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“In 2020, Mexico …

Spring / Summer 2013 Strategic Futures

“In 2020, Mexico …

Roberto Newell Garcia

…will once again be the darling of capital markets and investors. This status will be the reward for astute decisions, but it will not come without significant political costs.

The reforms currently underway in Mexico will dramatically reshape key markets (labour, education, petroleum, finance, telecommunications, etc.) – paying a growth dividend starting at some point in 2015-2016, when the economy will grow annually at a healthy six to seven percent clip. Of course, political turbulence and unrest will be another by-product of these reforms – peaking in 2014 in the period leading up to, and immediately following, the approval of the energy reforms.

Economic growth will be driven by significant efficiency gains in the Mexican economy. The liberalization of key markets will be a key driver of productivity change. Productivity change will also be driven by more intense competition in product/service markets, as well as by significant employment growth in the formal economy, as workers migrate from the informal economy in response to health and pension market reforms.

Growth conditions will be bolstered by continued reliance on an open-economy model, prudent macroeconomic policies, a sound and growing financial system, a competitive exchange rate set by market forces, and gradually improving security conditions in the country.

As mentioned, political conflict and unrest will have been part of the cost of the reforms. The ultimate effect of the extreme behaviour of radical political groups between 2013 and 2015 will be to have discredited key populist leaders – especially Andres Manuel Lopez Obrador (AMLO), leader of the National Regeneration Movement (MORENA) – and the policies that they espouse, but not before causing mayhem, fear and discomfort for a majority of the population.

The behaviour of MORENA and its followers will be in stark contrast to the ‘responsible’ behaviour of PRI, PAN and moderate PRD leaders, resulting in a public backlash against AMLO and MORENA in the Presidential elections in 2018. In 2020, therefore, Mexico will be governed primarily by PRI and, to a lesser degree, PAN and PRD moderates. The PRI will control the Presidency, Congress and the Senate, as well as several key state governments (i.e. Mexico, Nuevo Leon, Chihuahua, and possibly Jalisco and Baja California).

There is a downside to all of this. Opposition parties may prove too weak to successfully fulfill their role as a loyal opposition to the PRI. This will undermine the vitality and plurality of politics in Mexico. The country will once again be drifting toward a one-party system. There will be noticeable weaknesses in the governance of key sectors. Complacency due to the success of the reforms will delay the elimination of corrupt practices and undermine the balance between the three branches of government.”

» Roberto Newell Garcia is the Vice Chairman of the Mexican Institute for Competitiveness (IMCO), an independent think tank.

Alejandro García Magos

…will be seven years closer to a more meaningful integration with the rest of North America. By then, the political and economic elites of the country will have finally put to rest – both in rhetoric and practice – Bolivar’s dream of a Latin American union. This realignment will have been the result of two independent factors: first, the conviction among Mexican elites that northern integration is the best course of action; and second, the emergence of the Union of South American Nations (UNASUR) as the preferred regional body for left-leaning South American governments. Shunned by its sister republics of the South, Mexico’s attention and capital will naturally move in the other direction.

The consequences of Mexico’s realignment will be felt at both ends of the continent. In the US, Mexican companies will make solid inroads on the back of that country’s growing Hispanic market – creating jobs in economically depressed states. And as the prosperity of Mexico and that of the US become increasingly intertwined, Washington and Mexico City will be spurred to define a common hemispheric diplomacy. In South America, this will be strongly felt by the governments of the Spanish-speaking countries – particularly by those of moderate persuasion that might otherwise find themselves constrained in a Brazil-led UNASUR.”

» Alejandro García Magos is a Spanish-language Geo-Blogger with Global Brief.

Diana Villiers Negroponte

…can anticipate rising levels of income due to the growth of the manufacturing and service sectors. The legalization of undocumented Mexicans in the US will result in increased remittances to families in Mexico – thereby lifting many families out of poverty and providing access to education.

The consequence of rising incomes will, predictably, be a significant increase in families who identify themselves as middle class. Defined in marketing terms by the Mexican Association of Market and Public Opinion Research Agencies (AMAI) as the socioeconomic C and D+ categories, the middle class will account for 65 to 80 percent of urban Mexicans. (In Mexico, a middle class family is headed by someone with a high school degree, possessing a car and a computer with Internet service, and also having the ability to take one vacation away from home each year.) Family members will also seek to travel legally to the US to visit family and friends, forcing the US government to offer the Visa Waiver Program to Mexican citizens.

This emerging Mexican middle class will be better educated and therefore less ignorant. The old patronage system and reliance on political patrons will break down. Citizens will become more independent. The traditional top-down dictates of the political class will give way to greater demands for participation from the grassroots. Social movements will become widespread, capturing a wide variety of causes ranging from socio-political issues, justice and human rights to environmental matters. Those aged 15 to 27 and self-identified as generacion X will play a more active role both in formal politics and social movements. In short, Mexico will enjoy democratic ferment and also increases in public protest. Mexican law enforcement will have to learn to respect these within frameworks that value and protect human rights.

Demand for quality education that enables the younger and empowered middle class to participate in the knowledge economy will issue in more technical schools with standards equivalent to those of US community colleges. Combined degrees from US institutions will become available; there will be significant demand for these combined degrees. More American (and Canadian) students will be drawn to study in Mexico. For their part, Mexican students will still find the costs of US colleges prohibitive unless more American states follow the lead of Texas and offer in-state tuition to Mexicans from border states.

Demand for energy will increase with rising standards of living. Carbon-based fuels will be hard-pressed to meet this demand. As a result, there will be greater reliance on solar and wind power, with the proportion of electricity derived from renewable sources increasing by approximately 20 percent.

Prime jobs will be in the engineering services sector, with salaries eventually rising to US-equivalent levels. Increasing numbers of young professionals will work both in Mexico and the US – creating a more integrated citizenry in North America (as already exists in the northern half of the continent). Historical defensiveness vis-à-vis the US will diminish. However, the Catholic church and conservative social movements may grow in strength as they insist on traditional norms and symbols of national sovereignty.”

» Diana Villiers Negroponte is a Senior Fellow at The Brookings Institution.

(Photograph: The Canadian Press / AP / Dario Lopez-Mills)

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