BE­YOND BOR­DERS

Re­cent me­dia at­ten­tion may be fo­cused on Mex­i­can-US re­la­tions, but there is much more here for both tourists and in­vestors

Business Traveler (USA) - - CONTENTS -

De­spite the head­lines, there’s much more to Mexico’s story

All na­tions suf­fer to some ex­tent from be­ing car­i­ca­tured by su­per­fi­cial stereo­types and sen­sa­tional head­lines. Few, how­ever, get press as bad as Mexico. In the slew of lurid sto­ries on drugs and gun traf­fick­ing, border wall pol­i­tics and im­mi­gra­tion, you’d never guess that the United Mex­i­can States is the world’s 15th big­gest econ­omy, sec­ond big­gest in Latin Amer­ica, home to the largest Span­ish-speak­ing pop­u­la­tion in the Amer­i­cas – and a pow­er­house of lit­er­a­ture, the arts, ar­chi­tec­ture and gas­tron­omy.

Any vis­i­tor to Mexico City – per­haps the most mis­rep­re­sented of all Mex­i­can des­ti­na­tions – is quickly ap­prised of the fact that life south of the Rio Bravo (its name in Mexico, not Grande) can be pretty won­der­ful. The range of ho­tels is per­haps the widest in Latin Amer­ica, from five-star chains to bou­tique prop­er­ties. Gas­tron­omy is world-class; six of the top 50 Latin Amer­i­can restau­rants, in­clud­ing long-revered eater­ies Pu­jol and Quin­tonil, are in Mexico City. (An­other five are else­where in Mexico). Art is show­cased at shim­mer­ing build­ings such as the MUAC, Museo Jumex and Car­los Slim’s Museo Soumaya, while the city’s Zona Maco and Ma­te­rial Art Fair are among the western hemi­sphere’s most im­por­tant art gath­er­ings.

Home to 8.9 mil­lion in­hab­i­tants, it’s per­haps no sur­prise that Mexico City should have big-city at­trac­tions. But there are draws in smaller des­ti­na­tions, too, from Guadala­jara’s film and arts scenes to Oax­aca’s in­no­va­tive cui­sine and colo­nial cen­tre. WHEELS OF IN­DUS­TRY Un­der­ly­ing the cul­tural di­ver­sity is eco­nomic di­ver­sity as well. Mexico’s $1.15 tril­lion econ­omy is built on petroleum, iron and steel. Nev­er­the­less it’s also the only Latin Amer­i­can na­tion to edge into the eco­nomic com­plex­ity top rank­ings. The Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment (OECD) rates the Mex­i­can peo­ple as the hard­est-work­ing in the world.

In global tourism Mexico is al­ways near the top. Ac­cord­ing to the United Na­tions World Tourism Or­ga­ni­za­tion, 39.3 mil­lion peo­ple vis­ited Mexico in 2017, a 12 per­cent in­crease over 2016 mak­ing it the sixth-ranked tourism des­ti­na­tion; ad­mit­tedly the num­bers are pumped up by busy bor­ders, but Mexico is still among those coun­tries record­ing the great­est in­crease.

That growth comes de­spite crime and se­cu­rity prob­lems in states such as Du­rango and Mi­choacán and, above all, in cities close to the US fron­tier. May of this year was widely re­ported as “the dead­li­est month” on record in Mexico since the gov­ern­ment be­gan re­leas­ing homi­cide data in 1998. Quan­tify- ing the im­pact of se­cu­rity is­sues on com­merce is dif­fi­cult, to say the least. Who stays away? Which coun­tries with­hold in­vest­ment? How prob­lem­atic are per­cep­tions as com­pared with hard facts?

“Se­cu­rity and crime costs are im­mense from a so­cial and busi­ness per­spec­tive,” ob­serves En­rique Dus­sel Peters, economics pro­fes­sor at the Univer­si­dad Na­cional Autónoma de Méx­ico (UNAM). “Or­ga­nized crime in Mexico and most of Latin Amer­ica, how­ever, is a re­gional prob­lem and par­tic­u­larly re­lated to the US. Un­less the re­gion as a whole, in­clud­ing the US, ac­knowl­edges it as such, there are few chances for start­ing to solve it in the long term. Or­ga­nized crime in­cludes not only money and drugs, but also arms, per­sons and body-parts, and it’s a two-way street mainly with the US.”

