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Zirahuén Villamar, FES Mexico

Mexico’s Economy – A Quick Overview Input to the Conference „Union Coordination in the Automobile Industry – Building Briges“ Mexico City September 30 th - October 3 rd , 2013. Zirahuén Villamar, FES Mexico.

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Zirahuén Villamar, FES Mexico

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  1. Mexico’sEconomy – A Quick OverviewInput to the Conference „Union Coordination in the Automobile Industry – Building Briges“Mexico City September 30th - October 3rd, 2013 Zirahuén Villamar, FES Mexico September 2013 Friedrich-Ebert-Stiftung – Mexico

  2. Mexico: A Big Economy, an Unbalanced Society GDP Size (2012) Householdand Personal Income (2010) A Middle-ClassNation? … not so actually. Source: NationalInstitute of Geography and Statistics (INEGI)http://www.inegi.org.mx/inegi/contenidos/espanol/prensa/Boletines/Boletin/Comunicados/Especiales/2013/junio/comunica6.pdf Source: World Bank http://databank.worldbank.org/data/download/GDP.pdf ClassHouseoholdPeople% of total Upper Middle Low September 2013 Friedrich-Ebert-Stiftung – Mexico

  3. Economic Performance – The Quest for Stability and... • After a traumatic and volatile 80s decade, a new culture of economicstability • Big nationaleffortstogainexternalcredibility in orderto set foundationsforeconomicactivitieswithinthe North American integrationprocess • Reformsforthe new Mexicaneconomy • NAFTAentersintoforce in January 1st 1994 • Greaterrole of marketforcesand privateactors, lesserforStatepolicies and publicplayers and interventions • A bigopeningtoWorldeconomy: goods, services and finances • Credibilitymeantstability: • Inflation (Single aim, autonomous Central Bank) • Publicfinances (Zero deficit) • Exchange rate (rather free flotation) • Financialcrisis in 1995 (Tequilaeffect), withfurthereffectsonthereal economythefollowingyears • A decouplingnationaleconomy: thosesectors and activities(fewregions and players as well) linkedtothe NAFTA and those (most of regions and population) not in the NAFTA orbit September 2013 Friedrich-Ebert-Stiftung – Mexico

  4. Economic Performance – … the Unwanted but Logical Result: Low Growth Rationale • Afterthesecond trauma of 1995 crisis, the culture of stability and equilibriawasreinforced • Furtherreforms in publicfinances, monetaryfundamentals and more free tradeagreements • In ordertofulfillsuchgoals, littleornone chances foreconomicpublicpolicieswereleft Results • Mediocre GDP growth, quite belowpotentialcalculations • Real 30-year-average: 2% growth • Exchange ratebenefitsexports of particular goods and lots of imports, butitdoesn’tfostertheinternalmarket 2008-2013 • Whenthe crisis arose, therewereno countercyclicalmeassuresavailable • In 2009 Mexicogottheworst GDP performance in Latin America • Therecovery has beenweak • Updatedforecasts are getting more and more pessimisticfortheupcomingyears • Source: OrganizationforEconomic Co-operation and Development (OECD) http://www.keepeek.com/Digital-Asset-Management/oecd/economics/oecd-economic-surveys-mexico-2013_eco_surveys-mex-2013-en#page16 September 2013 Friedrich-Ebert-Stiftung – Mexico

  5. Poverty – A Vulnerabilities Approach Multimensional,2012 Data Deprivations Education Health Services Social Security Quality and Spaces of the DwellingBasic Household Services Access to food Results 45.5% of population living in poverty (53.3 mill) Modererately poor: 37.7% of population, income under $180 usd / month (urban) or $115 usd /month (rural) (41.8 mill) Extremely poor: 9.8% of population, income under $86 usd /month (urban) or $62 usd / month (rural) (11.5mill) • Source: National Council for the Evaluation of Social Development Policy (CONEVAL) http://www.inegi.org.mx/inegi/contenidos/espanol/prensa/Boletines/Boletin/Comunicados/Especiales/2013/junio/comunica6.pdf September 2013 Friedrich-Ebert-Stiftung – Mexico

