Destination Mexico

1. Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

2. Demographics and Economic Overview Alicia Dalton

3. Mexico • Independence Day -- September 16, 1810 • Consists of 31 states and 1 federal district • Ethnic groups -- Mestizo, Amerindina, and Caucasian • Major Religion -- Roman Catholic (89%) • Two military branches -- Army/Air Force, Navy/Marines

4. The Land • Less than three times the size of Texas -- 764,000 square miles • Terrain -- high, rugged mountains; low coastal plains; plateaus; deserts • Natural Resources -- Petroleum, silver, copper, gold, lead, zinc, timber, natural gas • Climate ranges from tropical to desert • Part of the “Ring of Fire”

5. Current Issues • Environmental Problems • Natural water resources scarce and polluted • Raw sewage and industrial effluents polluting • Deforestation, Erosion, Desertification, Air Pollution • Natural Hazards • Tsunamis • Earthquakes • Hurricanes

6. Mexican Government • Constitution ratified -- February 5, 1917 • Executive Branch and Legislative Branch (Bicameral National Congress) • Cabinet is appointed by President • Senate -- 128 seats, elected • Chamber of Deputies -- 500 seats, elected • 8 recognized political parties and countless other “pressure groups”

7. Population % Population Urban Population growth rate Mexico City population Population Density Life Expectancy Birth rate Mortality rate ~ 92 million 70.8% 2.1% - 1990, 1.8% -1995 20 million (23%) 46 people/km2 72 years 25.1/1000 4.5/1000 Population Statistics

8. Unique Facts • Mexicans average work week = 44.5 hours American average work week = 34.5 hours • Of 18,174,000 houses in 1994 • 16,548,000 had electricity • 12,309,000 has sewage • Of 306,142 km of roadways • Only 94,946 km were paved

9. Mexico -- Economy • Economy ranks in the top 15 in the world • Dominated by petroleum and tourism • “Blessed Years” of rising GDP gave Mexicans false hopes and buying power • Despite increased industrialization, membership in NAFTA, and reformed fiscal policies, in 1993 a recession begins • Now citizens are in tremendous debt

10. Factors Adding to Recession • Stagnant domestic demands • Declining industrial output • Slow growth in international economy • Rising interest rates • Decline in value of petroleum products • Severe inflation -- 7.1% in 1994 • Enormous foreign debt • Mining privatization reduces employment

11. Annual GDP

12. Exchange Rate (Pesos/Dollar)

13. 1998 Developments • Profound economic reform • Restrictive monetary and fiscal policy • Stronger domestic demand • Increased private consumption and investment offset effect of fewer exports • First half of year GDP growth = 5.4% • Increased confidence results in increased retail spending

14. Social and Environmental Issues Laurie Dressler

15. Environmental Concerns • Water resources are scarce, polluted or inaccessible • Deforestation • Widespread erosion • Serious air pollution

16. Deforestation: A Vicious Cycle

17. Mexico City • The largest & fastest growing city in the world • 1/4 of Mexico’s population lives in Mexico Valley • Faced with extremely high levels of air pollution • Pollution levels of the city break the air quality guidelines daily • Water is contaminated & of poor quality

18. U.S. California Arizona New Mexico Texas Mexico Baja California Norte Sonora Chihuahua Coahuila Nuevo Leon Tamaulipas U.S. - Mexico Border FactsBorder includes 4 U.S. and 6 Mexican states 200 km border homes 10 million people 14 major sister city pairs along border

19. Eight Major Sister Cities • Tijuana/San Diego • Cuidad Juarez/El Paso • Mexicali/El Centro • Nogales/Nogales • Nuevo Laredo/Laredo • Matamoros/Brownsville • Reynosa/McAllen • Piedras Negras/Eagle Pass • Cuidad Acuna/Del Rio • San Luis Rio Colorado/Yuma

20. Pollution Prevention Strategies • Develop air quality assessment & improvement programs • Continue to build infrastructure & expertise in the border region • Encourage community involvement • Develop economic incentive programs

21. Facts: Educational System • Mexico spends 0.7% of GDP on education versus 2.4% in the U.S. • The average level of education in 1995 was 3 years of grammar school • Of those that finish grammar school only 88% continue on to a secondary school • Only 5% of students attend institutions of higher learning • Only 12% of Mexicans in the border states are enrolled in higher education compared to 88% in the U.S. • Grammar school teachers now have to have a college degree • Middle school is now mandatory for children

22. “80 children under the age of one die each day in Mexico due to malnutrition”

23. The Mexican Debt Crisis Repairing Mexico’s Banking System Stacey Hipp

24. The Debt Crisis • Between 1987-93, Mexico attempted a vast program of economic and structural reform. • The strategies used such as price and trade liberalization, privatization, financial sector liberalization, deregulation, and tax reform were implemented in the hope of promoting greater and more efficient private and international investment. • In the beginning, the reforms appeared to be working. • Inflation decreased by 8% • Large fiscal deficits were eliminated • GDP increased from 0% in 1982-88 to 4% in 89-91 • Capital inflows increased • However, these reforms were proven unsuccessful in helping to decrease and restructure the country’s enormous external debt.

