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Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

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Page 1: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Destination Mexico

Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright

and Shanna Hamilton

Page 2: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Demographics and Economic Overview

Alicia Dalton

Page 3: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Mexico

• Independence Day -- September 16, 1810

• Consists of 31 states and 1 federal district

• Ethnic groups -- Mestizo, Amerindina, and Caucasian

• Major Religion -- Roman Catholic (89%)

• Two military branches -- Army/Air Force, Navy/Marines

Page 4: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

The Land

• Less than three times the size of Texas -- 764,000 square miles

• Terrain -- high, rugged mountains; low coastal plains; plateaus; deserts

• Natural Resources -- Petroleum, silver, copper, gold, lead, zinc, timber, natural gas

• Climate ranges from tropical to desert• Part of the “Ring of Fire”

Page 5: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Current Issues

• Environmental Problems– Natural water resources scarce and polluted– Raw sewage and industrial effluents polluting– Deforestation, Erosion, Desertification, Air Pollution

• Natural Hazards– Tsunamis– Earthquakes– Hurricanes

Page 6: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Mexican Government

• Constitution ratified -- February 5, 1917• Executive Branch and Legislative Branch

(Bicameral National Congress)– Cabinet is appointed by President– Senate -- 128 seats, elected– Chamber of Deputies -- 500 seats, elected

• 8 recognized political parties and countless other “pressure groups”

Page 7: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Population Statistics

• Population• % Population Urban • Population growth rate• Mexico City population• Population Density• Life Expectancy• Birth rate• Mortality rate

~ 92 million

70.8%

2.1% - 1990, 1.8% -1995

20 million (23%)

46 people/km2

72 years

25.1/1000

4.5/1000

Page 8: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Unique Facts

• Mexicans average work week = 44.5 hours American average work week = 34.5 hours

• Of 18,174,000 houses in 1994– 16,548,000 had electricity– 12,309,000 has sewage

• Of 306,142 km of roadways– Only 94,946 km were paved

Page 9: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Mexico -- Economy

• Economy ranks in the top 15 in the world• Dominated by petroleum and tourism• “Blessed Years” of rising GDP gave

Mexicans false hopes and buying power• Despite increased industrialization,

membership in NAFTA, and reformed fiscal policies, in 1993 a recession begins

• Now citizens are in tremendous debt

Page 10: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Factors Adding to Recession

• Stagnant domestic demands• Declining industrial output• Slow growth in international economy• Rising interest rates• Decline in value of petroleum products• Severe inflation -- 7.1% in 1994• Enormous foreign debt• Mining privatization reduces employment

Page 11: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Annual GDP

1,150

1,200

1,250

1,300

1,350

1,400

1992 1993 1994 1995 1996 1997

1,000,000,000 pesos

Page 12: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Exchange Rate (Pesos/Dollar)

0

1

2

3

4

5

6

7

8

1992 1993 1994 1995 1996 1997

Page 13: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

1998 Developments

• Profound economic reform

• Restrictive monetary and fiscal policy

• Stronger domestic demand

• Increased private consumption and investment offset effect of fewer exports

• First half of year GDP growth = 5.4%

• Increased confidence results in increased retail spending

Page 14: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Social and Environmental Issues

Laurie Dressler

Page 15: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Environmental Concerns

• Water resources are scarce, polluted or inaccessible

• Deforestation

• Widespread erosion

• Serious air pollution

Page 16: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Deforestation: A Vicious Cycle

Deforestation

Erosion

Pollution

Unproductive Land

Migration

Page 17: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Mexico City• The largest & fastest

growing city in the world• 1/4 of Mexico’s population

lives in Mexico Valley• Faced with extremely high

levels of air pollution• Pollution levels of the city

break the air quality guidelines daily

• Water is contaminated & of poor quality

Page 18: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

U.S. - Mexico Border FactsBorder includes 4 U.S. and 6 Mexican states

U.S.• California• Arizona• New Mexico• Texas

Mexico• Baja California Norte• Sonora• Chihuahua• Coahuila• Nuevo Leon• Tamaulipas

200 km border homes 10 million people

14 major sister city pairs along border

Page 19: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Eight Major Sister Cities

