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

Carlos YanezCarlos Yanez

Matt AnzardoMatt Anzardo

Econ. 465Econ. 465

Ramon A. CastilloRamon A. Castillo

SummarySummary

Relationship with U.S. economic Relationship with U.S. economic decline and Mexicodecline and Mexico

GDP: Investment, Trade, Consumption, GDP: Investment, Trade, Consumption, and Government Spendingand Government Spending

UnemploymentUnemployment

Consequences on; Consequences on; ImmigrationImmigration RemittancesRemittances PovertyPoverty

GDPGDPGDP Growth

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

2006 2007 2008 2009Mexico

United States

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

InvestmentInvestment

US provides half of Mexico’s FDIUS provides half of Mexico’s FDI Almost 70% is in manufacturing Almost 70% is in manufacturing

and assembly plants. and assembly plants. US FDI into Mexico has US FDI into Mexico has

decreased by 16% in 2008 and decreased by 16% in 2008 and 23% in 200923% in 2009

Significant decline in Significant decline in manufacturing jobsmanufacturing jobs

TradeTrade

Over 80% of Mexico’s exports go to Over 80% of Mexico’s exports go to the USthe US

Current account deficitsCurrent account deficits The value of the peso decliningThe value of the peso declining Mexico relies on 35% of foodstuffs Mexico relies on 35% of foodstuffs

from imports, therefore more hunger from imports, therefore more hunger may result if their currency can not may result if their currency can not buy as much.buy as much.

Caused more job losses in MexicoCaused more job losses in Mexico

TradeTradeCurrent Account of Mexico

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

2006 2007 2008 2009

mill

ion

Current Account of US

-1000

-900

-800

-700

-600

-500

-400

-300

-200

-100

0

2006 2007 2008 2009

Bill

ion

ConsumptionConsumption

Because of job losses, people are Because of job losses, people are cutting down on spendingcutting down on spending

Government hopes tourism will raise Government hopes tourism will raise consumption. consumption.

Swine fluSwine flu The value of bad credit card debt The value of bad credit card debt

shot up from $1.3 billion in shot up from $1.3 billion in November 2007 to more than $3 November 2007 to more than $3 billion in November 2008.billion in November 2008.

Government SpendingGovernment Spending

Cuts in public spending and Cuts in public spending and increased taxes on income and increased taxes on income and consumption.consumption.

Public officials and public sector. Public officials and public sector. New general consumption taxNew general consumption tax Still left with a 22.3 billion dollar Still left with a 22.3 billion dollar

deficitdeficit

UnemploymentUnemployment

Significant decline in manufacturing jobsSignificant decline in manufacturing jobs Many moved to informal sector such as street Many moved to informal sector such as street

vendingvending Since the beginning of the current economic Since the beginning of the current economic

crisis, Mexico’s unemployment rate has gone crisis, Mexico’s unemployment rate has gone from 3.7% to 5.67%, US has gone from 4.6% to from 3.7% to 5.67%, US has gone from 4.6% to 9.4%9.4%

Unemployment

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

2006 2007 2008 2009

Mexico

United States

United States: Unemployment United States: Unemployment Rate on Mexican ImmigrantsRate on Mexican Immigrants

RemittancesRemittances

Mexico’s largest source of incomeMexico’s largest source of income Reasons for the declineReasons for the decline

U.S. recessionU.S. recession Unemployment in the U.S.Unemployment in the U.S. Tighter security at bordersTighter security at borders

3.6% ($931m)in 2008 to $25bn.3.6% ($931m)in 2008 to $25bn. First decline in 13 yearsFirst decline in 13 years

RemittancesRemittances

RemittancesRemittances

• Michoacan, Mexico is where most remittances are sent to.Michoacan, Mexico is where most remittances are sent to.

• Baja California , $36mBaja California , $36m

ImmigrationImmigration

Higher cost of MigrationHigher cost of Migration Poor job prospects in the U.S. /Poor job prospects in the U.S. /

MexicoMexico Illegal aliens returned home Illegal aliens returned home

rose 20%rose 20% Mexico (NSEO) estimates that Mexico (NSEO) estimates that

433,000 Mexican migrants returned 433,000 Mexican migrants returned between (2008, 2009)between (2008, 2009)

Immigration LevelImmigration Level

Immigrants returning home could drive Immigrants returning home could drive down wages and put pressure on social down wages and put pressure on social services.services.

About 11% of everyone born in Mexico is About 11% of everyone born in Mexico is currently living in the U.S.currently living in the U.S.

PovertyPoverty

PovertyPoverty

44,700,000 Mexicans are now living 44,700,000 Mexicans are now living in poverty.in poverty.

14 million are considered living 14 million are considered living under extreme poverty.under extreme poverty.

Poverty levels are predicted to be Poverty levels are predicted to be similar to 1996.similar to 1996.

Poverty Poverty

http://www.youtube.com/watch?v=XjGXXOfoTek

ConclusionConclusion

As the result of the close As the result of the close relationship between Mexico and relationship between Mexico and the United States, Mexico will the United States, Mexico will continue to face all the factors continue to face all the factors mention above till the day Mexico mention above till the day Mexico dices to limit its relationship with dices to limit its relationship with the United Statesthe United States