MEXICO¿Un juego de serpientes y escaleras?

Jorge G. GonzalezTrinity University

Recent Economic and Political Events

• Economic recovery in the U.S.• Government gridlock• Political scandals (AMLO and PRI)• Mexico – U.S. relationship

Vital Signs

• Is the link alive?

50

60

70

80

90

100

110

120

U.S. Mexico

Industrial Production Index(January 2000 = 100)

Source: Banco de México and FED www.banxico.org.mx; www.federalreserve.gov

Vital Signs

• Is the link alive?• GDP growth

Real GDP% yearly change

Source: INEGI www.inegi.gob.mx

-10

-5

0

5

10

1994 1996 1998 2000 2002 2004

Vital Signs

• Is the link alive?• GDP growth• Direct foreign investment

Foreign Direct InvestmentBillions of Dollars

Source: Banco de México www.banxico.org.mx

2.64.8 4.4 4.4

11.0 9.5 9.2

12.812.4

13.5

17.2

27.5

17.3

12.9

18.217.8

0.0

5.0

10.0

15.0

20.0

25.0

30.0

1990 1992 1994 1996 1998 2000 2002 2004

Debt Market Foreign Investment

Billions of Dollars

Source: Banco de México www.banxico.org.mx

0.90.6

0.1 -0.9 0.0

0.9

0.1

0.9

5.2

3.3

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1996 1998 2000 2002 2004

Stock Market Foreign Investment

Billions of Dollars

Source: Banco de México www.banxico.org.mx

2.8 3.2

-0.7

3.8

0.4 0.2 -0.1 -0.1

-2.5

3.4

-4.0

-2.0

0.0

2.0

4.0

6.0

1996 1998 2000 2002 2004

Vital Signs

• Is the link alive?• GDP growth• Direct foreign investment• Super Peso and foreign sector

Exchange RatePesos per U.S. Dollar

Source: Banco de México www.banxico.org.mx

456789101112

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Exchange RatePesos per U.S. Dollar

Source: Banco de México www.banxico.org.mx

456789101112

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

1995 1997 1999 2001 2003 2005

Inflation Differential vs. Exchange Rate

Inflation

Exchange Rate

317

219

Source: Banco de México www.banxico.org.mx

10

20

30

40

50

60

70

94 - I 95 - I 96 - I 97 - I 98 - I 99 - I 00 - I 01 - I 02 - I 03 - I 04 - I 05 - I

Merchandise TradeBillions of Dollars

Source: Banco de México www.banxico.org.mx

Imports

Exports

Family RemittancesBillions of Dollars

4.2 4.9 4.7 5.9 6.68.9 9.8

13.416.6

20.0

0.0

5.0

10.0

15.0

20.0

1996 1998 2000 2002 2004

Source: Banco de México www.banxico.org.mx

Family RemittancesBillions of Dollars

4.2 4.9 4.7 5.9 6.68.9 9.8

13.416.6

20.0

0.0

5.0

10.0

15.0

20.0

1996 1998 2000 2002 2004

Source: Banco de México www.banxico.org.mx

Vital Signs

• Is the link alive?• GDP growth• Direct foreign investment• Super Peso and foreign sector• Federal government balance

0.2 0.0 0.0

-0.7

-1.1 -1.0 -1.0-0.7

-1.1

-0.6-0.2 -0.1

-2.0

-1.0

0.0

1.0

1994 1996 1998 2000 2002 2004

Government BalanceBalance / GDP

Source: SHCP www.shcp.gob.mx

Vital Signs

• Is the link alive?• GDP growth• Direct foreign investment• Super Peso and foreign sector• Federal government balance• War on inflation

Inflation

Source: Banco de México www.banxico.org.mx

7.05

51.97

27.70

15.7218.61

12.328.96

4.40 5.703.98 5.19 3.33

0

10

20

30

40

50

60

1994 1996 1998 2000 2002 2004

Vital Signs

• Is the link alive?• GDP growth• Direct Foreign Investment• Super Peso and Foreign Sector• Federal Government Balance• War on Inflation

Political Environment

•Presidential elections

Felipe Calderón Roberto Madrazo Andrés López Obrador

Political Environment

•Presidential elections•Structural reform paralysis

• Incredible transformation with stability

• Fox’s legacy: Separation of powers• Much work to be done• Grave danger: Rule of law

A Game of Chutes and Ladders?

A Game of Chutes and Ladders?

www.trinity.edu/jgonzal1

jorge.gonzalez@trinity.edu

MEXICO¿Un juego de serpientes y escaleras?