Without a doubt the Trump presidency has made us think about our past, present, and future.
It has made us think about what brought us to this point and how to prepare for what follows.
In the field of international trade, we see that our point of view was challenged and even our way of life. What we thought was a fact; absolute and continuous free trade between Mexico and the United States, has now been placed in doubt.
Although we remain optimistic about the new NAFTA (the USMCA) and its future, Mexico must look beyond trade.
The Past
Almost 80 percent of Mexico’s gross domestic product depends on foreign trade (imports and exports); clearly the greater part of the economy. Because of this, when access to the U.S. market is threatened, it causes great concern.
This also means that Mexico manufactures products for the most demanding markets in the world, which is positive and should continue. However, the reality is also that the country depends on foreign markets. This is because it does not have a developed domestic market. In other words, the country struggles to create value by its own citizens and their companies, technology, and brands.
The result? The majority of Mexicans have low wages. Mexicans income does not rise in real terms, therefore, poverty is high at around 40 percent of the population or more than 50 million people. This is not a criticism of the noble cause of foreign trade and the importance of the maquiladora industry in the country, this was a key for the development of Mexico. However, to become a great country in the future, it now must do more.
The Present
One of the main indicators of long-term, well-being, and increased living standards for any country is productivity. Allow me to make an analogy. If a shoemaker wants to earn more and therefore live better, what should he do? The most straight forward answer is simply more shoes, as well as improved quality, and cost competitiveness. Increasing the productivity and quality of products and services should be of utmost importance.
Following this same analogy, you will agree with me that this shoemaker only has two hands and the same 24 hours every day. He has to eat, rest, and no matter how much effort he makes, he would soon reach a limit in his personal production. He will now need a machine, method, an invention or something that makes him more efficient. In other words, innovation and technology. Mexico’s population needs affordable and available education and training to offer more in their jobs.
Unfortunately, productivity in Mexico is stagnant; a notable exception is the maquiladora industry. However, we see that overall those methods and technology do not permeate adequately in the rest of the country.
The Future
Mexico can develop its internal market with productivity and innovation from its citizens. The starting point are its schools and universities. This is where young Mexicans learn and expand their minds. These young people will then go to work and also start their own companies, therefore, they should have the right environment and assistance to develop their own products, brands, and technology.
Mexico has the most advanced and productive companies in the world; however, for its future, the maquila industry should be a type of training ground where young people learn the best methods and the best technology. Don’t get me wrong, the maquila industry has many good paying jobs but we should also encourage people to learn, contribute, and then move on to bigger and better things. After all, this is ultimately how great economies are built.
I want to wish you a very happy and successful 2019. I am very optimistic and very excited about the future of Mexico, the United States, and our region. We should be thankful for a strong U.S. economy in 2018. This is in part thanks to Mr. Trump. Now, regarding the president’s hostility towards trade, Mexico should see this as a learning opportunity as well. The country should understand that it cannot depend on foreign leaders and governments, that it must put its future in its own hands.
Editor’s Note: The above guest column first appeared in Spanish on licensed broker Adrian Gonzalez’s Linked-In page. It was translated into English and modified slightly for inclusion in the Rio Grande Guardian.
