Transcript Effects of the current U.S. crisis on Mexico

Effects of the current U.S.
crisis on Mexico
Carlos Yanez
Matt Anzardo
Econ. 465
Ramon A. Castillo
Summary

Relationship with U.S. economic decline
and Mexico
 GDP:
Investment, Trade, Consumption, and
Government Spending
 Unemployment

Consequences on;
 Immigration
 Remittances
 Poverty
GDP
GDP Growth
6.00%
4.00%
2.00%
0.00%
2006
-2.00%
2007
2008
2009
Mexico
United States
-4.00%
-6.00%
-8.00%
Mexico experienced the Largest decline in GDP growth in
2009 since the last 30 years.
Investment
 US
provides half of Mexico’s FDI
 Almost 70% is in manufacturing and
assembly plants.
 US FDI into Mexico has decreased
by 16% in 2008 and 23% in 2009
 Significant decline in manufacturing
jobs
Trade
Over 80% of Mexico’s exports go to the
US
 Current account deficits
 The value of the peso declining
 Mexico relies on 35% of foodstuffs from
imports, therefore more hunger may
result if their currency can not buy as
much.
 Caused more job losses in Mexico

Trade
Current Account of Mexico
0
2006
-2
2007
2008
2009
-4
million
-6
-8
-10
-12
-14
-16
-18
Current Account of US
0
-100
-200
Billion
-300
-400
-500
-600
-700
-800
-900
-1000
2006
2007
2008
2009
Consumption
Because of job losses, people are cutting
down on spending
 Government hopes tourism will raise
consumption.
 Swine flu
 The value of bad credit card debt shot
up from $1.3 billion in November 2007
to more than $3 billion in November
2008.

Government Spending
Cuts in public spending and increased
taxes on income and consumption.
 Public officials and public sector.
 New general consumption tax
 Still left with a 22.3 billion dollar deficit

Unemployment



Significant decline in manufacturing jobs
Many moved to informal sector such as street vending
Since the beginning of the current economic crisis,
Mexico’s unemployment rate has gone from 3.7% to
5.67%, US has gone from 4.6% to 9.4%
Unemployment
10.00%
9.00%
8.00%
7.00%
6.00%
Mexico
5.00%
United States
4.00%
3.00%
2.00%
1.00%
0.00%
2006
2007
2008
2009
United States: Unemployment
Rate on Mexican Immigrants
Remittances
Mexico’s largest source of income
 Reasons for the decline

 U.S.
recession
 Unemployment in the U.S.
 Tighter security at borders
3.6% ($931m)in 2008 to $25bn.
 First decline in 13 years

Remittances
Remittances
• Michoacan, Mexico is where most remittances are sent to.
• Baja California , $36m
Immigration
Higher cost of Migration
 Poor job prospects in the U.S. /
Mexico
 Illegal aliens returned home
rose 20%
 Mexico (NSEO) estimates that
433,000 Mexican migrants returned
between (2008, 2009)

Immigration Level


Immigrants returning home could drive down
wages and put pressure on social services.
About 11% of everyone born in Mexico is
currently living in the U.S.
Poverty
Poverty
44,700,000 Mexicans are now living in
poverty.
 14 million are considered living under
extreme poverty.
 Poverty levels are predicted to be similar
to 1996.

Poverty
http://www.youtube.com/watch?v=XjGXXOfoTek
Conclusion

As the result of the close relationship
between Mexico and the United States,
Mexico will continue to face all the
factors mention above till the day Mexico
dices to limit its relationship with the
United States