Mexico before the U.S.' Crisis

One in every five jobs in our country depends on the product demand of the United States. Trade, remittance and Mexican tourism will be the first sectors to be affected if the government and legislators of our neighboring country don’t achieve a domestic agreement to raise the domestic debt ceiling in order to meet their short-term financial obligations.

The United States could see lowered credit rating or declare suspension of payments, which in either case would be a disaster for the international financial system, but most of all for Mexico, whose economy is tied to America’s.

Our president, Felipe Calderón, has said that we are “relatively prepared” to resist such a contingency, but doesn’t rule out immediate effects such as sudden capital flight, abrupt changes in interest rates and movements in the exchange rate. He appeals to the historic reserves of the Bank of Mexico and a broad line of credit with the International Monetary Fund.

Two years ago the Mexican financial authorities downplayed the impact of the so-called mortgage crisis that has also been generated in the United States, initially ensuring that at worst it could give us a cold, but what we got was turbulence that affected thousands of businesses and sent many into the streets. This phenomenon was aggravated by the H1N1 influenza epidemic. All of these factors created an economic hole from which we are only just rising, as many financial indicators of the country have not even returned to the levels of 2008.

It is true that the global crisis that threatens everyone was started within the United States. The lack of control of their deficit was generated by years of sustained spending with borrowed money. To make matters worse, the problem is now used as a tool for political dispute between Republicans and Democrats. In the backdrop what can be glimpsed, as analyst Antonio Navalón noted, is the construction of a new economic model.

In Mexico, we have to be more than relatively prepared for the future changes in international financial paradigms. In recent years, many have appealed to the country’s macroeconomic stability, that we have moved away from double-digit inflation, but have failed to substantially raise the standards of living of the population. We shouldn’t just trust that we have money saved, for it is urgent to know more details of Mexico’s emergency plan in case of global turmoil.