The News
Friday 19 of July 2024

And Yet, It Moves

Felipe Calderón Hinojosa,photo: Cuartoscuro/Simón Sánchez
Felipe Calderón Hinojosa,photo: Cuartoscuro/Simón Sánchez
“We’re better off than other nations”

What’s the difference between a right-wing American and a Mexican socialist?

None, their opinions are very similar and so is their economic discourse. According to GOP candidates Ted Cruz and Donald Trump, the Barack Obama administration is not only a disgrace but the U.S. economy is in a shambles.

In Mexico, super pinko Andrés Manuel López Obrador says that the Enrique Peña Nieto administration is not only a disgrace — besides being very corrupt — but that … you guessed it, the Mexican economy is in a shambles.

Neither of these two points of view have a firm analysis. The U.S. has recovered from George Bush’s madcap Iraq war — which Obama says was financed with a credit card — as well as the devastating depression caused by the 2007-2008 foreclosure crisis that finally led many of the blue chip companies into bankruptcy.

By the way, this particular crisis hit Mexico very hard in 2009 under President Felipe Calderón when the economy plummeted by a whopping minus 6.2 percent. Calderón, a political coward like all politicians in responding to taking the blame for a disgrace like this one, blamed it on “the international financial crisis” which in part was true, but Calderón never saw the foreclosure crisis.

Talking ill about the economy is a national constant debate yet, at present, like economist Luis Enrique Mercado says about the Mexican economy, “consumers think things are not going well but they continue to purchase cars and leave the supermarket with carts full of merchandise.”

What’s going on?

Simple, the Mexican economy, though not booming, has been stabilized by the current policies implemented since the late 1990s, keeping inflation low.

Governments learned that even in low growth, having a minimal inflation is highly significant because regardless of the not-so-good current 2.5 percent gross domestic product yearly average increase, low inflation prices remain stable and with a little bit of savings consumers can do wonders.

A fact, says economics analyst Enrique Mercado, is that the economy is not doing as well as the current government and Mexico’s Central Bank would like us to believe. For one, what were once for many years “the motor of the economy,” namely exports, has stopped to be so as our main ally and consumer U.S. is not buying from Mexico as much as it used to, thus decreasing income in general.

However, the U.S. continues helping Mexicans through remittances — the same ones Trump was to confiscate to pay for his wall — and the great virtue of remittances, which oil, tourism, maquiladoras or car manufacturing do not have — is that this money, $24,791 billion in 2015 and still going to go directly into the pockets of families, and are not diluted into the economy through taxes.

For a while, Mexico’s Central Bank also foundered with the volatility of worldwide currencies and at least its governor Agustìn Carstens claims that nearly $25 billion belonging to the much valued and cherished federal reserves had to be auctioned to keep the peso from further devaluation.

This is at least true for the moment as the peso-dollar exchange has returned to an under 18 pesos per dollar average and seems stabilized, at least for the moment. This kind of direct cash also brings some confidence to the not so very confident consumers (the index says so) but pocket money, not great savings, is at hand.

So politicians in their permanent attack against “the institutions” (as Peña Nieto calls his administration) are seeking gain and indeed no administration, present or past, can claim they made at least a dent in poverty.

But with low inflation the economy keeps moving. Expect, and this will not come as a surprise, that the GDP growth expectations will be dropped from 2.5 to around two percent by the end of the year.

It’s not good, but as Peña Nieto claims when defending his ailing mandate, “we’re better off than other nations.”

Perhaps not, but like critics may claim, the economy is not in shambles and even if at a snail’s pace, it’s moving.