Professor Alejandro Diaz Bautista, Conference Presentation, Los Angeles, California June 2013. U.S. Mexico Relations 2013.Economics, Border Security and Collaboration of Both Countries.

1. U.S.-Mexico Relations 2013.U.S.-Mexico Relations 2013.
Economics, Border Security and Collaboration of BothEconomics, Border Security and Collaboration of Both
CountriesCountries
Alejandro Díaz-Bautista,Alejandro Díaz-Bautista, Ph.D.Ph.D.
Professor of International Economics at Colef
and
Distinguished Researcher
National Council of Science and Technology
adiazbau@gmail.com
Presentation for the 15 Annual Mexico Economic Review and Political
Outlook 2013“, organized by the US-Mexico Chamber of Commerce,
California Regional Chapter, Los Angeles, CA, June 13, 2013.

2. U.S.-Mexico Relations, a ShiftU.S.-Mexico Relations, a Shift
from Security to Economyfrom Security to Economy
 This shift is notable, as issues of security,This shift is notable, as issues of security,
law enforcement and combating crimelaw enforcement and combating crime
formed the backbone of U.S.-Mexicanformed the backbone of U.S.-Mexican
relations during the previous Mexicanrelations during the previous Mexican
administration.administration.
 Even before former Mexican PresidentEven before former Mexican President
Felipe Calderon took office, it was part ofFelipe Calderon took office, it was part of
the discussion with the U.S.the discussion with the U.S.
 The U.S. and Mexican administrationsThe U.S. and Mexican administrations
went on to develop a close and complexwent on to develop a close and complex
relationship on security matters.relationship on security matters.

3. U.S.-Mexico Relations, a ShiftU.S.-Mexico Relations, a Shift
from Security to Economyfrom Security to Economy
 During the administration of Ex PresidentDuring the administration of Ex President
Calderon, the headlines about Mexico wereCalderon, the headlines about Mexico were
about drugs and trafficking, organizedabout drugs and trafficking, organized
crime and violence.crime and violence.
 But the new Mexican administration isBut the new Mexican administration is
trying to shift the narrative of Mexico bytrying to shift the narrative of Mexico by
talking more about these economic issues:talking more about these economic issues:
the reforms that are happening in Mexicothe reforms that are happening in Mexico
that will promote economic growth, andthat will promote economic growth, and
new investments coming into Mexico.new investments coming into Mexico.

4. U.S.-Mexico Relations, a ShiftU.S.-Mexico Relations, a Shift
from Security to Economyfrom Security to Economy
 U.S.-Mexican relations are strategicallyU.S.-Mexican relations are strategically
important to both countries, and Mexico'simportant to both countries, and Mexico's
period of transition has createdperiod of transition has created
opportunities for each to reshape theopportunities for each to reshape the
partnership. And although U.S. mediapartnership. And although U.S. media
attention has focused primarily on bilateralattention has focused primarily on bilateral
security issues, namely cooperation insecurity issues, namely cooperation in
Mexico's drug war, the Pena NietoMexico's drug war, the Pena Nieto
administration is working with Washingtonadministration is working with Washington
to re-orient the cross-border conversationto re-orient the cross-border conversation
to one centered primarily on mutualto one centered primarily on mutual
economic possibility.economic possibility.

5. U.S.-Mexico Relations, a ShiftU.S.-Mexico Relations, a Shift
from Security to Economyfrom Security to Economy
 Labor and education overhauls passedLabor and education overhauls passed
through the legislative branch relativelythrough the legislative branch relatively
easily, and banking reforms intended toeasily, and banking reforms intended to
broadly increase access to credit are set tobroadly increase access to credit are set to
be proposed once the legislaturebe proposed once the legislature
reconvenes in September. Thereconvenes in September. The
administration still has an aggressive to-administration still has an aggressive to-
do list remaining, with planned overhaulsdo list remaining, with planned overhauls
ranging from the telecommunications andranging from the telecommunications and
energy sectors to issues such as taxation.energy sectors to issues such as taxation.
The majority of the reforms has beenThe majority of the reforms has been
structural in nature and driven bystructural in nature and driven by
economic issues.economic issues.

