As to what would mean for us if Trump really wins.
Trump’s possibility of winning the US presidency has ben called many names, “game changer”, “black swan”, “tragedy”, “worldwide crisis” and most of those names make sense for their own reasons. But, what would actually mean for Mexico if he was to win the race? Well, things wouldn’t be as well as former finance minister dared to state, but it really is a tragedy?
Sort of, I mean, is not that we have the highest bidding economy in the world (hell, not even in the continent), with an estimation of economic growth of 1.8 to 2.4 % yearly we have been better (also worse but that’s not the point). Also, our breach of income is the only thing actually growing at faster than 6% a year rates (at the moment represents a very shameful 0.43 on the Gini coefficient). With all, we also have a relatively low unemployment rate (4.3% of labour force), we are less dependent than ever of oil income (yes I am in favor of energy reform of 2013), and the exchange rate is more a reflex of the money trading market than the economic policy.
An important disclaimer before going any further, I am not pro-governement, even thought I am a gov employee (in a very small position actually) I’d like to believe I can keep myself being critic of the economic policy. With all, maybe some of the opinions here may not sound popular for those who are unrestrained critics of the Mexican government.
In the tax policy agenda we are also far behind of what we would call fine. Tax pressure above 30% of GDP, and besides the difference of GDP between US and Mexico (US$50,677 pc vs US$18,078), we are highly, extremely dependant of US economy. In fact, an old finance minister here once said that if the US economy had a flu, that would mean pneumonia for us… well, ok.
It would be unfair in many areas to use 2009 mortgage crisis as a proof, in fact, the only thing you can prove out of 09’s crisis is that we know nothing about world wide macroeconomic effects. This is mainly because our market regulations are still domestic, while our trading has gone universal (Ok, ok, we are not buying CDO’s on moon surfaces yet, but that’s not so far from happening).
Again, we are not talking of world market dependence here, in fact, we are not even referring to oil prices dependence of OPEP countries, here we got NAFTA bitch! And soon TPT, and it will be worse than ever…
Why? Because we have market and trade networks that grow in density every day and we rely on those networks for our very economic existence. Why is that a bad thing you say? Well, as most of things in this world is not bad itself, however you have to combine this with another nasty ingredient: political instability.
If Trump sneezes, farts or even speaks (it’s hard to tell the difference) our exchange rate collapses. When Hillary laughs, coughs, speaks (also hard to tell the difference) our exchange rate collapses. And what if one wins? or the other? If one of them dies? or both? You guessed right our exchange rate collapses. Why? Because we have no word on anything happening there, and investors know that (anybody knows that) and it triggers speculation an thus negative effects on Mexican economy. Some say this would be different if we were allowed to vote for the US president but I strongly doubt that, most Americans believe they don’t really vote and they are right, why would we believe we are actually participating of such thing?
What that all these stuff means? Well, basically that we are screwed no matter who wins. In this perspective a Trump victory wouldn’t be a extreme tragedy, just a little worse than Clinton and in any event nothing we wouldn’t survive. This puts into perspective that the Mexico-US relation whilst necessary should be put aside two steps by Mexican economy policy makers so that we can begin to believe we can actually dream of becoming independent from US economy. Yes, it’s a very dreamly utopia, but it is not bad as goal.
Therefore in the rare eventuality we become a Regional Economic zone and we can strengthen against domestic politics we may have something to offer in the economic agreements. Is just an idea, don’t get cocky.