By the time you are reading this article you will already know what happened to GDP during the fourth quarter of last year and also what the growth was for the whole year. Due to the partial information available at the time of writing this article, it can be anticipated that in the fourth quarter the GDP fell between 0.2 and 0.4%, compared to the level of the third quarter, thus accumulating two consecutive quarters with negative growth. For the whole year GDP will have grown by around 5 percent.
These results indicate that the economy rebounded during the second quarter but that this rebound was small and also short-lived, so we are very far from recovering the loss experienced in 2020 when the GDP fell by 8.5% and even further from reaching the level of 2018 given that during 2019 the GDP also contracted. Thus, in the first three years of President López’s government, GDP per inhabitant fell by 7 percent.
If international experience teaches us anything, it is that if a country does not experience a sustained process of economic growth, the well-being of the population will not be able to experience a sustained increase, much less a permanent one. Growth is not enough for an improvement in well-being, but it is undoubtedly necessary, and since the objective of public policy is to increase the level of well-being of the population, it is crucial to lay down the conditions for economic growth to take place.
The president still has the opportunity to recover some of what was lost in the first in the second triennium, but this depends on him valuing growth for what it represents, something that he has not done so far; Moreover, it has downplayed the fact that the GDP per inhabitant has fallen, as well as the fact that the level of well-being of a significant part of the population has decreased.
To recover some of what was lost, it is obviously necessary to change the objectives and correct the decisions that were made. The president must know that the fact that the government itself has violated the rule of law, generating legal uncertainty about compliance with the rules, has led to a significant contraction in private investment, both national and foreign. Mexico now has an opportunity that, if seized, would significantly boost growth, both in the short and medium term. This opportunity has at least two components.
The first is the tendency that a part of the US investment that has been channeled to China (and other Asian countries) tends to relocate in North America derived from two factors: the geopolitical derived from the Sino-American conflict and the search to reduce transportation costs. The second is the boost that the US government is giving to investment in clean technologies that entails, at least partially, international trade policy with an ecological component, which would imply taxing imports of goods produced with dirty energy, that is, electricity generated with fossil fuels (gas, coal and fuel oil). We have the mechanism to take advantage of this unique opportunity with the T-MEC.
What is missing is for the president to realize that national sovereignty is not strengthened by two government monopolies in the energy sector, but by an increasingly prosperous population derived from high and sustained growth. For the same reason, if you want to take advantage of the opportunity described above, it is crucial to discard the proposal to reform the electricity sector and promote instead a policy that encourages the adoption and growth of electricity generation from clean sources, solar and wind energy, including a more efficient and competitive CFE.
If the president insists on his proposal and it passes, the cost will be enormous, not only because this unique opportunity will be wasted, but it will also kill the possibility of the economy growing in the coming years, even beyond 2024.
Twitter: @econoclasta
Economist and professor
Point of view
Knight of the National Order of Merit of the French Republic. Medal of Professional Merit, Ex-ITAM.
