The Wall Street Journal-20080212-It-s the Economy- Amigo
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It's the Economy, Amigo
Full Text (608 words)The specter of migrant workers coming across the border has become pretty much the only lens through which Americans see the U.S.-Mexico relationship, especially with a Presidential campaign on. Not so for Mexico's President, Felipe Calderon, who in a visit to the Journal yesterday made clear that the economic stakes for his nation of 108 million people and the U.S. is about more than immigration. It's about the economy, amigo.
As the head of Mexico's central bank, Guillermo Ortiz, quipped at one point in the conversation, "This is a lot better meeting than we had with The Wall Street Journal in January 1995." Aficionados of national economic meltdowns will recall that as the time of the "peso crisis." Amid a severe peso devaluation, Mexican inflation ran over 50%. So it was understandable if the Mexican delegation reflected some pride when President Calderon noted that their inflation this past year "was below" that of the U.S. Ouch.
One could argue that controlling inflation alone helps stanch the flow of labor northward, reducing fear among Mexicans that a profligate government will debauch the value of their savings and kill job prospects. Mr. Calderon wouldn't let himself be drawn into a discussion of immigration and the politics of our Presidential election, but he argued that the social dislocations aren't all on the U.S. side of the border. "Mexico has been losing some of its best and bravest young men" to the North, he said. "There are towns and villages in Mexico that are virtually all women and mothers."
Fitfully, if steadily, President Calderon has been pushing a reform agenda. A pension reform early last year created independent retirement accounts for public workers. Mexico's Congress soon may convert its legal system from the Napoleonic-type inquisitorial system to a U.S.-like adversarial model. Even reform of Pemex, the state oil monopoly, may be possible. Few now deny that Pemex has hit a technical wall, able to drill only in shallow water, when all of Mexico's remaining reserves lie in deep water.
Once a new U.S. President takes office next year, Mr. Calderon would like to start a conversation about "rationalizing and integrating the trade, investment and labor markets of North America" -- the U.S., Mexico and Canada. Good luck to him on that: With a GOP victory comes a campaign promise to seal the border, while it has become Democratic orthodoxy to all but repudiate the North American Free Trade Agreement that was a signal achievement of the Clinton Presidency. Nafta has produced most of Mexico's new jobs.
President Calderon is surely right that a long-term solution to illegal migrant workers is to regularize the economic equilibrium between the U.S. and Mexico. That will require a Mexico capable of achieving sustained economic growth. Here, too, the arrow is pointing upward. Though Mexico's economy cooled last year after growing robustly at 4.8% in 2006, our visitors pointed to signs that the economy is strengthening. January's new-job number came in at 22,000, a month historically associated with little growth.
Presumably, creating its own jobs is what we want Mexico to do. But President Calderon said that what worried him most about the relationship now were "protectionist trends in the United States." He is not referring merely to the physical border but to the free flow of goods and services, or as he put it, "the free market."
Who'd have thought in 1995 that the President of Mexico would some day caution his neighbors not to stray too far from the mutual benefits of open markets? But just now, the Calderon arc is pointing both nations in the right direction. We hope the next U.S. President agrees.
