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Growing Mexican Middle Class Will Effect Economic Changes in Country

25 Jul 2012

With Mexico’s workforce transitioning in three decades from simple assembly to manufacturing precision parts for aerospace and other high-tech industries, its people have welcomed a growing middle-class population – and government must act accordingly to support that growth, an architect of NAFTA says.

“Mexico is, or was, a ‘poor’ country,” Luis de la Calle notes. “The definition of ‘poor’ was misused by politicians because it became an excuse to not do what was right.”

In addition to having a hand in shaping NAFTA, de la Calle is managing director and partner of de la Calle, Medrazo, Mancera (CMM), a consulting firm specializing in economy, regulatory processes and international-trade matters. He also recently authored a book, “Clase Mediero,” addressing the growth of Mexico’s middle class and its contributing factors.

“Eighty percent of Mexicans (now) consider themselves middle class,” de la Calle continues. “This means they are willing to entertain the idea that investing for their future is the right thing to do. The growing Mexican middle class is showing the country that development is possible and therefore worth investment.”

Energy, education and healthcare reform – along with “better respect of the law” – could be bolstered by the country’s recent elections, de la Calle believes. Another factor that would contribute to the country’s stabilization, he adds, is more accountability from local government in response to decentralization.

“The federal government and the congress in Mexico City have given governors a larger say and more resources for them to spend locally … (but) mayors and governors have little responsibility in terms of raising taxes and imposing taxes to people in their regions,” he says. “We need a more balanced system in such a way that government not only gets more funds but also the responsibility to impose taxes, particularly property taxes. In some Mexican regions property taxes are way too low, where they can be higher and a resource for the government.

“Mexico as a country will do well when the municipalities individually do better, and for this they need more resources so they can provide more public goods like water, roads, a nice environment, a sustainable environment, a good education system for kids and workers. In the end, Mexico’s development process goes hand in hand with Mexico’s municipalities’ own development.”

The country’s elections in early July returned to power the Institutional Revolutionary Party, or PRI, putting former Mexico State Governor Enrique Peña Nieto in control. Peña Nieto aims to lift his country’s growth to 6 percent annually via enhancing flexibility of labor markets, increasing tax revenues and allowing more private countries to enter the oil industry. If the PRI and PAN (National Action Party, the outgoing government) can get on the same page, these and other needed changes may happen.

Twenty years of open trade through NAFTA have benefited consumers by the production of more goods and services at better prices – and Mexico’s competitive manufacturing industry now has a global connection reaching beyond free-trade barriers, “including potentially Brazil,” de la Calle observes.

“The key for North America’s success going forward is to conceive not only our trade relationship and increase trade amongst ourselves, but actually how we transform North America into a net exporting region,” he adds. “The transformation depends on how to structure North American trade in such a way that we become an export region and that transformation is taking place, and policies from the government could accelerate that pace.”

How government alliances may continue to shape Mexico’s future should become clearer after Aug. 11, scheduled date of the PAN’s party conference.

 

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