Mexico: wages stay down in stalled economy

Even as Mexican president Enrique Peña Nieto continues to push for economic "reforms," government agencies report that the economy still has one of the worst records in the hemisphere. Gross domestic product (GDP) grew just 1.1% in 2013, the poorest result in four years, and the government has reduced its forecast for growth in 2014 to 2.7%. The Banco de México, the country's central bank, cut its key interest rate this June to stimulate economic activity, warning that the growth outlook was "weaker than expectations even a couple of weeks ago." Only one-half of the population works in the formal economy, and even these workers are probably earning less than their parents did. Mexico's legal minimum wage has fallen at least 66% in purchasing power over the last three decades, according to Alicia Bárcena, the executive secretary of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC, CEPAL in Spanish).

In an interview published by the left-leaning daily La Jornada, Bárcena said the largest drop in the minimum wage occurred in the 1980s; the wage stabilized in the 1990s, but it failed to grow and then fell slightly with the 2008 world economic crisis. Mexico is one of the few Latin American countries where the minimum wage didn't recover during the past 10 years, in sharp contrast to Argentina, Brazil, Cuba, Ecuador, Honduras, Nicaragua and Uruguay. Citing the example of Brazil, where the minimum wage doubled from 2002 to 2011, Bárcena said a clear and consistent minimum wage policy is what has been most effective in fighting poverty and inequality over the past decade. CEPAL is supporting a call from Miguel Ángel Mancera, the center-left head of government for Mexico's Federal District (DF, Mexico City), for a national discussion of the minimum wage. (LJ, June 9; Financial Times, UK, June 18)

Mexico's economy has been closely tied to the US economy, especially in the 20 years since the North American Free Trade Agreement (NAFTA) went into effect. The agreement has created both winners, such as Mexico's automotive assembly sector, and losers, notably agriculture, according to Alicia Girón, an economic researcher at the National Autonomous University of Mexico (UNAM). "In our case, with opening up and removing the duties on corn, genetically modified (GM) corn has arrived in Mexico and displaced production at the local level," Girón told the Pervuvian online magazine Mariátegui. "So if we observe the fields that were abandoned or simply stopped producing corn, now they are centers for narco trafficking." The loss of work in the countryside was also a major force driving migration to the US, she said. "It's a lesson that all the free trade treaties that have been signed with the US, such as those with Colombia, Chile, Peru, should take into account." (Mariátegui, June 6)

From Weekly News Update on the Americas, June 22.