• Tijuana/San Diego

• Cuidad Juarez/El Paso

• Mexicali/El Centro

• Nogales/Nogales

• Nuevo Laredo/Laredo

• Matamoros/Brownsville

• Reynosa/McAllen

• Piedras Negras/Eagle Pass

• Cuidad Acuna/Del Rio

• San Luis Rio Colorado/Yuma

Page 20: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Pollution Prevention Strategies

• Develop air quality assessment & improvement programs

• Continue to build infrastructure & expertise in the border region

• Encourage community involvement

• Develop economic incentive programs

Page 21: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Facts: Educational System• Mexico spends 0.7% of GDP on education versus 2.4% in

the U.S.• The average level of education in 1995 was 3 years of

grammar school• Of those that finish grammar school only 88% continue on

to a secondary school• Only 5% of students attend institutions of higher learning• Only 12% of Mexicans in the border states are enrolled in

higher education compared to 88% in the U.S.• Grammar school teachers now have to have a college degree• Middle school is now mandatory for children

Page 22: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

“80 children under the age of one die each day in Mexico due to

malnutrition”

Page 23: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

The Mexican Debt Crisis

Repairing Mexico’s Banking System

Stacey Hipp

Page 24: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

The Debt Crisis

• Between 1987-93, Mexico attempted a vast program of economic and structural reform.

• The strategies used such as price and trade liberalization, privatization, financial sector liberalization, deregulation, and tax reform were implemented in the hope of promoting greater and more efficient private and international investment.

• In the beginning, the reforms appeared to be working. – Inflation decreased by 8%

– Large fiscal deficits were eliminated

– GDP increased from 0% in 1982-88 to 4% in 89-91

– Capital inflows increased

• However, these reforms were proven unsuccessful in helping to decrease and restructure the country’s enormous external debt.

Page 25: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

The Debt Crisis

• The Current Account deficit grew from 3% to 7% from 1989-90 to 1992-94.

• After 1991, GDP growth slowed.

• The capital inflow growth was utilized through consumption rather than saving.

• By 1995, past due amount on bank loans had risen to 18% of the loans.

• At year end of 1995, overdue loans had also risen to account for 1/3 of total bank loans.

• Problems within the banking system were compounded by the instability of the financial market.

• The Mexican Crisis was further upset by its susceptibility to the fluctuations of foreign markets such as the United States system.

Page 26: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

The Debt Crisis• Other problems in Mexico also contributed to the debt crisis and

following turmoil. – The prime candidate for president was assassinated.– There were continuous uprisings in the state of Chiapas.– The election year lended even further uncertainty.– Foreign investors were reassessing their desires and plans for

investment within the country.• In addition to these, some unwise policy decisions were also being

made.– The replacement of the devalued peso debt by securities lead to

further instability on the part of Mexico in being able handle the following exchange rate fluctuations.

– Foreign countries became less willing to loan to Mexico because they could not pay on their previous debts.

Page 27: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Repairing the Damage

• While some, such as Milton Friedman, opposed the pegging of the exchange rates from the beginning by claiming that the only way to sustain the monetary rate was to set it free, others feel that Mexico was simply trying to help itself out of a bad situation.

• Because many international lenders were unwilling to continue to bail Mexico out of its situation without being repaid, the IMF was forced to act.

• Though the debt crisis was often referred to as the Mexican Crisis, the monetary problems were not limited to Mexico. Much of Latin America and some Asian countries were also affected by the debt crisis.

• Developing countries worldwide were experiencing devaluation problems and were left with few places to turn.

Page 28: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

IMF Contributions

• Opponents argue that the amount of funding given to Mexico to recover from its crisis was extreme and certainly more than what should have been provided for them in light of the fact that they had been unsuccessful in paying off the debts that they had incurred in the past.

• In an address delivered to the Zurich Economics Society, Michel Camdessus, Managing Director of the IMF had the following to say:

– While economic conditions may remain somewhat undetermined, the relative stability of Mexico’s public finances have been restored.

– Even though the funding provided for Mexico was the largest to ever be approved, the actions taken were necessary and certainly justified.

– Mexico has been taking responsibility for its debt and attempting to recover and pay for its debts.

– The seriousness of the crisis called for such interventionist measures in order to secure financial order and prosperity for the future.

Page 29: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Banking in Mexico

• Banking in Mexico has increasing similarities to banking in the United States.

