DEVELOPMENT BULLETIN-MEXICO: Business Moving Ahead – For Some

By IPS Correspondents Reprint | | Print |

Diego Cevallos

Mexico, May 2 1998 (IPS) - Despite a slump in oil revenues, the business climate in Mexico has greatly improved in past months – in some sectors. In others, however, social polarization and poverty are intensifying.

An index of international competitiveness released last Wednesday by the Swiss-based Institute for Business Development (IBD) put Mexico i 34th place – up from number 40 – on a list of 46 countries headed by the United States.

According to the report, this upward mobility in Mexico resulted from economic improvements since the dramatic contraction of the economy that followed the economic crisis at the end of 1994, and the so-called tequila effect.

Some of the glister on this good news disappeared with the release of two other reports – one on poverty and the other on the social impact of the two fiscal adjustments applied to the Mexican economy this year to confront the drop in oil prices.

The state-run Education, Health and Nutrition Program (Progresa) informed that the living conditions of those in extreme poverty has remained intact over the past 15 years and the social polarization has become the trademark of contemporary Mexico.

While the average monthly per capita income is put at 75 dollars, in rural communities it barely reaches 37 dollars and, in marginal and isolated areas of the country, such as the state of Chiapas, it is only 18 dollars. In terms of years of schooling, the national average today is 7.2 years, but in rural areas it drops to 4.9 and in Chiapas to 2.9.

“If we look at the conditions for development in the long term, we can say that we have made improvements in education, but we must also recognize that not all benefit from them,” stated Progresa’s Director, Jose Gomez.

According to Gomez, in areas like sanitation, living conditions, basic services and infrastructure for family development, there have been no significant improvements since 1983. The government, for its part, has stated that reversing these inequalities, duplicating the percapital income, and eliminating the extreme poverty that affec ts 10 million people will take at least 20 years, as long as annual economic growth remains above five percent.

The time needed may be even longer, since the estimates for growth in 1998 have dropped from 5.2 to 4.8 percent after the government implemented two significant cuts in the budget during the first quarter of 1998 to deal with the drop in oil prices. Oil sales account for 40 percent of budget revenues.

The adjustment, decreed to protect the countrys macroeconomic indicators and give positive signals to investors – according to authorities – cut almost 400 million dollars from the social development and anti-poverty budget.

Clara Brugada, president of the Commission of Social Development of the Chamber of Deputies, accused the government of Ernesto Zedillo of lying to the Mexican people when he told them that the budget adjustments would not affect social i nvestment. Opposition parties claim that while poverty is intensifying, the government app ears exclusively concerned with keeping investors, exporters and other privileg ed sectors happy.

The Zedillo government warned that it might implement a third adjustmet in public spending because the price of oil has not rebounded as expected following t he production decreases announced several weeks ago by oil-exporting countries, among them Mexico. Secretary of the Treasury Jose Gurria, said the objective was to maintain sound financial policies and avoid recurring economic crises.

For now, and thanks to the adjustments, the Mexican economy is moving as planned and consolidating itself as one of the strongest in the world, according to a report by the International Monetary Fund (IMF).

Authorities maintain that the country is not in crisis and finances are sound, as shown by the ranking published by the IBD, the positive trends on the stock exchange, the level of foreign investment and the stability of the national cur rency.

But the problems of social development persist and intensify. Latest statistics indicate that more than 50 million Mexicans, – more than half of the population- still live in poverty. (FIN/IPS/dc/mg/if/mg/mk/98)