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Effects of the current U.S. crisis on Mexico

Effects of the current U.S. crisis on Mexico. Carlos Yanez Matt Anzardo Econ. 465 Ramon A. Castillo. Summary. Relationship with U.S. economic decline and Mexico GDP: Investment, Trade, Consumption, and Government Spending Unemployment Consequences on; Immigration Remittances Poverty.

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Effects of the current U.S. crisis on Mexico

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  1. Effects of the current U.S. crisis on Mexico Carlos Yanez Matt Anzardo Econ. 465 Ramon A. Castillo

  2. Summary • Relationship with U.S. economic decline and Mexico • GDP: Investment, Trade, Consumption, and Government Spending • Unemployment • Consequences on; • Immigration • Remittances • Poverty

  3. GDP Mexico experienced the Largest decline in GDP growth in 2009 since the last 30 years.

  4. Investment • US provides half of Mexico’s FDI • Almost 70% is in manufacturing and assembly plants. • US FDI into Mexico has decreased by 16% in 2008 and 23% in 2009 • Significant decline in manufacturing jobs

  5. Trade • Over 80% of Mexico’s exports go to the US • Current account deficits • The value of the peso declining • Mexico relies on 35% of foodstuffs from imports, therefore more hunger may result if their currency can not buy as much. • Caused more job losses in Mexico

  6. Trade

  7. Consumption • Because of job losses, people are cutting down on spending • Government hopes tourism will raise consumption. • Swine flu • The value of bad credit card debt shot up from $1.3 billion in November 2007 to more than $3 billion in November 2008.

  8. Government Spending • Cuts in public spending and increased taxes on income and consumption. • Public officials and public sector. • New general consumption tax • Still left with a 22.3 billion dollar deficit

  9. Unemployment • Significant decline in manufacturing jobs • Many moved to informal sector such as street vending • Since the beginning of the current economic crisis, Mexico’s unemployment rate has gone from 3.7% to 5.67%, US has gone from 4.6% to 9.4%

  10. United States: Unemployment Rate on Mexican Immigrants

  11. Remittances • Mexico’s largest source of income • Reasons for the decline • U.S. recession • Unemployment in the U.S. • Tighter security at borders • 3.6% ($931m)in 2008 to $25bn. • First decline in 13 years

  12. Remittances

  13. Remittances • Michoacan, Mexico is where most remittances are sent to. • Baja California , $36m

  14. Immigration • Higher cost of Migration • Poor job prospects in the U.S. / Mexico • Illegal aliens returned home rose 20% • Mexico (NSEO) estimates that 433,000 Mexican migrants returned between (2008, 2009)

  15. Immigration Level • Immigrants returning home could drive down wages and put pressure on social services. • About 11% of everyone born in Mexico is currently living in the U.S.

  16. Poverty

  17. Poverty • 44,700,000 Mexicans are now living in poverty. • 14 million are considered living under extreme poverty. • Poverty levels are predicted to be similar to 1996.

  18. Poverty http://www.youtube.com/watch?v=XjGXXOfoTek

  19. Conclusion • As the result of the close relationship between Mexico and the United States, Mexico will continue to face all the factors mention above till the day Mexico dices to limit its relationship with the United States

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