Latin Inc
Economy
The Mexican Economy: Following Closely in Its Neighbor's Footsteps
From Universia-Knowledge@ Wharton
The pessimistic economic forecasts about Mexico have proven to be right. Day by day, the Latin American nation is becoming increasingly affected by the economic crisis. Its GDP for the first quarter of 2009 fell 8.2% from last year, according to INEGI, the National Institute of Statistics and Geography. Agustin Carstens, Mexico's finance minister, recently declared that the government has adjusted its expectations for 2009. It now expects the GDP to contract by 5.5%, compared with the government's previous estimate of 4%.
Carstens added that the prospects for the country for the rest of the year are also not encouraging when it comes to data about production, employment and other indicators, because they will be compared with the positive figures for last year "before the deepest period in the crisis." This is the worst slide in the Mexican economy since 1995, when the GDP collapsed by 9.2% amidst the "tequila crisis." That crisis was set off at the end of 1994 when the Mexican government made the decision to devalue its currency, leading to capital flight to several countries and the virtual suspension of voluntary external financing. The United States then made US$20 billion in funding available to Mexico, and by the end of 1995, the situation had already normalized.
According to Mauro Guillén, director of Wharton's Lauder Institute, "Mexico's problem is its overdependence on the North American market. Almost 90% of its exports are sent to the giant to the north (the U.S.)." Nevertheless, he adds, "although the situation is very delicate, at least the banks don't have problems. This is the big difference from 1994-1995." Juan Carlos Martínez Lázaro, a professor at the IE Business School, agrees with Guillén and adds that the swine flu outbreak has aggravated a decline that was already going to be very significant. "The forecasts were calling for the economy to fall, at first by 3%, but then they talked of about 4.5%. Now, it is considered a given that the economy is going to fall by 5%, and there are some studies that estimate that the fall will be closer to 7%. There is going to be a very strong contraction in the Mexican economy." >>>>Go to Full Story >>>
The Summit You Didn't See
From Universia-Knowledge@Wharton
There Was More to the Summit of the Americas than Obama's Handshake with Chavez: Even before the start of the Fifth Summit of the Americas in Trinidad and Tobago this month, U.S. President Barack Obama began a new chapter in his county’s relations with Latin America.
In the United States, headlines from the recently concluded Summit of the Americas focused intensely on President Barack Obama's easing of restrictions on travel and remittances to Cuba and his hearty handshake with Venezuelan President Hugo Chavez. But U.S.-Latin American relations were not the only pressing topic during the meeting of the region's 34 leaders: Latin America is focusing its attention on overcoming the current economic crisis and avoiding any chance of another lost decade like the one it experienced during the 1980s. Juan José Toribio, a professor at the IESE Business School and executive director of the International Monetary Fund from 1996-1998, and Riordan Roett, a professor in the international relations program at the Instituto de Empresa Business School, spoke with Universia-Konwledge@Wharton about the political and economic realities of the region. >>> Go to Full Interview >>>
