From bad to worse – El Financiero

Monday marked the 30th anniversary of the North American Free Trade Agreement, now T-MEC. Many colleagues are writing about it, and I recommend the number of Nexus of January, with several interesting texts. I join the crowd, I hope with a slightly different approach, that I contribute something.

In the 30 years in which we have had a closer relationship with the United States, we have become an example contrary to the so-called “convergence theory”, once very fashionable in economic growth studies. The central idea was that less developed countries tend to grow faster, converging over time to the level of those that are more developed. Our case, he told him, is the opposite. In these 30 years, the average growth of the Mexican economy has been 2% annually, compared to 2.5% for the US economy. Instead of growing more, we grow less than the rich country, half a point less each year.

However, if we go back to evaluate what happened in the first 25 years of the trade agreement, the difference was much smaller. In that period, Mexico grew 2.2% annually, while the United States grew at 2.5%, that is, a difference in favor of its neighbors, but of barely 0.3%.

It happens that, from 2018 to date, that is, in the current government, the difference between the United States and Mexico has widened noticeably. In these five years, Mexico’s average growth is 0.6% annually, compared to 2% in the United States. Not because foreign trade fails us: agriculture and manufacturing grew more than double the national average in that period, and communications and transportation grew even more. The reason is that the entire rest of the economy is in ruins.

During the first 25 years of the treaty, the aforementioned activities grew, but also other services, such as trade or anything related to the financial sector. During that period, what grew little was education and, believe it or not, entertainment and tourism. The industry (outside of manufacturing) was pitiful since then. This behavior became extreme in the last five years. Education and entertainment have grown half a point in five years. Tourism has lost four. Electricity is 27 points below the 2018 level, and construction has barely grown.

In this six-year term, as we had already commented, what has grown is what is associated with the exterior: agricultural and manufacturing exports, remittances, consumption of imported goods, and investment in imported machinery and equipment. During 2023, the very strange behavior of the construction of civil engineering works (which this column continues to believe is a fraud by Sedena) has led several to celebrate exceptional economic performance. As can be seen in the aforementioned data, there is no such thing: we are in the worst six-year term, in economic matters, in a long time. Only Miguel de la Madrid’s is less good, due to the cost of the absurd policies of the previous 12 years, which was paid then.

In addition to evidencing the poor management of the economy during these five years, what the data tells us is that we have not been able to fully take advantage of the advantages of openness and globalization. We have known the cause of this for a long time, and precisely to address it was that the structural reforms were carried out during Peña Nieto’s time. It was necessary to break the concentration that favored the fortunes, and the unions, created under the PRI. We also know the reaction: he lives in the Palace.