Mexican government statistics show the economy has slowed to zero growth and criticism of President Vicente Fox's economic policies is growing as a result. But, economists say there is little the government can do to quickly improve the situation.
Most economists say the slowdown in Mexico was inevitable given the fact that Mexico exports more than 80 percent of its products to the United States, where demand for those products has fallen. At the same time, Mexico has lost thousands of jobs to Asian countries where wages are far lower, and infrastructure and worker training are better.
Mexico-based economic analyst David Shields says President Fox may not deserve the blame for the current downturn, but he must act soon to address the problem. "Really I do not think there is much that Mr. Fox could have done, and certainly it would have been hard for Mr. Fox to anticipate the economic slowdown," he says. "However, now that the slowdown is here, I think a lot of people are looking to him, are correctly looking to him, to see if he can find some domestic measures that can be implemented to at least alleviate some of the crisis."
Mr. Shields says President Fox should target areas of the economy that need government help. He also says business leaders need to find ways of gaining back jobs that have been lost to cheaper labor markets in Asia. "I think one major thing that can be looked at would be specific measures to stimulate areas of the economy, such as textiles, petrochemicals, and energy, which are slower than the rest of the economy," he says. "Another thing that can be done is to look at ways of improving Mexico's competitiveness overall."
Mr. Shields notes that Mexico's main competitive advantage, other than low wages, is its geographical location next to the United States. It is generally cheaper to produce goods in Mexico and transport them north by road than it would be to produce them in Asia and have to bring them over the ocean. But that advantage is beginning to narrow.
Mexico has lost several thousand technology jobs to China, where wages are so low that even the transportation expense is no longer an issue. Mr. Shields says greater efficiency and a boost in productivity are needed in Mexican factories in order to meet that challenge.