For those bullish on Mexico, Sunday was a big day. Thomas Friedman, the New York Times foreign affairs columnist, published a glowing essay on why Americans should look next door to Mexico as the country to watch, not China or India.
The essay, titled How Mexico got Back in the Game, notes that Mexico has 44 free-trade agreements, more than any other country in the world, and the country sits atop “massive cheap natural gas finds.”
The three main political parties have signed a pact “to fight the big energy, telecom and teacher monopolies that have held Mexico back.” Americans, Friedman says, need a “more nuanced” view of Mexico but should be quite bullish on the nation.
There are many ways to slice Friedman’s essay. And some analysts went to work immediately. One is George Baker, a Houston-based energy analyst who lived for a time in Mexico. He quickly whipped off a comment to the Grey Lady taking apart Friedman’s argument. Here is one paragraph on trade:
“Take out intra-firm transactions in which Chrysler-Mexico sells to Chrysler-China, and daily trade will shrink to the value of commerce in oil and food products, services (including oilfield services), plus the remnants of a tourism industry battered by violence. Meanwhile, Carlos Slim skims off the top of the Mexican economy monopolistic rent whose value has been estimated by Mexican economists at 3% of Mexico’s GDP.”
Baker dismissed the reference to huge shale oil reserves – “Pemex has no plans to develop shale fields” – and concludes that, “Celebrations about Mexico’s advances in its economy and governance are premature.”
If the enthusiasm (or hype) about Mexico is reminiscent of the euphoria for Brazil back around 2009, then Friedman’s essay may actually be a contrarian indicator. Friedman was a regular visitor to Brazil back then. Here’s one of his columns.
As a colleague noted at a weekly bull session we foreign reporters hold on Friday evenings, Brazil seemed at the top of the emerging market heap back then, the lead nation of the BRICS (Brazil, Russia, India, China and, later, South Africa). But the BRICS are now passé. And Brazil has posted anemic growth for several years.
Indeed, the benchmark Bovespa index is down 16% since the end of 2010.
Maybe the apathy for Brazil is overdone. And the euphoria for Mexico also an overreaction.
Certainly the number of free-trade agreements that Mexico has signed does not indicate how open the economy is. It only takes a trip to Office Max, the neighborhood supermarket or a furniture stores to see hidden barriers to entry in Mexico. Why are Hewlett Packard printers assembled in Mexico not available here? Why are Sony plasma screen TVs assembled in Mexico cheaper in the States than here? If it's so open, why are there so many monopolies and duopolies?
This is not Taipei, Singapore or even some Central American capitals. There are many things you cannot get here or that are quite costly. Anybody go in the Liverpool department store and look at prices lately?
I don’t find my reporting colleagues here a cynical group. Mexico-bashing is not a practice. Many are married to Mexicans, are Mexican themselves or have lived here for decades. That’s a short way of saying they want Mexico to progress and flourish. But the obstacles are many. Governance and security issues are critical. Corruption is rampant. It is too early to pop the champagne.