25. The Debt Crisis • The Current Account deficit grew from 3% to 7% from 1989-90 to 1992-94. • After 1991, GDP growth slowed. • The capital inflow growth was utilized through consumption rather than saving. • By 1995, past due amount on bank loans had risen to 18% of the loans. • At year end of 1995, overdue loans had also risen to account for 1/3 of total bank loans. • Problems within the banking system were compounded by the instability of the financial market. • The Mexican Crisis was further upset by its susceptibility to the fluctuations of foreign markets such as the United States system.

26. The Debt Crisis • Other problems in Mexico also contributed to the debt crisis and following turmoil. • The prime candidate for president was assassinated. • There were continuous uprisings in the state of Chiapas. • The election year lended even further uncertainty. • Foreign investors were reassessing their desires and plans for investment within the country. • In addition to these, some unwise policy decisions were also being made. • The replacement of the devalued peso debt by securities lead to further instability on the part of Mexico in being able handle the following exchange rate fluctuations. • Foreign countries became less willing to loan to Mexico because they could not pay on their previous debts.

27. Repairing the Damage • While some, such as Milton Friedman, opposed the pegging of the exchange rates from the beginning by claiming that the only way to sustain the monetary rate was to set it free, others feel that Mexico was simply trying to help itself out of a bad situation. • Because many international lenders were unwilling to continue to bail Mexico out of its situation without being repaid, the IMF was forced to act. • Though the debt crisis was often referred to as the Mexican Crisis, the monetary problems were not limited to Mexico. Much of Latin America and some Asian countries were also affected by the debt crisis. • Developing countries worldwide were experiencing devaluation problems and were left with few places to turn.

28. IMF Contributions • Opponents argue that the amount of funding given to Mexico to recover from its crisis was extreme and certainly more than what should have been provided for them in light of the fact that they had been unsuccessful in paying off the debts that they had incurred in the past. • In an address delivered to the Zurich Economics Society, Michel Camdessus, Managing Director of the IMF had the following to say: • While economic conditions may remain somewhat undetermined, the relative stability of Mexico’s public finances have been restored. • Even though the funding provided for Mexico was the largest to ever be approved, the actions taken were necessary and certainly justified. • Mexico has been taking responsibility for its debt and attempting to recover and pay for its debts. • The seriousness of the crisis called for such interventionist measures in order to secure financial order and prosperity for the future.

29. Banking in Mexico • Banking in Mexico has increasing similarities to banking in the United States. • Improvements have been made in the communications industry which have made banking in Mexico more efficient and convenient. • Many banks with home offices in the United States have broadened their markets by expanding into many countries in Latin America. • NationsBank • Citibank • Bank One • The ease and familiarity of banks have helped to increase foreign investment within Mexico. Since the debt crisis, these types of congruencies are what have stimulated some of the investment in Mexico.

30. Mexico’s Political System

31. Introduction to Political Candidates PAN Candidate-Vicente Fox PRD Candidate-Cuauhtemoc Cardenas

32. Voting • The recent election was seen as the most democratic and fair in the nations history. President Zedillo took great measures to ensure the authenticity and fairness of the elections. • More money was spent to ensure the fairness of this election than has been spent on elections in the United States. • Voting in Mexico is ritualistic in nature. • Elections are most frequently held on Sundays with day being declared a national holiday. • The holiday is a time for family gatherings and trips to one’s hometown. • Candidates parade through the streets of Mexico City in caravans.

33. Results of 1997 Election *based on 87% of polling places

34. Party System in Mexico • Historically, Mexico has had a one party monopolistic system, the PRI • During the 1980’s Mexico allowed the first unhampered opposition in the national political race. While there were some oppositionist victories, the PRI was able to maintain its power. Instead of maintaining one party power, however, Mexico’s party system became known as a 1 1/2 party system, giving it the appearance of democracy. • The PRI dominated the political power in Mexico for over 50 years. • Only recently, in the July 7, 1997 election, was the power of the PRI substantially challenged. The PRD and PAN were very close in the race to overcome the PRI in the mid-term, but the PRD was determined the winner. • What this victory holds in store for the 2000 election will surely prove to be a substantial and influential part of the Mexican political system.