• Improvements have been made in the communications industry which have made banking in Mexico more efficient and convenient.

• Many banks with home offices in the United States have broadened their markets by expanding into many countries in Latin America.

– NationsBank

– Citibank

– Bank One

• The ease and familiarity of banks have helped to increase foreign investment within Mexico. Since the debt crisis, these types of congruencies are what have stimulated some of the investment in Mexico.

Page 30: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Mexico’s Political System

Page 31: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Introduction to Political Candidates

PAN Candidate-Vicente Fox PRD Candidate-Cuauhtemoc Cardenas

Page 32: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Voting

• The recent election was seen as the most democratic and fair in the nations history. President Zedillo took great measures to ensure the authenticity and fairness of the elections.

• More money was spent to ensure the fairness of this election than has been spent on elections in the United States.

• Voting in Mexico is ritualistic in nature. – Elections are most frequently held on Sundays with day being declared a national

holiday.

– The holiday is a time for family gatherings and trips to one’s hometown.

– Candidates parade through the streets of Mexico City in caravans.

Page 33: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Results of 1997 Election

PARTY % VOTE SEATS(n=500)

PRI 38.9 239

PRD 27 125

PAN 25.6 122

*based on 87% of polling places

Page 34: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Party System in Mexico

• Historically, Mexico has had a one party monopolistic system, the PRI

• During the 1980’s Mexico allowed the first unhampered opposition in the national political race. While there were some oppositionist victories, the PRI was able to maintain its power. Instead of maintaining one party power, however, Mexico’s party system became known as a 1 1/2 party system, giving it the appearance of democracy.

• The PRI dominated the political power in Mexico for over 50 years.

• Only recently, in the July 7, 1997 election, was the power of the PRI substantially challenged. The PRD and PAN were very close in the race to overcome the PRI in the mid-term, but the PRD was determined the winner.

• What this victory holds in store for the 2000 election will surely prove to be a substantial and influential part of the Mexican political system.

Page 35: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Other Political PowersInterest Groups

• The Armed Forces

• Economic Elite's

• The Catholic Church

• The Rising Middle Class

• Trade Unions

• University Educated Students

• Government Workers

• Peasants

• Women

• Indigenous Groups

– “the noble savage”

• International Influence

Page 36: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

NAFTA and Trade Relations

Emily Lambright

Page 37: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

NAFTA and Trade Relations

• How has NAFTA influenced the economies of the Unites States and Mexico?

• What changes have occurred in certain industries: textiles and apparel, assembly plants, and manufacturing plants?

• What has been the affect of NAFTA on employment?

• How has NAFTA affected the politics of Mexico and the U.S.?

• What are future predictions for NAFTA?

Page 38: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Trade Relations

• By 1996, Mexico became the U.S.’s third largest trading partner

• Within the first year after NAFTA was enacted, Trade was increased by 24%.

• Mexican imports to the U.S. went from $27 billion in 1990 to $48 billion in 1995.

• From 1994 to 1998, trade has multiplied 21/2 times from $80 billion to 200 billion.

Page 39: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Industries: Textiles and Apparel

• Since NAFTA, the Mexican textile and apparel industry has grown considerably.

• There has been an increase in the number of alliances and joint ventures between American and Mexican companies.

• U.S. owned plants are being built in Mexico.

Page 40: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Industries: Assembly Plants or Maquiladoras

• Maquiladoras are assembly plants that are mostly foreign owned. They are found predominantly along the northern border of Mexico.

• Between 1994 to 1995 over 300 new maquiladora programs were started.

• In 1998 the industry employees 1 million people.• Just in the one year following NAFTA the money that Mexico

received from the assembly plants makes up 15% of the country’s GDP.

Page 41: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Industries: Manufacturing

• NAFTA stipulates that by the year 2001 all components of manufactured goods that are sold in the U.S., Canada, or Mexico must be built in one of those three countries to qualify for the tariff exemption.

• For Asian producers to qualify for the tariff exemption, their plants will likely have to be moved to Mexico.

• New plants mean increased employment in Mexico.

Page 42: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Mexican Employment

• New textile and apparel plants have increased employment in that sector.

• In the assembly plants 89,000 new jobs were created between 1994 and 1995, and a total of 400,000 new jobs have been created in the past five years.

