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 Relationship with U.S. economic decline and Mexico GDP: Investment, Trade, Consumption, and Government Spending GDP: Investment, Trade, Consumption, and Government Spending Unemployment Unemployment Consequences on; Consequences on; Immigration Immigration Remittances Remittances Poverty Poverty

GDP Mexico experienced the Largest decline in GDP growth in 2009 since the last 30 years.

Investment US provides half of Mexico’s FDI US provides half of Mexico’s FDI Almost 70% is in manufacturing and assembly plants. Almost 70% is in manufacturing and assembly plants. US FDI into Mexico has decreased by 16% in 2008 and 23% in 2009 US FDI into Mexico has decreased by 16% in 2008 and 23% in 2009 Significant decline in manufacturing jobs Significant decline in manufacturing jobs

Trade Over 80% of Mexico’s exports go to the US Over 80% of Mexico’s exports go to the US Current account deficits Current account deficits The value of the peso declining 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. 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 Caused more job losses in Mexico

Trade

Consumption Because of job losses, people are cutting down on spending Because of job losses, people are cutting down on spending Government hopes tourism will raise consumption. Government hopes tourism will raise consumption. Swine flu 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 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. Cuts in public spending and increased taxes on income and consumption. Public officials and public sector. Public officials and public sector. New general consumption tax New general consumption tax Still left with a 22.3 billion dollar deficit Still left with a 22.3 billion dollar deficit

Unemployment Significant decline in manufacturing jobs Significant decline in manufacturing jobs Many moved to informal sector such as street vending 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% 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%

United States: Unemployment Rate on Mexican Immigrants

Remittances Mexico’s largest source of income Mexico’s largest source of income Reasons for the decline Reasons for the decline U.S. recession U.S. recession Unemployment in the U.S. Unemployment in the U.S. Tighter security at borders Tighter security at borders 3.6% ($931m)in 2008 to $25bn. 3.6% ($931m)in 2008 to $25bn. First decline in 13 years First decline in 13 years

Remittances

Remittances Michoacan, Mexico is where most remittances are sent to. Michoacan, Mexico is where most remittances are sent to. Baja California, $36m Baja California, $36m

Immigration Higher cost of Migration Higher cost of Migration Poor job prospects in the U.S. / Poor job prospects in the U.S. / Mexico Mexico Illegal aliens returned home Illegal aliens returned home rose 20% Mexico (NSEO) estimates that 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. 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. 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. 44,700,000 Mexicans are now living in poverty. 14 million are considered living under extreme poverty. 14 million are considered living under extreme poverty. Poverty levels are predicted to be similar to Poverty levels are predicted to be similar to 1996.

Poverty

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 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