By many measures, Mexico’s 20th-century revolution appears to have succeeded. Since 1910, illiteracy has plunged from 80 percent to 10 percent, life expectancy has risen from 30 years to nearly 70, infant mortality has dropped from a whopping 40 percent to about 2 percent, and, in terms of caloric intake, average Mexicans are eating about twice as much as their forebears at the turn of the 20th century.
Decades of near-continuous economic growth account for rising Mexican living standards. The Mexican economy has rebounded from its last two recessions because of plentiful natural resources, notably oil and metals; diversified manufacturing, such as cars, steel, and petrochemicals; steadily increasing tourism; exports of fruits, vegetables, and cattle; and its large and willing low-wage workforce.
Recent Mexican governments, moreover, have skillfully exploited Mexico’s economic strengths. The Border Industrialization Program that led to millions of jobs in thousands of border maquiladoras has spread all over the country, especially to Monterrey, Mexico City, Guadalajara, and Puerto Vallarta itself. Tourism, Puerto Vallarta’s strongest job creator for years, grew even stronger during 2005, when Puerto Vallarta drew more foreign visitors than any other Mexican beach destination.
In Mexico as a whole, the country’s increased manufacturing output has produced manifold economic benefits, including reduced dependency on oil exports and burgeoning foreign trade. Consequently, Mexico has become a net exporter of goods and services to the United States, its largest trading partner. In 2001, however, the U.S. economic slowdown decreased demand for Mexican products; consequently Mexico lost more than half a million jobs, forcing economic growth down to a weak 2.5 percent for 2001. Nevertheless, the slower growth resulted in neither significant inflation nor weakening of the peso, and by late 2004, the Mexican gross domestic product was again rising at a healthy annual rate of about 5 percent.
But, during 2004 and 2005, despite high prices for its oil, rock-bottom inflation, large payments of money from Mexicans working in the United States, and a balanced budget, the Mexican economy still didn’t produce the million jobs a year it needed to keep up with population increase. Although some of the sluggishness could be blamed on the hurricane that devastated Cancún in fall 2005, most experts agree that Mexico’s largest economic problem is lack of ability to compete, especially with respect to Asian countries, especially China, which floods Mexico with low-cost goods, while Mexico sells very little to China in return. A serious marker of all this appeared in 2004, when China replaced Mexico as the United States’ second-largest import source, jumping to about 14 percent of U.S. imports, compared to Mexico, at around 10 percent.
Fortunately, 2006 painted a much brighter economic picture. Nearly all economic experts agreed with the pronouncement that the Mexican economy is “firing on all cylinders.” Virtually all of Mexican economic indicators rose sharply, from the annual growth rate (more than 5 percent for the first half-year), pushed upward by a 50 percent increase in car production and the high price of Mexico’s exported oil, both of which lifted exports to the United States by 22 percent to record levels. Moreover, on the domestic side, wages were up by more than 4 percent, coupled with both the fortunate low inflation and low interest rates. In fact, if government predictions turn out to be correct, 2006 will have been the year that Mexico produced the million jobs a year that Vicente Fox promised—a million new jobs that Mexico needs to begin stemming the hemorrhage of workers to north of the border for jobs.
All of this good economic news bodes well for what many experts suggest: that Mexico, in order breathe permanent new life into its economy, needs fundamental structural reforms, such as more flexible labor rules, more effective tax collection (hardly anyone pays any income tax), and more private investment to modernize the energy and oil industries.