• It is predicted that there will be thousands of new jobs in new manufacturing plants.

Page 43: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

U.S. Employment

• Despite U.S. textile producers’ claims, some Americans feel that they are losing jobs when U.S. owned plants are being opened in Mexico.

• A 1998 analysis of the four most industrialized states (Illinois, Michigan, New York, and Ohio) shows that there has been no net loss of jobs.

• There was actually a net increase of 80,000 jobs since 1994.

Page 44: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Political Thoughts on NAFTA

• Not all Americans are convinced that NAFTA was a positive political step.

• The week of September 21, 1998, the U.S. House of Representatives voted down a measure (243 to 180) that would allow the president more power to negotiate free-trade deals.

• In Mexico, NAFTA has been seen as a positive political step because it has generally expanded trade and increased employment.

• President Ernesto Zedillo seems to be more of a proponent of NAFTA than his predecessor, Carlos Salinas.

Page 45: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Future Predictions

• Employment, especially in Mexico will continue to rise because new facilities are being built.

• The assembly plant industry is expected to become the leading source of revenue for Mexico because of the decline of oil prices on the international market.

• The manufacturing industry looks to grow significantly within the next few years because of the NAFTA tariff stipulations.

• Employment in the U.S. has grown in the manufacturing industry, but there is still the fear that U.S. jobs will Mexican jobs.

Page 46: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

What does the future hold for Mexico???

Mexico future is optimistic, but there are some real concerns!!

Shanna Hamilton

Page 47: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Mexico is a third world country as such there are some inherent barriers

to advancement• Unstable Economy• Political Instability

– Corruption• Lack of technological advancements• Large populations

– Poor– Crime

Page 48: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Mexico’s Economy

• The future of Mexico’s economy is uncertain, although they have made substantial improvements with the help of the US, IMF and NAFTA. None of that may be enough to prepare them for:– Continued lower oil prices

– Decreases in exported goods

– Higher deficits in external accounts that will put pressure on the currency

Page 49: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

From whence they’ve come:• 1994 Statistics

– Exchange rate of the Peso was 3.12

– GDP was 1,256.2 trillion

– Exports reached an all time low of 51 billion

– Imports reached an all time low of 66 billion

• 1998 Statistics– Exchange rate of the

Peso is 8.18

– GDP is 1,385.4 trillion

– Current value of Exports is $110 billion

– Current value of Imports $109 billion

Page 50: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Public Opinion

• 47% of the companies participating in the councils late January poll expect Mexico's business climate to improve during the first ten months of this year, 37 % expect that it will remain unchanged and 17 % expect to worsen.

Page 51: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Mexican Politics

• Mexico is moving toward a Free Choice System which has captured the interest of the Unites States

• It is now being run by a multi-party Congress

• It’s increasing political stability encourages foreign investment, trade relations and intra-country morale

Page 52: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

‘2000 the ELECTIONS• Party of the Democratic Revolution(PRD) is

expected to lead during the presidential election• Cardenas leader of the PRD is seen as the most

likely candidate. The popularity of the Institutional Revolutionary Party (PRI) is falling.

• The election PRD party can be attributed to the growing influence of the United States

Page 53: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Corruption• Drugs Trafficking, Crooked Political Figures and

a Debauched Judicial System make Mexico one of the largest suppliers of drugs in the US

• Mexico is the second-largest supplier of heroin to the US and is used as the principal route for cocaine crossing the border

• There are many high level officials in the PRI who were to be involved in drug trafficking

Page 54: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Lack of Technological Development

• Like any third world country, lack of money inhibits original technological advancements.

• This decreases the opportunity for Mexico to enter into the global competitive global market

• However, Mexico is making attempts to improve it’s rate of college graduates in technical fields, by encouraging enrollment in Monterrey Tech– Monterrey Tech

– Currently Mexico has a college graduation rate of 8%

Page 55: Destination Mexico Alicia Dalton, Laurie Dressler Stacey Hipp, Emily Lambright and Shanna Hamilton

Solutions • The US is working closely with Mexico to help

them devise a drug trafficking control program• US is installing strict regulation regarding

immigration• Increasing the stringency of customs to

discourage drug trafficking• Actually beginning to enforce the judicial

system by punishing offenders