied to the U.S. economy. This impacts the border positively because of speed to market (for instance, if you go into Best Buy and configure your computer, the most likely thing is that if it’s an HP, Acer, or Gateway, it is manufactured in Mexico in one of the many plants on the border that manufacture computers), reduced transportation costs, and the fact that both a skilled and unskilled work force make manufacture in Mexico very attractive to U.S. manufacturers. Contrary to popular belief and some recent movies such as Bordertown starring Jennifer Lopez, the maquilas employ cutting edge technologies and the latest personnel management systems. For instance, I have worked on a free lance basis with Cordis, Lexmark, and some others and have observed first hand over many years that they are socially very attuned to the wellbeing of their employees, providing financial assistance for acquiring housing, subsidizing transportation costs, and the purchase of basic food stuffs. They have the best working conditions in the country and encourage their employees to take special courses and training programs in addition to paying for secondary school studies, undergraduate studies, and master degrees. The greatest opportunities for advancement come about by working in the maquilas, companies that are producing world class products and components mainly for export to the United States.
Another very important fact is that remittances from Mexican immigrants to Mexico help alleviate the poverty level of their families. This is a very strong incentive to migrate for those living in extreme poverty – often subsistence farmers of indigenous ethnicity. The money migrants send home commonly exceeds locally generated income. And that is the least of it: it should be absolutely unacceptable for the Mexican government that some $20 billion per year in remittances from immigrant workers just about equals the country’s income from oil exports and is so far beyond revenue from tourism it isn’t even funny.
Extreme poverty in Mexico is due to unequal land distribution, subsistence farming on small parcels, lack of rural infrastructure to distribute products, lack of competitiveness in the production of basic crops, competition from imports of subsidized American producers of products like corn, beans, and sorghum , poor transportation and irrigation networks, etc. Result: farmers look for better opportunities elsewhere. There is no denying that Mexico is a poor country, that enormous amounts of land are not suitable for modern agriculture and that others have eroded and produce less because they were exploited inadequately; that agriculture today does not produce enough basic products to feed the population even at its most indispensable level. The country’s dependence increases because of hunger: the country that invented corn is importing corn.
Why is the Mexican government unable to create economic opportunity for its people when it has the potential to become a huge job creator? It is easy to lay the blame on either side of the border, but isn’t it possible that if the U.S. had done what the wealthier countries in Europe did before opening the labor market - investing billions of dollars in the development of the economies of its poorer members – the immigration situation would not be what it is today? As for Mexico, as mentioned before, it has a major job creation problem. For instance, between 1994 and 2002, around six million people entered the Mexican work force and yet only four million new jobs were created during the same period, leaving over two million people without employment. If you were one of those two million, what options would you have? You go north to the border cities or you seek to cross over to the United States. Mexico has oil, a good work force, endless coastline, proximity to the United States, etc. etc. So what’s the problem? First and foremost, access to capital is deplorable. And as for oil, Pemex, a monopoly, is the prime example of inefficient management. And the banks? Try to get a loan! Even though this has gotten easier – one can now get a loan for a new car whereas before one either paid cash for the car or didn’t get one – it is still far more expensive than in the U.S. For instance, the interest would be 14% or more and I think the down payment required would be a whopping 25% to 50%!
The good news? Presumably, the number of young people yearly entering the workforce is expected to have been cut by half between 1996 and 2010 which means it is now a little easier to integrate a larger proportion of the workforce into formal employment. This presumably translates into fewer Mexicans emigrating. However, the incentives to emigrate are still there; it is only the number that may diminish. So, we’re just about back to square one: as long as the jobs are not created, the poverty is not alleviated, and as long as the opportunity is there in the U.S., immigration will continue, no matter what obstacles are put in the way of the immigrants.
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