In Au­gust, US and Mex­i­can law en­force­ment au­thor­i­ties an­nounced a joint ven­ture tar­get­ing the lead­ers and fi­nances of drug car­tels. Ear­lier in the year, busi­ness lead­ers in Mexico’s pow­er­ful Con­sejo Co­or­di­nador Em­pre­sar­ial (CCE) busi­ness lobby is­sued a state­ment that “the high lev­els of vi­o­lence have be­come the great­est ob­sta­cle to (eco­nomic) ac­tiv­ity.” This came on the heels of Mex­i­can dairy pro­ducer Grupo Lala shut­ting a distribution cen­ter in the north­ern state of Ta­mauli­pas and the world’s big­gest Coke bot­tler, Coca-Cola Femsa, in­def­i­nitely clos­ing a 160-em­ployee distribution cen­ter in south­west­ern Guer­rero state. NEIGHBORLY RE­LA­TIONS It may be dif­fi­cult to un­der­stand why the US and Mexico can­not work more closely to re­solve crime- and drug-re­lated mat­ters. But the re­la­tion­ship has been trou­bled for the bet­ter part of two cen­turies, and more re­cently cooled con­sid­er­ably when Pres­i­dent Don­ald Trump took over in Wash­ing­ton DC.

Mexico’s prox­im­ity to the US should rep­re­sent an enor­mous op­por­tu­nity in terms of eco­nomic de­vel­op­ment. The prob­lem, says Pro­fes­sor Dus­sel Peters, is that the North Amer­i­can Free Trade Agree­ment (NAFTA), signed in 1994 by the US, Canada and Mexico, has been at best un­even and, in some sec­tors, to­tally in­ef­fec­tual.

“NAFTA has sub­stan­tially po­lar­ized Mexico’s econ­omy, in that only a small group of house­holds, firms, re­gions and global value chains have in­te­grated through ex­ports to the US; the vast ma­jor­ity have not. From this per­spec­tive, the newly rene­go­ti­ated NAFTA [the United States-Mexico-Canada Agree­ment, or USMCA, for­mally agreed on Oc­to­ber 1]

has few new and rel­e­vant top­ics, the most im­por­tant be­ing that it was signed at all,” Dus­sel Peters notes.

Trump claimed a vic­tory for the US on the deal, but some in­dus­try ob­servers be­lieve the new trade pact will be good for Mexico as well, and will lead to in­creased trade vol­umes among the three mem­ber coun­tries. UMSCA also ended months of un­cer­tainty that com­pelled Mexico’s cen­tral bank to main­tain high in­ter­est rates in case of a run on the peso. The coun­try is now able to loosen mon­e­tary pol­icy, giv­ing a short-term boost to GDP that’s al­ready ex­pected to grow by 3 per­cent in 2018. FRESH THINK­ING On July 1, Mexico elected a new pres­i­dent, An­drés Manuel López Obrador, a former mayor of Mexico City, run­ning as the can­di­date for Jun­tos Hare­mos His­to­ria, a coali­tion of the left-wing Labour Party, right-wing So­cial En­counter Party, and so­cial demo­cratic Na­tional Re­gen­er­a­tion Move­ment.

Nick­named AMLO in the lo­cal and in­ter­na­tional press, López Obrador is re­garded as a pop­ulist, a na­tion­al­ist and some­thing of a mav­er­ick, and has been de­scribed as a “foil” and “nat­u­ral en­emy” of the US pres­i­dent as well as “Juan Trump,” al­legedly by Trump him­self.

But AMLO is no po­lit­i­cal novice, hav­ing been ac­tive across var­i­ous left-wing par­ties for more than 40 years. As mayor of the mega­lopo­lis he was, on the whole, a suc­cess­ful and oc­ca­sion­ally in­spired leader.

Eric L Ol­son, deputy di­rec­tor of the Wil­son Cen­ter’s Latin Amer­i­can Pro­gram and se­nior ad­vi­sor to the Cen­ter’s Mexico In­sti­tute, be­lieves there is some room for op­ti­mism.