35. The Armed Forces Economic Elite's The Catholic Church The Rising Middle Class Trade Unions University Educated Students Government Workers Peasants Women Indigenous Groups “the noble savage” International Influence Other Political PowersInterest Groups

36. NAFTA and Trade Relations Emily Lambright

37. NAFTA and Trade Relations • How has NAFTA influenced the economies of the Unites States and Mexico? • What changes have occurred in certain industries: textiles and apparel, assembly plants, and manufacturing plants? • What has been the affect of NAFTA on employment? • How has NAFTA affected the politics of Mexico and the U.S.? • What are future predictions for NAFTA?

38. Trade Relations • By 1996, Mexico became the U.S.’s third largest trading partner • Within the first year after NAFTA was enacted, Trade was increased by 24%. • Mexican imports to the U.S. went from $27 billion in 1990 to $48 billion in 1995. • From 1994 to 1998, trade has multiplied 21/2 times from $80 billion to 200 billion.

39. Industries: Textiles and Apparel • Since NAFTA, the Mexican textile and apparel industry has grown considerably. • There has been an increase in the number of alliances and joint ventures between American and Mexican companies. • U.S. owned plants are being built in Mexico.

40. Industries: Assembly Plants or Maquiladoras • Maquiladoras are assembly plants that are mostly foreign owned. They are found predominantly along the northern border of Mexico. • Between 1994 to 1995 over 300 new maquiladora programs were started. • In 1998 the industry employees 1 million people. • Just in the one year following NAFTA the money that Mexico received from the assembly plants makes up 15% of the country’s GDP.

41. Industries: Manufacturing • NAFTA stipulates that by the year 2001 all components of manufactured goods that are sold in the U.S., Canada, or Mexico must be built in one of those three countries to qualify for the tariff exemption. • For Asian producers to qualify for the tariff exemption, their plants will likely have to be moved to Mexico. • New plants mean increased employment in Mexico.

42. Mexican Employment • New textile and apparel plants have increased employment in that sector. • In the assembly plants 89,000 new jobs were created between 1994 and 1995, and a total of 400,000 new jobs have been created in the past five years. • It is predicted that there will be thousands of new jobs in new manufacturing plants.

43. U.S. Employment • Despite U.S. textile producers’ claims, some Americans feel that they are losing jobs when U.S. owned plants are being opened in Mexico. • A 1998 analysis of the four most industrialized states (Illinois, Michigan, New York, and Ohio) shows that there has been no net loss of jobs. • There was actually a net increase of 80,000 jobs since 1994.

44. PoliticalThoughtsonNAFTA • Not all Americans are convinced that NAFTA was a positive political step. • The week of September 21, 1998, the U.S. House of Representatives voted down a measure (243 to 180) that would allow the president more power to negotiate free-trade deals. • In Mexico, NAFTA has been seen as a positive political step because it has generally expanded trade and increased employment. • President Ernesto Zedillo seems to be more of a proponent of NAFTA than his predecessor, Carlos Salinas.

45. FuturePredictions • Employment, especially in Mexico will continue to rise because new facilities are being built. • The assembly plant industry is expected to become the leading source of revenue for Mexico because of the decline of oil prices on the international market. • The manufacturing industry looks to grow significantly within the next few years because of the NAFTA tariff stipulations. • Employment in the U.S. has grown in the manufacturing industry, but there is still the fear that U.S. jobs will Mexican jobs.

46. What does the future hold for Mexico??? Mexico future is optimistic, but there are some real concerns!! Shanna Hamilton

47. Mexico is a third world country as such there are some inherent barriers to advancement • Unstable Economy • Political Instability • Corruption • Lack of technological advancements • Large populations • Poor • Crime

48. Mexico’s Economy • The future of Mexico’s economy is uncertain, although they have made substantial improvements with the help of the US, IMF and NAFTA. None of that may be enough to prepare them for: • Continued lower oil prices • Decreases in exported goods • Higher deficits in external accounts that will put pressure on the currency

49. 1994 Statistics Exchange rate of the Peso was 3.12 GDP was 1,256.2 trillion Exports reached an all time low of 51 billion Imports reached an all time low of 66 billion 1998 Statistics Exchange rate of the Peso is 8.18 GDP is 1,385.4 trillion Current value of Exports is $110 billion Current value of Imports $109 billion From whence they’ve come:

50. Public Opinion • 47% of the companies participating in the councils late January poll expect Mexico's business climate to improve during the first ten months of this year, 37 % expect that it will remain unchanged and 17 % expect to worsen.