As US economy struggles, Mexico feels the pressure
The US recession and the swine flu outbreak have delivered a one-two punch to Mexico's sources of revenue, threatening gains against poverty made in the past two decades.
It has been nearly a month since Alonso Salvador Aguirre brought home a paycheck. A cook at a Mexico City restaurant, Mr. Aguirre was one of thousands left jobless after eateries and bars were closed – some for good – with the outbreak of swine flu.
He is looking for a new job, but has found only minimum-wage opportunities that pay about $4.16 a day. Credit-card charges are piling up, he says. “It’s difficult, because a lot of companies are closing down restaurants,” says Aguirre.
Late last year, many economists agreed that the impact from the US crisis would be relatively mild in Mexico, which has received high marks on its economic policies over the past decade and is considered a model for emerging markets.
But a series of external shocks threaten to undo key gains on poverty. In January, the Finance Ministry predicted gross domestic product for 2009 would be flat. In late May, it was downgraded to a 5.5 percent dip.
Oil, remittances, and tourism are Mexico’s top sources of foreign revenue. All have been battered. Factory workers, idled by a dampened US demand, are being fired. Unemployment jumped in April to a 13-year high, 5.25 percent.
“Mexico has not grown like gangbusters in the last decade,” says Stephen Haber, a senior fellow at the Hoover Institution at Stanford University in California. But, he says, smart fiscal and monetary policies and a commitment to trade and investment have slowly built a middle class, many of whom will be hit first. “They are having a doozy of a recession. They are not going to recover until we do,” he says.
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