Misconceptions about Mexico
November 27th, 2012
08:55 AM ET

Misconceptions about Mexico

By Ravi Agrawal, CNN

Editor's note: Ravi Agrawal is senior producer of Fareed Zakaria GPS. The views expressed are his own. This was originally published in September 2012 and re-posted as Mexico's President-elect Enrique Pena Nieto meets with President Obama on Tuesday.

Here’s some trivia. Which of these countries has the highest average income: India, China, Brazil or Mexico? If you guessed Brazil, you’d be wrong. And if you guessed India or China, you’d be way off: even if you combine the incomes of the average Indian and Chinese you wouldn’t reach the $15,000 annual purchasing power of the average Mexican.

These numbers don’t fit with many people’s perception of America’s southern neighbor. Mexico, you see, has a PR problem. A quick Google search for news from Mexico throws up a set of results that usually includes the words violence, drugs, cartels, and migrants (or the 2010 oil spill in the Gulf of Mexico). But it’s not just the international media that seems to have it in for Mexico’s reputation. Mexicans themselves seem woebegone. A recent Pew survey found that only a third of Mexicans think they have a good national economic situation. Compare that with half of Indians, 65 percent of Brazilians, and 83 percent of Chinese. Or let’s go back to average citizens: 52 percent of Mexicans think they have a good personal economic situation, but for Indians, Chinese, and Brazilians, those numbers rise to 64 percent, 69 percent, and 75 percent respectively – and that’s despite the fact that in purchasing power terms, Mexicans actually earn more per capita than citizens of all three of those countries. And, unlike the others, Mexico’s growth rate is actually rising.

Indeed, Mexico’s economy has a number of strengths. It is the 14th largest in the world. If you take into account purchasing power, it is the 11th largest economy – larger than Canada, Turkey, and Indonesia. It is projected to grow 4 percent this year, and even faster in the coming decade, a rate that the financial services firm Nomura says will lead to Mexico overtaking Brazil as Latin America’s biggest economy within 10 years, despite the fact that Brazil’s economy is currently twice as large.

Still, there is a weakness in Mexico’s growth, as I saw for myself when I was there last month: the money hasn’t been trickling down. According to the Organization of Economic Cooperation and Development, Mexico has the highest rate of poverty among the group’s 34 member nations. If you consider inequality, the OECD ranks it the second most unequal, with only Chile more unequal.

So although the headline numbers might surprise, Mexico presents something of a mixed bag. Yet this hasn’t deterred investors taking a growing interest in this Latin-but-North American country. In a special report on investing in Mexico, the Financial Times went as far as to call its macroeconomy “virtually bulletproof.” Move over BRICs – Brazil, Russia, India, China – it’s time for the MISTs – Mexico, Indonesia, South Korea, Turkey.

Part of Mexico’s appeal to investors is tied into what I think may be the country’s key weakness: inequality. You see, at the lowest-end, labor remains cheap. The Economist points out that in 2003, Mexican pay was three times China’s rates; now it is only 20 percent higher. So Mexican manufacturing is poised for a boom. And while in the past few years Mexico banked on its proximity to the U.S. (lower transport costs) and trade deals like NAFTA to compete with China, it will now be able to manufacture and price products at an advantage.

The big question, of course, is whether the export dollars will trickle down. But making this happen will require significant market reforms. In his recent book "Breakout Nations: In Pursuit of the Next Economic Miracles," Morgan Stanley’s Ruchir Sharma points out how the top 10 Mexican families account for more than a third of the country’s stock market value – an almost unheard of number. “Private cartels produce about 40 percent of the goods that Mexicans consume and charge prices that are 30 percent higher than international averages,” he writes. “Phones, services, soft drinks, and many foodstuffs cost more in Mexico than in the United States.”

One thing is clear – Mexico is not the war-torn wasteland it is often made out to be. Its people have a glorious history, and a hopeful future. This isn’t to say that Mexico is destined to be the next investment hotspot – that’s far too simplistic a way of looking at this. Instead, the numbers suggest the truth is somewhere in between. Mexico has enormous capacity to surprise on the economic stage. But to really shine, it needs to work on developing a vibrant – and bigger – middle class.