6. U.S.-Mexico Relations, a ShiftU.S.-Mexico Relations, a Shift
from Security to Economyfrom Security to Economy
 Domestic political factors will determineDomestic political factors will determine
the success of the pending overhauls. Butthe success of the pending overhauls. But
the labor reform could improve bilateralthe labor reform could improve bilateral
commerce and investment with the Unitedcommerce and investment with the United
States, as would a successful liberalizationStates, as would a successful liberalization
of the country's energy sector in theof the country's energy sector in the
coming years.coming years.

7. U.S.-Mexico Relations, a ShiftU.S.-Mexico Relations, a Shift
from Security to Economyfrom Security to Economy
 Mexico is already the United States' third-Mexico is already the United States' third-
largest trading partner, and economiclargest trading partner, and economic
coordination between the two countriescoordination between the two countries
has become a routine matter at thehas become a routine matter at the
ministerial level, but there is still a need toministerial level, but there is still a need to
ease bureaucratic trade and investmentease bureaucratic trade and investment
barriers.barriers.

8. U.S.-Mexico Relations, a ShiftU.S.-Mexico Relations, a Shift
from Security to Economyfrom Security to Economy
 Certain details have emerged indicatingCertain details have emerged indicating
that the Pena Nieto administration intendsthat the Pena Nieto administration intends
to change the nature of intelligenceto change the nature of intelligence
cooperation between the United Statescooperation between the United States
and Mexico. Until now, the two countries'and Mexico. Until now, the two countries'
various law enforcement and intelligencevarious law enforcement and intelligence
agencies have been able to interactagencies have been able to interact
directly, but Mexico's interior ministry willdirectly, but Mexico's interior ministry will
begin overseeing all intelligencebegin overseeing all intelligence
collaboration.collaboration.

9. U.S.-Mexico Relations, a ShiftU.S.-Mexico Relations, a Shift
from Security to Economyfrom Security to Economy
 The Mexican Interior Ministry has takenThe Mexican Interior Ministry has taken
charge of the federal police, and Penacharge of the federal police, and Pena
Nieto intends to eventually create aNieto intends to eventually create a
national gendarmarie under the interiornational gendarmarie under the interior
secretariat in order to fill the role in thesecretariat in order to fill the role in the
drug wars currently played by the Mexicandrug wars currently played by the Mexican
military with a security body bettermilitary with a security body better
equipped with law enforcement training.equipped with law enforcement training.

10. U.S.-Mexico Relations, a ShiftU.S.-Mexico Relations, a Shift
from Security to Economyfrom Security to Economy
 The extent and manner to which thisThe extent and manner to which this
centralization will affect securitycentralization will affect security
cooperation with the United States iscooperation with the United States is
unclear.unclear.
 But the changes are primarily designed toBut the changes are primarily designed to
give Mexico greater control over thegive Mexico greater control over the
intelligence process involved in combatingintelligence process involved in combating
the country's violent gangs. The intentionthe country's violent gangs. The intention
is not to block U.S. collaboration andis not to block U.S. collaboration and
assistance, but rather to reform existingassistance, but rather to reform existing
structures.structures.

11. U.S.-Mexico Relations, a ShiftU.S.-Mexico Relations, a Shift
from Security to Economyfrom Security to Economy
 Economics is at the center of the relationEconomics is at the center of the relation
between both countries in 2013.between both countries in 2013.
 The United States is Mexico’s largestThe United States is Mexico’s largest
trading partner, and the two countriestrading partner, and the two countries
engaged in nearly 500 billion dollars worthengaged in nearly 500 billion dollars worth
of trade in 2012. Much of that trade is inof trade in 2012. Much of that trade is in
what are known as intermediate inputs,what are known as intermediate inputs,
referring to semi-finished U.S. goods thatreferring to semi-finished U.S. goods that
are finalized with Mexican resources, aare finalized with Mexican resources, a
process seen as increasing theprocess seen as increasing the
competitiveness of both countries.competitiveness of both countries.

12. United States - Mexico Border States
Description:
• 10 border states.
• Nearly 2,000-mile (3,169 km or 1,969 miles) of international
border.
• Population: more than 83 million.

