Mexico’s Economic Growth Struggles

Mexico’s economy grew a sluggish 3% last year, the government announced Wednesday, marking one of the worst showings in Latin America and another disappointing year for a country that many analysts say should be expanding twice as fast.

Gross domestic product, the country’s output of goods and services, increased a modest 2.7% in the fourth quarter over the same period a year earlier. Officials blamed the lackluster showing largely on fallout from hurricanes that battered the tourist magnet Cancun and farming areas in the south.

But analysts said Mexico’s economic doldrums couldn’t be blamed on a passing storm. The nation ended 2005 as it did many years during the last decade, with GDP growth among the lowest in the Western Hemisphere and far off the pace of rival emerging economies in Asia. The country’s perennial underachievement in growth and employment has surfaced as the biggest challenge facing the candidates in this year’s presidential election.

Mexico isn’t generating anywhere near the 1 million jobs it needs each year to keep up with population growth. Illegal emigration to the U.S. is believed to be at an all-time high. And China is grabbing market share in the U.S., the destination for more than 90% of Mexico’s exports.

What’s more, Mexico is underperforming at a time when many factors should be working in its favor, notably a sound U.S. economy, high prices for its crude oil, record remittances from Mexicans living abroad and its lowest inflation rate in years.

Although there is disagreement among policymakers and analysts on what needs to be done, nearly all concur that Mexico is fast losing competitiveness and that changes are needed to roust Latin America’s second-largest economy from its funk.

Source: LA Times, Feb. 16, 2006

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