Topics: Mexico

soundoff (244 Responses)
  1. jaime98903

    Where is the prompt to e-mail this item?
    It seems that being able to share via e-mail is getting left behind.
    Please include an e-mail link..

    January 1, 2013 at 9:35 am | Reply
  2. dougd120

    the older options work if one can collude the older editions of life.

    January 2, 2013 at 6:55 pm | Reply
  3. arnulfo

    Averages do not mean much in a country with so many poor and a few very rich

    January 7, 2013 at 8:47 pm | Reply
  4. phrancis

    It's all relative. The average Mexican probably doesn't see themselves as "well off" because they live next too a very rich country and are exposed to it's media and lifestyle. The average Indian or Chinese was dirt poor in a backwards society for generations and any improvements are seen as awesome.

    January 10, 2013 at 5:11 pm | Reply
  5. ElreyJones

    Many Americans would like to exterminate foreigners who sell drugs to USA citizens. Pure and simple truth.

    January 16, 2013 at 10:34 pm | Reply
    • Maria Lopez

      EIlrey, Would Americans also be willing to kill the drug users. Without drug users, there would be no drug sellers. Also would they be willing to kill the domestic drug pushers. They are the ones that actually sell the drugs to the drug users. The drug trade is driven by drug users. Unfortunately,some people in the United States can't understand the simple fact of demand and supply and look for excuses to blame foreigners and others. Drug users = drug suppliers.

      July 23, 2013 at 11:05 pm | Reply
  6. Hahahahahhaha

    No misconceptions here. I KNOW it's a s_h_i_thole. Hahahahahahaaa

    January 22, 2013 at 11:52 am | Reply
  7. Karen

    What most of the people do for a living there?

    January 26, 2013 at 1:50 pm | Reply
  8. Rebecca

    I find all of the comments about the supply and demand of drugs and Mexico being the root of US drug problems absolutely hilarious. If every drug cartel in Mexico was shut down tomorrow, I can guarantee that there would be no difference in the amount of drugs consumed in the United States. It would just change the source that some of the drugs come from. I know plenty of entreprenuers that grow their own drugs at home. I used to live in a classy neighborhood that had the honor of being called the Meth Capital of the Pacific Northwest. An old aquaintance of mine used to sell the drugs he was prescribed by his doctor at a significant mark up and another aquaintance used to use his prescription sleep aids for that lovely narcotic effect they produced when you didn't use them to aid in sleeping. The demand is here, and that's a problem we have to fix on the US side of the border.

    Regarding the actual article, I had no idea that Mexico had the 14th largest economy in the world. I've heard a lot about the growth in Brazil and China, but all I ever hear about Mexico is drug cartels and violence. This article was an eye opener.

    January 29, 2013 at 12:01 am | Reply
  9. yahmez

    Will the last person to leave Mexico please turn off the lights?

    January 29, 2013 at 7:39 pm | Reply
  10. Auden Lasso

    I'm pruod to be Mexican and almost a Texan!

    February 28, 2013 at 8:59 pm | Reply
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    July 7, 2013 at 6:55 pm | Reply
  12. mudpgi

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    July 7, 2013 at 7:18 pm | Reply
  16. Alex

    Good article, sadly most Americans (i'd say over 90%) are completely stupid and they think they live in a bubble and anything foreign is bad. Just by reading a couple of comments here makes me wanna slap the next American I see you think all Mexicans are dying in the country, wanting to escape to the US cause things are horrible, please! the majority of Mexicans are middle class and live much better than the middle class in the US. Just go on a tour in a middle/upper class neighborhood in the country and you will see it clearly. Mexico's curse is only being next to a country full of retards.

    July 21, 2013 at 7:13 pm | Reply
  17. Tom

    I totally recommend this article about Mexico http://www.thexygeneration.com/xy-lifestyle/misconceptions-about-mexico/

    March 28, 2014 at 4:20 pm | Reply
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