13. The United States- Mexico border regionThe United States- Mexico border region
 The ten Border States represent the largest binational regional economy inThe ten Border States represent the largest binational regional economy in
the world, with over 83 million people and a combined economy rankedthe world, with over 83 million people and a combined economy ranked
estimated at number four in the world in economic terms.estimated at number four in the world in economic terms.
 This region has 51 border crossings, 32 bridges and seven federal railwayThis region has 51 border crossings, 32 bridges and seven federal railway
routes, placing it as the busiest border in the world, with over 350 millionroutes, placing it as the busiest border in the world, with over 350 million
people cross the border each year.people cross the border each year.
 The economic slowdown and unemployment are among the issues thatThe economic slowdown and unemployment are among the issues that
currently affect the people on both sides of the border.currently affect the people on both sides of the border.
 The state of Arizona had an unemployment rate of 9.4 percent, Texas, 8.4The state of Arizona had an unemployment rate of 9.4 percent, Texas, 8.4
percent; New Mexico, 6.7 percent, and California, 12 percent (thepercent; New Mexico, 6.7 percent, and California, 12 percent (the
highest), according to the figures from July 2011, compared to anhighest), according to the figures from July 2011, compared to an
unemployment rate of 9.1 percent in the United States during July 2011.unemployment rate of 9.1 percent in the United States during July 2011.
 In July 2011, the northern border states of Mexico were also showing highIn July 2011, the northern border states of Mexico were also showing high
unemployment rates. The state of Baja California had an unemploymentunemployment rates. The state of Baja California had an unemployment
rate of 5.05 percent, Sonora, 5.65 percent; Chihuahua, 6.81 percent;rate of 5.05 percent, Sonora, 5.65 percent; Chihuahua, 6.81 percent;
Coahuila, 6.27 percent; Nuevo Leon, 6.49 percent; and Tamaulipas, 8.81Coahuila, 6.27 percent; Nuevo Leon, 6.49 percent; and Tamaulipas, 8.81
percent (the highest).percent (the highest).

14. The United States MexicoThe United States Mexico
Border Unemployment (2012)Border Unemployment (2012)
 Official figures from the National Institute of Statistics andOfficial figures from the National Institute of Statistics and
Geography (INEGI) show that during the second quarter of 2012,Geography (INEGI) show that during the second quarter of 2012,
the northern border states in Mexico continue to show highthe northern border states in Mexico continue to show high
unemployment rates. Chihuahua had a 7% unemployment rate,unemployment rates. Chihuahua had a 7% unemployment rate,
Tamaulipas with 6%; Sonora with 5.4%, Coahuila with 5.5%,Tamaulipas with 6%; Sonora with 5.4%, Coahuila with 5.5%,
Nuevo Leon with 6.4% , and Baja California with a 6.1%Nuevo Leon with 6.4% , and Baja California with a 6.1%
unemployment rate. On average, the unemployment rate of theunemployment rate. On average, the unemployment rate of the
northern border states of Mexico is estimated close to 6.06%northern border states of Mexico is estimated close to 6.06%
during the second quarter of 2012.during the second quarter of 2012.
 Furthermore, at the end of July 2012, the southern U.S. borderFurthermore, at the end of July 2012, the southern U.S. border
states also suffered with high unemployment rates: California withstates also suffered with high unemployment rates: California with
10.7%, Arizona with 8.3%, 6.6% for New Mexico, and Texas with10.7%, Arizona with 8.3%, 6.6% for New Mexico, and Texas with
an unemployment rate of 7.2 percent. On average, thean unemployment rate of 7.2 percent. On average, the
unemployment rate of the southern border states of the Unitedunemployment rate of the southern border states of the United
States is estimated at 6.06% during the month of July 2012.States is estimated at 6.06% during the month of July 2012.

15. Unemployment in CaliforniaUnemployment in California

16. VATVAT
 Possible increase inPossible increase in
the VAT rate in 2013the VAT rate in 2013
in Mexico.in Mexico.
 Mexico has a VAT ofMexico has a VAT of
11% in the border11% in the border
region and 16% forregion and 16% for
the rest of thethe rest of the
country.country.
VAT/GST rates in OECD member countries
2010 2011
Australia 2000 10.0 10.0
Austria3
1973 20.0 20.0
Belgium 1971 21.0 21.0
Canada4
1991 5.0 5.0
Chile 1975 19.0 19.0
Czech Republic1993 20.0 20.0
Denmark 1967 25.0 25.0
Estonia 1991 20.0 20.0
Finland 1994 22.0 23.0
France5
1968 19.6 19.6
Germany 1968 19.0 19.0
Greece6
1987 19.0 23.0
Hungary 1988 25.0 25.0
Iceland 1989 25.5 25.5
Ireland 1972 21.0 21.0
Israel7
1976 16.0 16.0
Italy 1973 20.0 20.0
Japan 1989 5.0 5.0
Korea 1977 10.0 10.0
Luxembourg 1970 15.0 15.0
Mexico8
1980 16.0 16.0
Netherlands 1969 19.0 19.0
New Zealand 1986 12.5 15.0
Norway 1970 25.0 25.0
Poland 1993 22.0 23.0
Portugal9
1986 20.0 23
Slovak Republic1993 19.0 20.0
Slovenia 1999 20.0 20.0
Spain10
1986 16.0 18.0
Sweden 1969 25.0 25.0
Switzerland 1995 7.6 8.0
Turkey 1985 18.0 18
United Kingdom1973 17.5 20.0
Unweighted average 18.0 18.5

