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Hands Across the Colorado River

Posted on by Laurie Garrett

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Shannon O’Neil’s love affair with Mexico began in 1994 when she signed onto a boutique bank analyst job in Mexico City. From her financial perch, Irish-American O’Neil watched Mexico struggle out of decades of dire poverty, into BRICS status – alongside China, India, Russia, Brazil, and Indonesia, exploding economies of the twenty-first century. She is an unabashed booster, certain that Mexico’s future is bright.

But O’Neil is no Pollyanna. She knows that Mexico’s expanding middle class, growing manufacturing sector and (hopefully) modernization of its petrochemical sector are only half the story. Violence, the drug trade, corruption, and tense relations with El Norte are the other half.

Last fall I spoke at a conference run by the Aspen Institute and the Atlantic magazine at which Chris Anderson, former editor of Wired, talked about his new company 3D Robotics.  Anderson’s company makes drones – not for the military, but for anybody that wants one. And they are manufactured in Mexico. Anderson explained that he looked all over the world, comparing manufacturing potentials in China, India, elsewhere in Asia, and realized every smart American gringo should put his factories right across the border, in Mexico. Anderson detailed Mexico’s advantages, including a well-educated labor force, solid infrastructure and roads, cheap transportation costs for shipping products back to the United States, and language – most Americans can fake a little Spanish, and vice versa. He concluded that putting 3D Robotics production outside Tijuana was “a no-brainer.”

Many American and Canadian manufacturers are reaching similar conclusions, as Chinese wages rise,  rendering the shipping and corruption costs of doing business in that country less favorable. Foreign investment in Mexico – especially from the United States, Canada, and Spain – soared from $7.4 billion in 2009 to a breathtaking $196 billion in 2012, and remains on an upward trajectory.  With that, employment in Mexico’s northern industrial belt rose by 25 percent, greatly reducing incentives to migrate to the U.S.

As both the quality and quantity of jobs have improved inside Mexico, fewer Mexicanos are trying to enter the United States in search of work.  O’Neil argues that successive U.S. administrations have wasted billions of dollars trying to keep Mexicanos out, and round up those that have been living illegally inside the country. The best way to keep Mexicanos in Mexico, she says, is to invest more money in the country, employ more of its labor force, and open border crossings to easier flows of goods and production.

Migration from Mexico reached zero in 2011, meaning as many Mexicans were returning to their homeland as were heading into El Norte.  U.S. spending on border patrol skyrocketed since 9/11, topping $3 billion annually by 2010, O’Neil writes. For all that money spend on the border of the United States and Mexico, actual  arrests of drug smugglers and illegal entrants to the United States fell sharply, from 1.6 million in 2000 to less than eight hundred thousand in 2010.

Mexico remains a tough sell, however. Crime, violence, kidnapping, corruption, and tremendous inequalities in economic and social terms are genuinely rife. O’Neil tells the history and policy truths behind the gory headlines, insisting Mexico’s big moment on the world stage is just around the corner.

“In the last fifteen years, Mexico’s middle has blossomed,” O’Neil writes. “An open and diversifying economy, expanding home ownership and credit, new schools, new products, and new opportunities have all worked in its favor. Yet despite its successes, the economic center remains quite fragile. Serious obstacles threaten its growth and stability. The next challenge is to find ways to consolidate and broaden this middle class, to build picket fences from Nuevo Laredo to San Cristobal.

“Looking forward, social inclusion remains one of Mexico’s biggest challenges. Mexico has come a long way from the repression of the 1960s, the lost decade of the 1980s, and even the asymmetric opening of the 1990s. Today it is an emerging middle-class nation. And many of the trends are moving in the right direction; per capita income has increased from a little over US$6000 in 1990 to over $US15,000 in 2011, and, while still high, inequality has fallen steadily during the last decade.”

In the end, O’Neil argues, the numero uno determinant of Mexico’s democratic and economic futures is its relationship with the United States.  Americans should embrace Mexico, she says, because it “could be a partner – not a problem – for the United States.”

Embracing Mexico means liberalizing immigration laws, encouraging American companies to follow 3D Robotics and Ford across the border to build factories, and realizing that Ross Perot had it wrong: “The ‘giant sucking sound’ would be products going south, driven by Mexico’s booming middle class and its desire for U.S.-made goods, benefiting American companies and workers alike.”

TWO NATIONS INDIVISIBLE: Mexico, the United States, and the Road Ahead, By Shannon O’Neil, Oxford Press 2013