Mexico’s Economic Policy: Latin America’s Other Story

A brief introduction

 

Commodity exporters had profited from the price boom that occurred over the last decade, but the recent fall in demand amid the global financial crisis hit their economies and unleashed a series of concerns. That is particularly the case in some countries in Latin America, such as Brazil, Argentina, Ecuador, and Venezuela, where deep structural problems will make them more vulnerable amid a weak global environment.

As a result, policymakers in the hemisphere are urged to carry out much-needed reforms, as they will face slowing growth and increasing demands from new constituents. The type of adjustment they embrace will be a result of geopolitical and domestic factors, such as the geographical position, the political capital of incumbents, and the economic structure.

Most emerging economies will transition to different economic models, as the developed world fails to provide a consistent path towards growth. Latin America, a region historically under the influence of the US, would probably continue to embrace a state-led economy, and seek protectionism to defend domestic interests.

Highly misread by many analysts, Mexico will adopt a different response to global economic slowdown, especially at a time when its pro-market economic model and location is starting to pay off. The economy of Mexico is again in a different phase of the business cycle relative to other countries in Latin America, and is growing stronger despite the crisis in the developed world.

The extent to which Mexico is capable to maintain this trend will depend on the new government’s ability and willingness to advanced long-postponed reforms and on the economic recovery of its northern neighbor. It will be critical to determine whether the country is ready to lead a new trend in the Americas and become a relevant strategic partner to the US, a country that could find solutions to its domestic economic problems by formulating a more proactive relation with Latin America. 

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