17. The United States MexicoThe United States Mexico
BorderBorder
 People cross the United StatesPeople cross the United States
Mexico border every day to doMexico border every day to do
business, go shopping, visit familybusiness, go shopping, visit family
members, or simply to enjoy eachmembers, or simply to enjoy each
other’s tourism.other’s tourism.
 This results in around 350 millionThis results in around 350 million
crossings and almost $400 billion incrossings and almost $400 billion in
trade each year, making it the mosttrade each year, making it the most
important border region in the world.important border region in the world.

18. Baja California and California Economic IntegrationBaja California and California Economic Integration
 Economic Integration can also be seen at the regional level.Economic Integration can also be seen at the regional level.
 During 2010, the official data shows that the number ofDuring 2010, the official data shows that the number of
northbound crossers from Baja California to Californianorthbound crossers from Baja California to California
reached 61,105,484 people, the majority of whom, crossedreached 61,105,484 people, the majority of whom, crossed
in personal vehicles. Baja California residents constitute anin personal vehicles. Baja California residents constitute an
important component in the economy of communities andimportant component in the economy of communities and
counties on the U.S. side of the border, like San Diegocounties on the U.S. side of the border, like San Diego
County.County.
 These visitors from Baja California enter the U.S. regularlyThese visitors from Baja California enter the U.S. regularly
for shopping, tourism, work, and socialization with familyfor shopping, tourism, work, and socialization with family
and friends. It’s a well known fact that cross border visitorsand friends. It’s a well known fact that cross border visitors
from Mexico have a significant economic impact on U.S.from Mexico have a significant economic impact on U.S.
communities and counties.communities and counties.

19. The Border Economic Zone (BEZ) in Baja California
 A major challenge for the commercial
sector of Baja California is without a
doubt, the increase consumer spending of
Baja California residents into the U.S.
market, which has been estimated at
around 6 billion dollars a year.
 With the implementation of the BEZ in
2012, Baja California wants to recover
part of the consumer spending by Baja
residents in California.
 The BEZ is intended to promote the
consumption of regionally made goods in
the Baja California region. The economic
impact of the implementation of the BEZ
could be as high as an 8% reduction of
spending by Baja California residents in
California.

20. The Border Economic Zone (BEZ)The Border Economic Zone (BEZ)
 A considerable amount of money is spent onA considerable amount of money is spent on
a multitude of retail items includinga multitude of retail items including
groceries, clothing, appliances, tourism andgroceries, clothing, appliances, tourism and
services.services.
 As a measure to increase consumer spendingAs a measure to increase consumer spending
in the state of Baja California, thein the state of Baja California, the
government and business sectors of Bajagovernment and business sectors of Baja
California in conjunction with the StateCalifornia in conjunction with the State
Government and the Federal GovernmentGovernment and the Federal Government
proposed the new Border Economic Zoneproposed the new Border Economic Zone
(BEZ) in 2012.(BEZ) in 2012.

21. “El Buen Fin” Program in Mexico
 The idea of “El Buen Fin” program in Mexico was
created as a private initiative to enforce the economic
activity in Mexico during November of 2011. The
initiative was presented through a program created by
the federal government and some of the most
important media networks of Mexico.
 The program is similar, in some way, to the famous
“Black Friday” of the United States, while this day
represents the day with highest consumer spending,
and when the commercial sector shows their best
offers and the biggest discounts throughout the year.
 The economic impact of the implementation of the “El
Buen Fin Program” was estimated as high as a 2%
reduction of spending by Baja California residents in
California during 2011.

