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January 2007, Volume 14, Number 1

Mexico: Jobs, Politics, NAFTA

Mexican President Felipe Calderon of the National Action Party (PAN) took office on December 1, 2006, promising to be Mexico's "jobs president." However, the opposition Democratic Revolutionary Party led by Andres Manuel Lopez Obrador, the runner-up in July 2006 elections, attempted to block Calderon's inauguration, portending sharp divisions in the Mexican Congress. Lopez Obrador took an "oath of office" in the Zocalo on November 20, 2006 and declared himself the "legitimate president" of Mexico. Calderon won by a margin of 240,000 votes among the almost 42 million cast.

Outgoing president Vincente Fox promised to add six million jobs during his six years in office, but Mexican employment rose by only 1.5 million, an average of 250,000 a year. During the 2000-06 Fox term, Mexico's economy grew by an average 2.3 percent a year. The country's 10 billionaires now receive six percent of GDP, highlighting persistent inequality. Carlos Slim, the world's third- richest man with a net worth estimated at $30 billion, controls Telmex, Mexico's telephone company, a supermarket chain, retail, banking, insurance and other enterprises.

State monopolies in oil (Pemex) and electric power (Federal Electricity Commission) are inefficient, and private near-monopolies charge high prices in telecommunications (Telmex), television networks (Televisa), cement (Cemex), bread and tortilla manufacturing (Bimbo and Maseca, respectively) and banking (Banamex/Citigroup and Bancomer/Banco de Bilbao). Entrenched unions also resist reform. The Mexican teachers union (the largest in Latin America), the oil workers union (the richest in Latin America), and the Social Security employees union ( which has blocked pension and health reforms) resist changes that would reduce the benefits of their members.

On the other hand, Mexico's middle class enjoyed low inflation and a stable exchange rate under Fox. This allowed mortgages, automobile loans and consumer credit to become widely available.

The OECD's Labor Force Survey reported that Mexican employment was 41 million in 2005, including 6.1 million in agriculture, 15 percent. Employment rose by a million for the first time in a decade. However, half of the additional jobs were temporary posts in sectors such as construction.

Foreign tourists spent almost $12 billion in Mexico in 2005. However, tourism was down in 2006, and analysts cite turmoil in Mexico City after July 2006 elections and the protests in Oaxaca that ended after six months in December 2006. Acapulco, the tourism hub of Guerrero state, complained that the federal government has funneled most of its tourism infrastructure support to Cancun, Ixtapa and Los Cabos.

An estimated 12 million Mexicans earn at least some income making traditional art and crafts, including rug weavers in Oaxaca, pottery makers in Puebla and wood carvers in Morelos. However, they complain that Chinese imports are undercutting them, encouraging some to quit.

NAFTA. Reform Party candidate Ross Perot predicted in 1992 that there would be a "giant sucking sound" as US jobs moved to Mexico under NAFTA. In November 2006, Perot Systems Corporation announced that it was hiring 270 engineers in Guadalajara; Perot Systems has 20,000 employees, including 6,000 in India.

US-Mexican relations are often described as dominant and dependent. The US tends to dominate the relationship, and Mexico is dependent on the US for trade, finance, and increasingly jobs- a third of the roughly 21 million Mexicans with formal jobs are employed in the US. The number of unauthorized foreigners in the US is 12 million, including seven to eight million Mexicans.

The tariff on Mexican corn dropped from 27 to 16 percent on January 1, 2007, and disappears January 1, 2008. Mexican imports and production of corn have increased since NAFTA went into effect in 1994, but relatively little has been done to help small Mexican corn farmers to adapt.

Education. The World Bank released a paper in November 2006 that concludes the US makes it too easy for Mexicans with little education to immigrate and find jobs, reducing the incentives of Mexicans to get more education. Networks move Mexicans with little education from rural Mexico to rural and urban areas across the US. The fact that these networks continue to defy US border and interior controls means that many young Mexicans believe more education is not necessary to earn higher US wages.

The World Bank paper argues that the US should make it harder for the unskilled to get into the US, and easier for the more educated Mexicans to immigrate, which would change incentives in migrant areas of origin and encourage more young people to stay in school.

Mexican President Felipe Calderon in December 2006 said that "Just as we demand respect for the human rights of our countrymen, we have the ethical and legal responsibility to respect the human rights and the dignity of those who come from Central and South America and who cross our southern border...[they] suffer abuses, extortion and are victims of crime, many times with the complicity of authorities." The number of migrants detained in Mexico rose from 138,061 in 2002 to 240,269 in 2005, when 42 percent were Guatemalan and 33 percent Honduran.

E. Eduardo Castillo, "Mexico acknowledges abuses of migrants from Central and South America," AP, December 13, 2006. Marla Dickerson, "Mexico's rich getting richer, study finds," Los Angeles Times, November 29, 2006.