Since the global recession, Mexico has been making its voice heard at the global level. And it should be since Mexico is now the 15th largest economy in the world, 2nd largest trading partner with the United States, 12th largest global exporter and a poster child for how other commodity export-dependent peers can transition to an internally-fueled economy through structural reform aimed at bolstering sustainable consumer demand. Recall Mexico of the early 1990s, going through the same privatization fury we saw in the former Soviet Union, Eastern Europe and China – and yet Mexico’s story stands out for several reasons.
First, in the 1980s, oil exports were approximately 80% of USD income; today, oil represents only 20% of USD income with export manufacturing representing the largest source of USD income, just ahead of foreign remittances. What this means is the government budget no longer lives and dies by the price of oil but by Mexico’s strategic position as a value-add exporter of manufactured goods. This evolution, made more robust by the rise of the middle class consumer, makes Mexico one of the most important global trade partners and a major beneficiary of foreign direct investment.
Second, over the last 25 years, Mexico has successfully transitioned away from the single party political system, marked by graft, back room deal-making and a heavy-handed regulatory environment. That said, while it’s certainly easier to do business today in Mexico, they still have a lot to do to make business investment easier. Note: avoid getting dragged into court if doing business in Mexico. Its Napoleonic legal system is not fun and unless your claim is physically documented, notarized and witnessed by the Ave Maria, you may find yourself sucking wind on the short end of a contractual good faith agreement. Intent matters little; paper rules. So no, an email isn’t going to make your case in court.
Third – and this is the theme we’ve really watched over the last few years – Mexico is becoming a bona fide global player in both foreign affairs and trade. Many don’t realize that Mexico is an extremely key member of OAS, the 10th largest country measured by contributions to the UN’s annual operating budget and under Claudia Ruiz Massieu, Mexico’s visibility on the global stage has only increased (Fact: Mexico has 80 embassies and almost 200 consulates around the world). So, this from Dow Jones this morning, reminds us that Mexico’s growing role on the global stage should be seen from two perspectives: First, Mexico, like all countries, seeks to promote its own interests. That is a given, but, second, Mexico appears more and more to be carrying water for US foreign policy when it makes sense. Dragging what remains of OPEC into the 21st century strikes us as one of those policy objectives that suits Mexico’s unique position well.
“Dow Jones: Mexico Energy Min Says “Just Coming for Informal Conversations” with OPEC, Non-OPEC Representatives in Istanbul
Wed Oct 12 06:37:23 2016 EDT”
No, it’s not the first time that Mexico has attended an OPEC meeting but given all that has transpired, it surprises us little that Mexico pops up for “informal conversations” with OPEC members as world focus on crude supply remains – let’s say – intense.