22. Economic Impacts and Expenditures
 Shopping is the primary reason to cross into the U.S. for
Baja California residents. Depending on the study, 42 to
68% of border crossers identify shopping as the primary
reason for the visit into Southern California. Other reasons
are social in nature, like visiting family and friends, or are
work related.
 During 2010, around 74 percent of crossers entered
California in their private vehicles, since a car allows them
freedom of movement between different shopping locations
in the U.S. as well as enough room to handle the volume of
their purchases.
 The estimated average daily expenditures reported by Baja
California visitors into San Diego County and California in
various studies ranges from US $140 per trip to $300 per
trip. The current estimation uses an average amount of
expenditures per trip of $240 per trip as the base case
scenario.

23. Annual Retail Sales in California byBaja California Border Crossers
(Economic Growth Scenario)
0
1000000000
2000000000
3000000000
4000000000
5000000000
6000000000
7000000000
8000000000
9000000000
2010 2011 2012 2013 2014
year
Dollars
Low Spend. Case
High Spend. Case
Base Spend. Case
El Buen Fin Program
BEZ

24. California Economic Impacts
 The California and Baja California border region remains an
example of social and economic integration in North
America, where cross-border shopping is only one aspect of
that economic reality in the border region.
 Mexican citizens cross frequently into the U.S. to shop,
work, dine, vacation, and visit friends and family. What
they spend on those visits results in a key contribution to
local border economies in California.
 The results reveal annual retail sales by Baja California
Cross Border Visitors in the range of 5.9 to 6.8 billion
dollars along the U.S.-Mexico border, depending on the
complete implementation of the Border Economic Zone
(BEZ) in Baja California and the “El Buen Fin Program”.
 The base case scenario shows that Baja California
consumer and economic drain into the U.S. market is
estimated at around 5.9 billion dollars in 2012 and 6.2
billion dollars in 2014, with the implementation of the
Border Economic Zone (BEZ).

26. Surface Trade between U.S. and NAFTASurface Trade between U.S. and NAFTA
Countries : 1995 – 2011.Countries : 1995 – 2011.
 Surface transportation trade between the United States andSurface transportation trade between the United States and
its North American Free Trade Agreement (NAFTA) partnersits North American Free Trade Agreement (NAFTA) partners
Canada and Mexico increased by 14.3 percent in 2011Canada and Mexico increased by 14.3 percent in 2011
compared to 2010, valued at $904 billion in 2011,compared to 2010, valued at $904 billion in 2011,
according to official data by the Bureau of Transportationaccording to official data by the Bureau of Transportation
Statistics (BTS) of the U.S. Department of Transportation.Statistics (BTS) of the U.S. Department of Transportation.
 The 14.3 percent increase in trade was the third largestThe 14.3 percent increase in trade was the third largest
year-to-year increase for the years covered by these data.year-to-year increase for the years covered by these data.
 The $904 billion in U.S.-NAFTA trade was the highestThe $904 billion in U.S.-NAFTA trade was the highest
amount since NAFTA went into effect in 1994.amount since NAFTA went into effect in 1994.

27. Commodities Exports Imports Total
Electrical
Machinery;
Equipment and
Parts
29,672 50,799 80,471
Computer-
Related
Machinery and
Parts
29,703 37,864 67,567
Vehicles Other
than Railway
17,726 43,446 61,172
Plastics 12,570 3,369 15,939
Measuring and
Testing
Equipment
4,083 9,348 13,431
Top Five Commodities Transported between theTop Five Commodities Transported between the
U.S. and Mexico by All Surface Modes ofU.S. and Mexico by All Surface Modes of
Transportation, 2011. (In millions).Transportation, 2011. (In millions).

