A look at Mexico’s economic past

In the last fifteen years Mexico’s economy has turned around in what the country’s former foreign minister, Jorge Castaneda Gutman, believes have been the best years for Mexico at least since the 1960s.

Speaking today at the Prospectors and Developers Association of Canada’s convention in Toronto on Mexico’s economic and political outlook, Castaneda, who held his position from 2000 to 2003, says since 1995 the country had more than a decade of financial stability. Despite the severe downturn in 2009, which cut the country’s gross domestic product (GDP) growth by 6.5%, Mexico has not experienced a financial and currency meltdown -– something Castaneda says it managed to do before almost routinely.

“These fifteen years are special for Mexico because we hadn’t had a financial and currency meltdown. “This may seem to you or some of you to be no major accomplishment,” he says to investors and members of companies looking to foray into Mexico, “after all a bunch of countries have and go through 20 or 30 years without their economies imploding.

“Well, for us it’s kind of complicated because what we were used to doing was having a crisis every six years. We were actually quite good at it. We really got it down pat. Every six years we had a major crisis. You can set your watch by it… we did it very well. ”

Since entering calmer waters in the mid-nineties, Mexico lowered its interest rate, provided greater access to credit, currency stability with floating exchange rate, and a low inflation as it strengthened its public finances.

This reinforcement led the country to experience two things, says Castaneda, the first being a slight but sustained economic growth of around 2.5% to 3% on average. Acknowledging it’s a small percentage, he says when it’s compounded over the fifteen years it creates “quite a bigger pie.”

Mexico now boosts a US$1.5-trillion economy.

“In purely economic terms…it could have been better. It should have been better. People expected it to be better. But it has not been bad at all,” opines Castaneda.

He argues in the last fifteen years the country’s gradually improving economy has helped create a social change, where the old middle class consisting of 30% of the population has jumped into to a new middle class, or a low-middle class, including slightly more than half of the population.

“We now have a country that is less unequal than it used to be, it is still horrendously unequal but less than ten or fifteen years ago. That is also quite an achievement.”

The former foreigner minister notes because of this new class and the country’s international commitments, which despite not having as many safeguards as he hoped regarding environmental, labour, human rights and democracy issues, Mexico is a “more or less a fully functioning democracy.”

Arguably the country’s most transparent election took place in 2000, when Vicente Fox Quesada, the candidate of the opposition party, became president. He served until 2006.

Despite the more democratic stance, the country is burden with its drug problem. Mexican’s President Felipe Calderón declared a war on drugs in December 2006, and since then around 45,000 to 60,000 people have died in drug-related deaths.

“The war on drugs… is a bloody, total disaster and failure,” argues Castaneda. He reckons the problem could be solved through drug legalization. A move, the U.S. government, which committed US$1.6 billion in 2008 to fight drug gangs in Mexico and Central America, strongly opposes.

This largely leaves the challenge of how to solve the drug problem on the table of the incoming 2012 Mexican president.