Globalization and Its Effects on Mexico
Globalization and Its Effects on Mexico
Mexico has the size and assets which could contribute to wealth and prosperity within their borders. The nation has the second longest border with the United States, significant oil resources, and the 11th largest population in the world. Mexico underwent all the necessary free market changes to help support globalization despite initial resistance, but they are yet to complete the interior microeconomic makeover they drastically need. Mexico has many things working for them but continue to underperform when it comes to global power and economy, China out performs Mexico for low-cost manufactured goods and India is often the target for outsourcing jobs and services over Mexico (Biggs, Shiess).
After sustained pressure from the United States and the International Monetary Fund, Mexico decided to change their global economic stance to one that supports the free market. They changed their economy to one based upon exports, they eliminated most tariffs while lowering others, attracted foreign direct investment and private state assets, and finally reduced government spending. These steps were taken at an effort for Mexico to join in on the economic benefits of globalization, but Mexico only finished half of the necessary adjustments necessary for economic prosperity. (Biggs, Shiess) Many residents of Mexico may blame their problems on issues such as the drug cartels, the lack of quality jobs, or lack of foreign investment. Although these ideas may contribute to the problems that control Mexico, they are not the true reason. After Mexico completed their globalization efforts by using the ideas of macroeconomics, they had only completed half the necessary adjustments to truly compete as an economic superpower in the world today.(BBC News)
Mexico has failed in great part due to their stubbornness and interior corruption to evolve their nation from that of an above average Latin American Economic power, to that of one on par with most European nations, China, India, and the United States. The second half of the puzzle that Mexico is missing relies heavily on the ideas of microeconomics. Mexico never created the level playing field for companies within their country and is greatly powered by monopolies which ruins an economy due to lack of competition and innovation. For Mexico to begin to succeed in the free market needs to put resources into banks, education(specifically on technology), mechanisms which will support collaboration between competing companies, and most importantly new laws to disallow the monopolies which control Mexico’s economy. (Biggs, Shiess) Until these steps are taken Mexico remains a country which can be overwhelmingly difficult to do business in, which turns away the majority of investors, and people looking to expand companies into different countries. It is not a good sign when according to the International Finance Corporation Mexico ranks 75 out of 183 countries in the world for “ease of starting a business”. (IFC)
Around the year 2000 when the globalization movement was fully set in motion, Mexico was going through an extreme change in their political stance as well. This was a major problem for Mexico, even though the economic changes which were drastically needed were happening outside Mexico’s borders it is a very difficult task of changing their political institutions at the same time of changing economic institutions. Mexico continues to stand where they are rather than take a step back to allow for future gains, for example Mexico continues to rely on their state owned oil giant Pemex instead of bringing in new companies and investors for an attempt at innovation and competition in their oil industry. (Biggs, Shiess) Until Mexico decides to take a small hit and clean house in regards to their current internal economic stance companies will continue to avoid Mexico at all costs. Startup companies need stability in a political and economic system, and until Mexico is willing to offer that and put in place fair trade laws, better tax laws, and economic regulations they will continue down the same road.
Mexico is greatly reliant on their petroleum exports; this has been called the Resource Curse by many experts. The problem lies in that when they started to nationalize their oil resources, they needed foreign investment to refine petroleum into oil as they lacked the local funds to do so themselves. This results in some economic benefits due to other countries purchasing crude oil for themselves, but the process remains to be quite draining on what could be the road to economic prosperity. Mexico needs to mine the crude oil, export it to outside nations where they can refine it and then re-import it as gasoline. (Biggs, Shiess) The biggest problem that their fossil fuel dependence will bring upon Mexico is that the country is relying on the industry, and because demand and prices are high Mexico has no reason to start new industries. Oil is a fossil fuel and resources are diminishing, and when they are gone Mexico will not be in even rougher shape than they are currently.
Mexico is at the crossroads when it comes to their economy and what direction those in power want to take the country in. As of right now the globalization efforts have helped the Mexican economy but due to lack of funds and a change in political scenery at the same time Mexico was unable to fully capitalize on the free market. They may have helped their trading relationships with outside countries, but not enough was done within their own borders to disallow corruption and monopolies. Mexico is stuck in place until they take the necessary short term economic downfall to get the full rewards from globalization. With the constant changing of political motives, problems with drug cartels, and corruption the chances of new businesses starting up is slim. Without new businesses to inspire competition the economy will continue to rely upon oil to sustain the country’s economy, but eventually the oil resources they have will run out and lead to ultimate turmoil within Mexico.
Biggs, Cate, Ami Shiess, Kelly Korenak, Linda Chang, and Laura Neumeister. “World Savvy Monitor.” World Savvy Monitor. Ed. Anita Trachte. The World Savvy Board, Aug. 2009. Web. 17 Oct. 2012. .
“Mexico Country Profile.” BBC News. BBC, 09 Apr. 2012. Web. 17 Oct. 2012. .
“Doing Business in Mexico – World Bank Group.” Doing Business in Mexico – World Bank Group. International Finance Corporation, 2012. Web. 17 Oct. 2012. .
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 29 December 2016
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