28. Top 10 States Exporting toTop 10 States Exporting to
Mexico, 2009 to 2011.Mexico, 2009 to 2011.

29. U.S. Mexico Trade in 2012U.S. Mexico Trade in 2012
 Total bilateral trade between the U.S. and Mexico has returned toTotal bilateral trade between the U.S. and Mexico has returned to
the levels before the economic downturn and crisis.the levels before the economic downturn and crisis.
 In 2011, Mexico and the United States had almost 461 billion dollarsIn 2011, Mexico and the United States had almost 461 billion dollars
in trade in goods, which represents more than 1,250 million dollarsin trade in goods, which represents more than 1,250 million dollars
or 1.25 billion in trade crossing the border in both directions everyor 1.25 billion in trade crossing the border in both directions every
day.day.
 The economic relationship also adds 39 billion dollars in serviceThe economic relationship also adds 39 billion dollars in service
trade.trade.
 Mexico continues to export more of their products and services toMexico continues to export more of their products and services to
the United States than any other country in the world. The Unitedthe United States than any other country in the world. The United
States remains the main destination of Mexican goods and services.States remains the main destination of Mexican goods and services.
 The trade relationship between Mexico and the United States notThe trade relationship between Mexico and the United States not
only is 'back' but it is getting stronger between Mexico and theonly is 'back' but it is getting stronger between Mexico and the
United States in 2012.United States in 2012.

30. Migration and border issuesMigration and border issues

31. Migration and border issuesMigration and border issues
 Mexico has seen a significant drop inMexico has seen a significant drop in
migration recently. For the first time in 60migration recently. For the first time in 60
years the movement of Mexicans to theyears the movement of Mexicans to the
United States is at a net zero.United States is at a net zero.
 A mixture of tougher anti-immigrationA mixture of tougher anti-immigration
legislation in the southern United States,legislation in the southern United States,
combined with fewer job prospects in thecombined with fewer job prospects in the
US may have forced many Mexicans toUS may have forced many Mexicans to
come back home.come back home.

32. Migration and border issuesMigration and border issues
 The net zero migration rate between Mexico and the UnitedThe net zero migration rate between Mexico and the United
States does not mean that Mexican migrants have notStates does not mean that Mexican migrants have not
crossed to the United States between 2011 and 2012.crossed to the United States between 2011 and 2012.
 The decrease in net Mexican migration is the differenceThe decrease in net Mexican migration is the difference
between those who go to the United States and those whobetween those who go to the United States and those who
leave the country and go back to Mexico, a socialleave the country and go back to Mexico, a social
phenomenon that began five years ago and already has ledphenomenon that began five years ago and already has led
to the first decline in two decades of the undocumentedto the first decline in two decades of the undocumented
Mexican population in the United States.Mexican population in the United States.

33. Migration at Net ZeroMigration at Net Zero

35. Migration and border issuesMigration and border issues
 The reduction of Mexican migration to theThe reduction of Mexican migration to the
United States is a social phenomenon thatUnited States is a social phenomenon that
is explained by the slow evolution of theis explained by the slow evolution of the
U.S. economy during the worst economicU.S. economy during the worst economic
crisis in decades, the labor marketcrisis in decades, the labor market
situation in the United States, thesituation in the United States, the
deportations of migrants and the increasedeportations of migrants and the increase
in border enforcement and security. Alsoin border enforcement and security. Also
the growing dangers associated with illegalthe growing dangers associated with illegal
border crossings, the long-term decline inborder crossings, the long-term decline in
Mexico’s birth rates and broader economicMexico’s birth rates and broader economic
conditions in Mexico.conditions in Mexico.

36. Economic Contribution ofEconomic Contribution of
Mexicans to the U.S. EconomyMexicans to the U.S. Economy

37. RemittancesRemittances
 The increase in remittances were oneThe increase in remittances were one
of the key factors of macroeconomicof the key factors of macroeconomic
stability in Mexico, before thestability in Mexico, before the
economic crisis of 2008 and 2009.economic crisis of 2008 and 2009.

39. RemittancesRemittances
 Remittances come almost entirely from the U.S.,Remittances come almost entirely from the U.S.,
and remain one of the most important sources ofand remain one of the most important sources of
foreign income in Mexico.foreign income in Mexico.
 Flows to the Mexican economy come from threeFlows to the Mexican economy come from three
main areas: oil, tourism and remittances frommain areas: oil, tourism and remittances from
Mexican nationals living abroad.Mexican nationals living abroad.
 During 2011, Mexico managed to stay as theDuring 2011, Mexico managed to stay as the
third recipient of remittances in the world afterthird recipient of remittances in the world after
India and China.India and China.

40. Gas Prices in Mexico and the United States

41. Mexico’s Energy and the
Economy in 2012
 Moreover, a decline in
crude production due to
under investment by the
Mexican state oil firm
Petroleos Mexicanos
(Pemex) and a weak
non-oil tax base are
expected to draw funds
away from public
investment.

