Letter to the Editor, NYT — Thomas Friedman:

How Mexico Got Back in the Game

The “game” to which Mr. Friedman refers is statistical legerdemain. This is a game that Mexico plays adroitly, especially since 1991 when the government added “border transactions,” which referred to maquiladora assembly operations, to the national accounts. The move was to inflate Mexico’s status as a trading partner with the U.S. in order to promote NAFTA.

Take out intra-firm transactions in which Chrysler-Mexico sells to Chrysler-China, and daily trade will shrink to the value of commerce in oil and food products, services (including oilfield services), plus the remnants of a tourism industry battered by violence. Meanwhile, Carlos Slim skims off the top of the Mexican economy monopolistic rent whose value has been estimated by Mexican economists at 3 percent of Mexico’s GDP.

As for the “massive cheap natural gas finds,” the reference is to the 400+ TCF of shale gas, which will doubtless still be there a generation from now, as Pemex has no plans to develop shale fields. The new government, meanwhile, is almost certain to limit its reforms to making Pemex more efficient by any means except that of market competition.

Celebrations about Mexico’s advances in its economy and governance are premature.

Read Friedman’s op-ed article published in The New York Times by clicking here.

Written by

Mexico Energy Intelligence

Baker & Associates offers niche-market business and policy intelligence related to Mexico's oil and gas, power and chemical industries. Over 1,000 reports have been issued in the last 20 years. Subject matter expert and publisher George Baker, who directs the firm, has carried out consulting assignments starting in the late 1970s at the height of the Oil Boom in Mexico. He brings bilingual and bicultural skill-sets to understanding and responding to challenges of business and public policy, coupled with a deep familiarity with the history and idiosyncrasies of the Mexican operating environment.