Mexico: envisioning a prosperous future

Optimism about Mexico’s prospects is on the upswing. There is no doubt that everything related to Mexico has welcomed changes in focus and tone. Furthermore, by adding dimension to the country’s story, without diminishing the security challenges Mexico faces, it allows a more balanced and accurate portrayal to emerge.
President Enrique Peña Nieto has been in office a little bit more than one year, yet there’s a sense of urgency attached to his ambitious agenda. Substantial challenges loom, and surmounting them will require the president’s and the administration’s full complement of skills. The most important reforms in energy, labor, education and fiscal policy have already been achieved. Those achievements are the result of political deal making and legislative maneuvering to strategic communications and diplomacy.
There’s some trepidation on the domestic front given the scope of change and the sectors it will touch, but there’s also a great dose of optimism. The first signs are here: In 2014, several global companies already place their trust in Mexico through important packages of investment. This transfer of resources has reached 7.5 billion of dollars. Nestle for example announced an investment of 7 billion shortly before the 44th World Economic Forum in Davos. CISCO systems will invest 1.3 billion in 2014 and Pepsico will invest 5 billion in a space of 5 years.
Regarding the first opportunities under the Energy reform that has been approved by the Mexican Senate, a Memorandum of Understanding on Cooperation was signed between PEMEX and the Russian company Lukoil. The objective is to carry out actions of cooperation in themes of exploration and production, social responsibility and environment. But there are still more reasons to be optimistic about the Mexican present and its future prosperity.
An Open Economy
Mexico’s economy ranks among the world’s most open and competitive. Since the opening of its economy in the mid-1990s, Mexico’s trade with the world has risen rapidly: registering a 475% increase in exports between 1994 and 2013 and a 342% increase in imports.
Trade makes up a bigger portion of Mexico’s GDP (63%) than of any other large countries, including the US and China. Annual exports of manufactured goods are roughly equal to the value of all exports by the rest of Latin America.
Mexico currently boasts 12 FTAs that provide preferential access to 44 countries (more than any other country). It was the first Latin American country to gain preferential access to the European Union (2000). Its agreement with Japan (2005) was the first comprehensive trade pact that the country had signed with any nation.
Today, Mexico continues to lead. Mexico makes part of the Trans-Pacific Partnership (TPP), the multilateral FTA that the US considers central to its “Asia Pivot.” Mexico views the TPP as an opportunity to be part of the first 21st century FTA, implying both an opportunity to “update” NAFTA and to build out a more strategic approach to hemispheric trade relations.
Shared Democratic Values
Mexico has developed its stature on the international stage largely through trade. In contrast to other countries in Latin America, Mexico’s pursuit of trade alliances hasn’t been driven by ideological concerns but by a pragmatic focus on economic policy and strategic geopolitical interests.
With 20 years of NAFTA, Mexico became a pioneer among emerging markets of economic integration and trade liberalization. The agreement provided an institutional framework-in essence a “rule of law” governing trading practices-on which the country has built a global presence while developing closer connections with the world’s largest and most dynamic economy.
NAFTA also facilitated meaningful change in Mexican society. The country is now majority middle class: 23 percent of Mexicans joined the middle class during the last several years. This new middle class is younger, more educated, wealthier and healthier and far more likely to protect their economic gains and hold their government accountable.
Today, as Asia and Europe look to build stronger ties to Latin America, Mexico is of priority interest because of its core values and its strong record of promoting trade and investment along with growth and effective institutions.
Solid Economic Fundamentals
Few countries have an economic record as impressive as Mexico’s: almost 20 years of macroeconomic stability, low inflation and interest rates, manageable debt, record high international reserves, economic openness and increasing competitiveness.
Mexico has supplanted Brazil as the main focus for economic optimism in the region since 2012 when its stock market received five times as much investment as Brazil’s.
Pragmatic Leadership
The global economic turmoil of recent years has made this much clear: arguably the most important determinant of economic success is leaders who understand and can implement the reforms required for growth. Despite the brief time that Peña Nieto has been leading the country, the president and his team have been highly effective thus far.
Labor, accounting and education reform measures passed during the transition were substantive accomplishments and signaled a break from years of inaction and gridlock. The Pacto por México, announced within hours of the inauguration, saw the three main political parties presenting a unified front for the first time in decades.
Fiscal and energy reform are realities after months of a delicate political work. Both are essential to accelerate growth and improve Mexico´s competitiveness. The private sector is envigorating its presence in the international arena including Hong Kong and China. This year it will be receiving in Hong Kong a mission of more than 100 small and medium enterprises.
The Mexican Chamber of Commerce in Hong Kong, is more active than ever before in order to strengthen the presence of Mexico and stimulate trade and investments in both Mexico and Hong Kong.
A short list of the issues and developments that appear to be trending positively includes: a recovering US economy; growing global demand for US and Mexican manufactures; a likely reform of US immigration policies; the rising costs of doing business in China and transatlantic interest in deepening trade and investment ties with Latin America.
A more ambitious Vision for Mexico
Mexico faces brighter prospects than it has in decades. But to fully realize the promise of what the president has termed “Mexico’s momentum,” the administration must do more than ensure progress on the economic front. It must also modernize institutions, strengthen its commitment to good governance, assert the rule of law, support human rights, lead on the environment and promote greater inclusiveness.
Mexico has set its sights high. By aiming even higher, it just might find itself not only growing, but leading in Latin America and transitioning into a real leadership role in the world.