42. New oil fields in the Gulf ofNew oil fields in the Gulf of
MexicoMexico
 The discovery of a new
oil field in the Gulf of
Mexico during 2012,
may lead to an increase
in crude production in
Mexico in the medium
and long term.

43. International ReservesInternational Reserves

44. International ReservesInternational Reserves
 Mexico’s international reserves rose to 161.2 billion in theMexico’s international reserves rose to 161.2 billion in the
week that ended August 24, 2012, according to official dataweek that ended August 24, 2012, according to official data
by the central bank.by the central bank.
 Mexico’s International Reserves are at historic levels inMexico’s International Reserves are at historic levels in
2012.2012.
 Mexico’s reserves have climbed 13 percent this year, givingMexico’s reserves have climbed 13 percent this year, giving
the central bank greater leeway to intervene in the foreignthe central bank greater leeway to intervene in the foreign
exchange markets to buy pesos when needed.exchange markets to buy pesos when needed.

45. International ReservesInternational Reserves
 On June 1, the mexican peso reached its weakestOn June 1, the mexican peso reached its weakest
level against the dollar since March 2009 onlevel against the dollar since March 2009 on
concerns that Europe’s sovereign debt crisisconcerns that Europe’s sovereign debt crisis
would affect global economic growth.would affect global economic growth.
 Mexico uses dollar auctions to limit daily declinesMexico uses dollar auctions to limit daily declines
in the peso after it tumbled 11 percent againstin the peso after it tumbled 11 percent against
the dollar in 2011, the most among major Latinthe dollar in 2011, the most among major Latin
American currencies.American currencies.
 Since November 2011, the central bank has beenSince November 2011, the central bank has been
offering $400 million daily at an exchange rateoffering $400 million daily at an exchange rate
that’s at least 2 percent weaker than the previousthat’s at least 2 percent weaker than the previous
day.day.
 This year, the peso has strengthened 5.7 percentThis year, the peso has strengthened 5.7 percent
against the dollar.against the dollar.

46. Dollar vs. PesoDollar vs. Peso

47. Global Market Volatility
 Unfortunately, all of the world’s
economies, including the emerging
markets, will be affected to a greater
or lesser degree by the events in
europe, and therefore the challenge
is to mitigate the degree of economic
and financial impact.

48. Opportunities in Emerging Markets

49. Opportunities in Emerging Markets

50. U.S.-Mexico Relations, a ShiftU.S.-Mexico Relations, a Shift
from Security to Economyfrom Security to Economy
 Demographic changes in the United StatesDemographic changes in the United States
are driving a debate about immigrationare driving a debate about immigration
reform in 2013 that, if implemented,reform in 2013 that, if implemented,
would require collaboration with Mexico,would require collaboration with Mexico,
many of whose citizens would seek tomany of whose citizens would seek to
legalize their residential status in thelegalize their residential status in the
United States.United States.

51. U.S.-Mexico Relations, a ShiftU.S.-Mexico Relations, a Shift
from Security to Economyfrom Security to Economy
 The U.S. political decision-making processThe U.S. political decision-making process
is largely isolated from internationalis largely isolated from international
influence, and the Pena Nietoinfluence, and the Pena Nieto
administration likewise appears to beadministration likewise appears to be
consolidating key policy areas underconsolidating key policy areas under
Mexican control at the expense of U.S.Mexican control at the expense of U.S.
influence. Still, Mexico's steady emergenceinfluence. Still, Mexico's steady emergence
as an economic power in North Americaas an economic power in North America
sets the stage for a bilateral relationshipsets the stage for a bilateral relationship
much more heavily focused onmuch more heavily focused on
opportunities for economic cooperation.opportunities for economic cooperation.

52. U.S.-Mexico Relations 2013.U.S.-Mexico Relations 2013.
Economics, Border Security and Collaboration of BothEconomics, Border Security and Collaboration of Both
CountriesCountries
Alejandro Díaz-Bautista,Alejandro Díaz-Bautista, Ph.D.Ph.D.
Professor of International Economics at Colef
and
Distinguished Researcher
National Council of Science and Technology
adiazbau@gmail.com
Presentation for the 15 Annual Mexico Economic Review and Political
Outlook 2013“, organized by the US-Mexico Chamber of Commerce,
California Regional Chapter, Los Angeles, CA, June 13, 2013.