News Column

Everyone is Optimistic About Mexico, Except for Mexicans

February 19, 2014

By David Agren, Special for USA TODAY

When President Obama arrives in Mexico today he will find a nation touted by some economists and political figures as on the verge of a great leap forward.

Ordinary Mexicans seem to disagree, though.

This month, Moody's raised Mexico's bond rating a full notch, confirming the confidence of investors in the structural reforms that the Mexican government says will grow an economy long lagging behind other Latin American nations.

But on that same day, Mexico's national statistics service released a survey showing that consumer confidence has crashed to its lowest level since the depths of the world economic crisis in 2009.

The pessimism is rooted in worries over rising prices, new taxes and stagnant wages, and respondents were skeptical that the "structural reforms" would help them, according to the survey.

Outside observers and international investors often exhibit more optimism for Mexico and its economy than Mexicans themselves. That's because ordinary Mexicans remember the many past reforms and privatizations that promised to turn Mexico into an advanced nation but instead created monopolies and underwhelming economic growth, say analysts.

"People inside the country have a sense of history that's a little different" than international investors, says Jonathan Heath, an independent economist in Mexico City.

"They know that on many occasions, when the whole world has been positive about Mexico, we've fallen into crisis," adds Heath, recalling the peso crash of 1994, when Mexicans suspected something was economically amiss and bought U.S. dollars as international investors kept investing in Mexico.

Obama, who arrives here today for a meeting of North American leaders, is among those expressing optimism. Vice President Biden expressed similar sentiments during a September visit to Mexico City when he told his hosts: "We wish you well in those reforms. Because, as an outsider looking in, they're all needed."

Mexican President Enrique Peña Nieto has made reforms his top priority since taking office 14 months ago. He has reached across party lines to broker deals with a weak opposition in Congress, including a measure in December that approved an end to a seven-decade-long state oil monopoly.

"Reforms elevate the expectations of (GDP) growth of the national economy over the medium- and long-term, a factor that distinguishes us from other emerging nations," Peña Nieto told an audience of bankers last week.

The feedback has been fawning for Peña, 47, whose Institutional Revolutionary Party (PRI) retook office after spending a dozen years in opposition, when it ironically opposed the very reforms that the president now champions as his own.

Many of the kudos are coming not from inside Mexico but from abroad.

Peña Nieto was treated like a star at the World Economic Forum last month in Switzerland. Finance Minister Luis Videgaray was named best in the world at his job by The Bankermagazine.

But in Mexico, just 32% approve of Peña Nieto's performance, the lowest level in four presidential administrations, according to a February survey by polling firm BGC.

Mexico's economy expanded a measly 1.3% in 2013, less than half of the 3.5% forecast by the U.S. government. It did not stop the accolades.

"Peña Nieto's public relations entourage puts Madison Avenue to shame," says George Grayson, Mexico expert at the College of William & Mary in Virginia.

Time magazine summed up the sunny sentiments by putting Peña Nieto on the cover of its international editions with the headline, "Saving Mexico." It also noted how he had changed the narrative to economic issues and structural reforms instead of drug cartel killings.

Yet that may be only because he has always talked little about the drug cartels that have swamped Mexico despite recent headlines on the emergence of self-defense groups of citizens who are arming themselves to fight gangs in several states where police provide little protection.

"Those outside the country see it as, 'Now that reforms have been passed, Mexico is going to magically grow,' while the people inside (the country) are much more skeptical," Heath says.



Source: Copyright 2014 USA TODAY


Story Tools