  6. Labour – Not a Matter of Unemployment… People at work Unemploymentrate Structuralunemploymentisbelow6% Evenduringtheworstyear of the crisis (2009), thisnumberwasthepeak Latest data (August 2013) shows a 4.78% • Total population: 118mill. (ca.) • Economically Active Population: 52 mill. (ca.) • Workingpopulation: 49mill. (ca.) • Source: NationalInstitute of Geography and Statistics (INEGI)http://www.inegi.org.mx/inegi/contenidos/espanol/prensa/boletines/boletin/Comunicados/Especiales/2012/Diciembre/comunica3.pdf • Source: El Economista, September 20th, 2013 http://eleconomista.com.mx/industrias/2013/09/20/desempleo-cede-su-menor-nivel-seis-meses September 2013 Friedrich-Ebert-Stiftung – Mexico

  7. Labour– …butof Informal Employment Informal Employment • Around 60% of employment is informal: 29 mill. • Much of the employment growth has been in informal jobs • It means people (workers and their families) with no social protection • Low added-value sectors/activities • Many workers are self-employed • Geographical characteristics: Informal Employment is concentrated in Southern and Center States September 2013 Friedrich-Ebert-Stiftung – Mexico

  8. Productivity Working a lot… …because of lowProductivity As a whole, Mexico has thelowestLabourProductivityamong OECD countries Total Factor Productivity, has actuallydecreasednearly 10% comparedto 1991 In some particular fields, Productivityissimilar toothereconomies Thisnationaldifferencesunderlinethedisparities, whethergeographicalorbyincome What • People in Mexico work 2,250 hours a year, more than the OECD average of 1,776 hours. • 29% of employees work very long hours, much more than the OECD average of 9% Why • Low salaries forcepeopletofindanotherjobtocompensatetheirincomes • High number and hours of unpaidactivitiesto be performed • Lowproductivityeconomicactivities (informal sector) • Source: OrganizationforEconomic Co-operation and Development (OECD) http://www.oecdbetterlifeindex.org/countries/mexico/and http://dx.doi.org/10.1787/888932708674 • Source: OrganizationforEconomic Co-operation and Development (OECD) http://dx.doi.org/10.1787/888932706546 September 2013 Friedrich-Ebert-Stiftung – Mexico

  9. Low and StagnatedProductivity • In thelastdecade, thenationalaverageLabourProductivity has decreased • Ups and downs are duetotheeconomiccycle: all in all, they are recoveriestocertainlevelsbutnot true growth • A significantpartforlowgrowth of GDP liesonthisreason LabourProductivityIndex GDP Index WorkingPopulationIndex • Source: NationalInstitute of Geography and Statistics (INEGI) http://www.stps.gob.mx/bp/secciones/conoce/areas_atencion/areas_atencion/web/productividad/Aspectos.pdf September 2013 Friedrich-Ebert-Stiftung – Mexico

  10. Labourcosts Features • In ordertoattractforeigninvestments and tofoster local competitivinessMexican labor costshaveconstantlydecreasedcomparedtothose of otheremerging industrial countriescompetitors (vr.gr. China and Brazil) • Thistrend has itsoriginsnotonly in diminishingMexicancostsbyitself (flexibilization of thelabourmarketregulation) butalso in theimprovements of othercountries’ salaries Effects • Little orinexistentoptionsfor an internalmarketdriveneconomicgrowth • A robustracetothebottombehavior • Source: OrganizationforEconomic Co-operation and Development (OECD) http://www.keepeek.com/Digital-Asset-Management/oecd/economics/oecd-economic-surveys-mexico-2013_eco_surveys-mex-2013-en#page16 September 2013 Friedrich-Ebert-Stiftung – Mexico

  11. TheReforms The new Government (2012-2018) and thePactforMexico • Great expectations • Political, economical and social agreementamongmainPoliticalParties Reforms • LabourLaw (2012, before new Governmenttook office) • Education (passedonAugust 2013) • Finances and Banking (passedonSeptember 2013) • Energy (Oil and Electricity) (beingdisscussednow) • Fiscal (beingdiscussednow) Programmes • CruzadeagainstHunger(Ministries and Agencies co-ordination) • Democratization of Productivity(NationalDevelopmentPlan’sGoal) • FormalizingEmploymentProgramme(part of the Fiscal Reform) September 2013 Friedrich-Ebert-Stiftung – Mexico

  12. Thankyou!  zirahuen.villamar@fesmex.org September 2013 Friedrich-Ebert-Stiftung – Mexico

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