Out of the box on Mexico

April 06, 2004|By Thomas L. Friedman

MEXICO CITY - Because it happened so peacefully, it's easy to forget that Mexico in one decade has gone through two remarkable revolutions. One of the oldest one-party governments in the world was eased out with ballots, not bullets, and a poor developing country lowered its tariff barriers and became America's second-largest trading partner. Good news, right? So why does it feel like so many people here who were riding high three years ago are losing confidence?

The short answer is that Mexico's political and economic revolutions, driven from the top, were great for the 1990s. But unless they are followed up now by a third revolution - a reform revolution - that mobilizes and upgrades the skills of the whole society, Mexico will not stay competitive, and people here know it. But their politics are gridlocked. If Mexico does not get some real leadership, it's likely to have a real crisis. It is hard to stay competitive when you collect the lowest percentage of taxes among leading Western economies, or when you are an oil-rich country but you import energy from America because your constitution restricts foreign investment in the energy sector.

If Mexico were where Australia is, this would not worry me. Not only is it next-door, but Mexico's baby boomers born in the 1970s are now entering their prime working years. If Mexico can't develop an economy that can keep them at home, they will flock to a theater near you.

"What NAFTA accomplished was to get Mexicans to think forward and outward instead of inward and backward," said Luis Rubio, president of Mexico's Center of Research for Development. "[But] NAFTA was seen as an end more than a beginning. It was seen as the conclusion of a process of political and economic reforms and was meant to consolidate them. ... Not only did Mexico not have a strategy for going forward, neither did America."

Which is why it's time to start thinking out of the box - or maybe into a bigger box. "This situation doesn't have to end in crisis, but it will if Mexico, the U.S. and Canada fail to act," says Robert Pastor, director of the Center for North American Studies at American University and author of Toward a North American Community.

Mr. Pastor has proposed a way out - deeper integration. Canada, Mexico and the United States have to go beyond NAFTA and start addressing continental issues, from transportation to terrorism, in a wider framework. Among other things, he proposes that the United States, Canada and Mexico establish a North America investment fund, which, over 10 years, would invest in roads, telecommunications and postsecondary education in Mexico. When the European Union brought in the poorer countries of Spain, Portugal, Greece and Ireland, it didn't just tell them, "OK, now you're in our free-trade zone, let the market rip." The European Union invested big, big money in roads and education in the four new states and narrowed their income gap with the rest of Europe, giving their workers an incentive to stay home.

"The United States and Canada should only contribute to such a fund, though, if Mexico contributes an equal amount through new taxes and implements the reforms that will make its economy more competitive," said Mr. Pastor. "If the United States shaped this approach with Mexico as part of building a larger community, it could break the Mexican stalemate on reforms. Without reform, Mexico will never develop to the next stage, and without Mexican development, no U.S. immigration plan will stem the flow."

President Dwight Eisenhower said: If a problem can't be solved as it is, enlarge it. Right now Mexico does not have the resources or consensus to reform, and America does not have a strategy for managing immigration or the relationship with its neighbors. Neither will solve its problem without a larger canvas. The Bush team is just pretending it has an immigration policy to win Hispanic votes. But it has neither a policy nor a Mexican partner. The Democrats are still debating whether NAFTA was a good idea! Hello? The truth is this relationship is drifting aimlessly, and the problem won't get smaller until the thinking gets bigger.

Thomas L. Friedman is a columnist for The New York Times. His column appears Tuesdays and Fridays in The Sun.

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