Seguridad

Mexico’s Economic Integration and Outlook

Remarks by

Manuel Sánchez

Member of the Governing Board of the Bank of Mexico

at the

United States-Mexico Chamber of Commerce

California Regional Chapter

Los Angeles, CA

December 9, 2011

It is an honor to be in Los Angeles to address the United States-Mexico Chamber of
Commerce. I would like to thank the organizers of the 14thAnnual Mexico
Economic Review and Political Outlook 2011 for the invitation to speak to you
today.

Because California is one of the U.S. states most interconnected to Mexico, it is
natural to begin my review of the Mexican economy by examining its everincreasing integration with that of the United States. After that, I would like to
describe the effects of current international conditionson Mexico and discuss its
economic outlook.

My main message is that, while the strength of the current economic upturn in
Mexico may be limited by that of the United States, the benefits of its long-term
association with its northern neighbor continue to be substantial. Also, Mexico will
realize its upside potential for sustained economic growth if it strengthens its
fundamentals andpromotes pending structural reforms. As usual, my remarks are
entirely my own responsibility and do not necessarily reflect those of the Bank of
Mexico.

Expanding economic integration
During the last three decades, Mexico has been undergoing a process of expanding
economic integration with the United States. Deeper relations between the two

2

countries have been built on their geographicproximity, especially as a result of
the opening up of the Mexican economy, which began in 1983 with a phase of
unilateral reduction of tariffs and other barriers to trade. Ever greater openness
has been achieved through the North American Free Trade Agreement (NAFTA)
since 1994, which included Canada, the United States and Mexico. Despite the
important role that Canada plays in intraregionaltransactions, in what follows I
will focus on the growing economic links between the United States and Mexico.

Enhanced economic integration between these two countries is multifold. The
most dramatic reflection of this relation is the consistently high growth of their
bilateral trade in goods and services, which surpasses that of their respective
GDPs. Specifically, highly dynamic Mexicanexports to the United States have
implied markedly more Mexican imports from north of the border. Additionally,
bidirectional tourism has been increasing, and workers’ remittances from the
United States are an important source of inflows in Mexico’s balance of payments.
At the same time, foreign direct investment between the two countries and from
other nations has being growing in view ofadvantages from business
opportunities arising from their greater commercial interaction.1

From 1980 to 2010, Mexican exports to the United States rose from 5.0 percent of GDP to
23.1 percent, while Mexican imports from the United States increased from 5.7 percent of GDP
to 14.0 percent. During the same period, FDI from the United States to Mexico grew by more
than 1.8 times in constantdollars, while workers’ remittances, most of which come from the
United States, increased 32 times.
1

3

The benefits of this association have accrued to both nations, but being the less
developed economy, Mexico has profited in particular. One direct effect of Mexico’s
opening to trade has been a trend towards product specialization and efficiency, a
result of fiercer competition fromabroad as well as multiplied opportunities to
send goods to the world’s largest market. Of course, this transformation has not
been a zero-sum game, as suggested by the complementary roles that the two
countries have played in certain expanding sectors, such as Mexico’s in-bound
maquiladora and auto industries. More importantly, and as predicted by theory,
both economies have benefited from a...