“Like all new gov­ern­ments, there is a prob­lem of vague­ness about the poli­cies to be pur­sued upon tak­ing of­fice. AMLO’s gov­ern­ment is no ex­cep­tion. Nev­er­the­less, there are some broad out­lines tak­ing shape. AMLO won an over­whelm­ing man­date from the vot­ers who were sick of the tra­di­tional par­ties, record lev­els of vi­o­lence and out­ra­geous cor­rup­tion at every level of gov­ern­ment. So there is a gen­eral

Un­der­ly­ing the cul­tural di­ver­sity is eco­nomic di­ver­sity built on petroleum, iron and steel

sense of op­ti­mism that AMLO will take a fresh ap­proach to these prob­lems,” Ol­son says.

“In my view, an em­pha­sis on the ‘soft side’ of se­cu­rity – eco­nomic in­vest­ments, de­vel­op­ment and op­por­tu­ni­ties for youth – is much needed, but will mostly have long-term im­pact and may not be ad­e­quate to ad­dress the cur­rent press­ing prob­lems of high lev­els of vi­o­lence and lack of pub­lic trust in the in­sti­tu­tions of state, such as po­lice and pros­e­cu­tors.”

As Ol­son says, “What is needed is a spe­cific strat­egy to re­build the state at lo­cal level.” ECO­NOMIC GROWTH Ul­ti­mately, so­cial in­jus­tice and in­equal­ity is Mexico’s main and en­dur­ing prob­lem. In ad­di­tion to se­cu­rity mea­sures, the coun­try des­per­ately needs eco­nomic agility, a much fairer distribution of wealth and even greater di­ver­si­fi­ca­tion.

Some ma­jor changes are al­ready afoot. Mexico’s en­ergy re­forms, signed off by out­go­ing pres­i­dent En­rique Peña Ni­eto in 2013, ended 75 years of state mo­nop­oly in the lo­cal oil and gas sec­tor. With UMSCA set­tled, there is cau­tious op­ti­mism that pri­vate cap­i­tal and tech­ni­cal ex­per­tise will re­build the Mex­i­can en­ergy in­dus­try, max­i­mize oil and gas rev­enue, and boost eco­nomic growth in the long term.

Startup in­no­va­tion has tra­di­tion­ally been cen­tered in Mexico City, as well as Mon­ter­rey and Guadala­jara, but is now spread­ing wider. The north­ern city of Chi­huahua, for in­stance, is emerg­ing as a po­ten­tial tech hub with cam­pus-led ini­tia­tives from the Tec­nológico de Mon­ter­rey (TEC), of­ten re­ferred to as the MIT of Mexico.

On the down­side, shrink­ing wages, fall­ing growth and a weak­en­ing peso were 2017 trends that need to be re­versed. But Mexico doesn’t do doom and gloom. In fact, says En­rique Dus­sel Peters, the main prob­lem may be a ten­dency to be too rosy about the na­tion’s prospects.

“In Mexico we are wit­ness­ing huge op­ti­mism and huge ex­pec­ta­tions. These ex­pec­ta­tions, how­ever, have to be dealt with cau­tiously, since no gov­ern­ment in Mexico, in­clud­ing AMLO, will be able to solve most of the struc­tural prob­lems of Mexico’s so­ci­ety and econ­omy – from cor­rup­tion and in­equal­ity to poverty and se­cu­rity – in the short and medium term.”

There is cau­tious op­ti­mism that pri­vate cap­i­tal and tech­ni­cal ex­per­tise will re­build the en­ergy in­dus­try

Early morn­ing on the Rio Grande, which serves as a nat­u­ral border be­tween Texas and Mexico

Na­tional Mu­seum of Fin­land.

TOP: Started in 1573, Mexico City’s Cathe­dral was not com­peted un­til 1813 ABOVE AND ABOVE RIGHT: Pu­jol, which is ranked 13th in the World’s 50 Best Restau­rants list, rein­ter­prets Mex­i­can cui­sine through a con­tem­po­rary lens

ABOVE: The strik­ing ar­chi­tec­ture of Mexico City’s Museo Soumaya houses an im­pres­sive art col­lec­tion that spans al­most ten cen­turiesRIGHT: The vi­brantly coloured em­broi­dery of a tra­di­tional huipil gar­mentFAR RIGHT: Monte Al­ban, a preColumbian ar­chae­o­log­i­cal site near Oax­aca, flour­ished from 500BC to 850AD

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