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equally difficult for most people to understand how it has already risen as
high as it has.
There are several things working in Mexico’s favor economically. The
first is oil. Mexico has been a major oil producer
and exporter over the last
century. For many, that is an argument against Mexico becoming a major
power. Oil exports frequently undermine the ability—or appetite—of a na
tion to develop other industries. It’s therefore important to understand one
other fact about Mexico: despite the surge in global oil prices since 2003, its
energy sector actually represents a declining portion of Mexico’s overall
economy. Oil constituted about 60 percent of Mexico’s exports in 1980, but
by 2000 it was only about 7 percent. Mexico has oil reserves, but it doesn’t
depend on oil exports to grow.
The second factor in Mexico’s economic growth has to do with its prox
imity to the United States—the same thing that will later pose a geopolitical
challenge. Mexico—with or without NAFTA—will be able to export effi
ciently into the world’s largest and most dynamic market. While NAFTA
cut the cost of exports and increased the institutional efficiency of the rela
tionship, the fundamental reality is that Mexico’s proximity to the United
States has always given it an economic advantage, despite the geopolitical
disadvantage that goes with it.
Third, there are massive amounts of cash flowing back to Mexico from
the United States in the form of remittances from legal and illegal immi
grants. Remittances to Mexico have surged and
are now its second- largest
source of foreign income. In most
countries, foreign investment is the pri
mary means for developing the economy. In Mexico, investment by foreign
ers is being matched by foreign remittances. This remittance system has two
effects. It leverages other sources of investment when it is banked. And it
serves as a social safety net for the lower classes, to whom most remittances
flow.
The inflow of money into Mexico has meant a growth in technologically
based industry and services. Services now account for 70 percent of Mex
ico’s GDP, and agriculture for only about 4 percent. The rest is made up of
industry, oil, and mining. The proportion of services centered around
tourism
is relatively high, but the mix as a whole is not typical of a develop
ing country.
There is an interesting measure, created by the United Nations, called
the human development index (HDI), which charts global standards of liv-
ing, including factors like life expectancy and literacy rates. The HDI di-
vides the world into three classes. On the map that follows, black represents
the advanced industrial world, medium gray indicates the middle- tier and
developed countries, and light gray shows the developing world. As the map
shows, Mexico already ranks with Europe and the United States on the hu-
man development scale. That doesn’t mean it is the equal of the United
States, but it does mean that Mexico cannot simply be viewed as a develop-
ing country.
When we drill deeper into the HDI, we see something else interesting
about Mexico. Mexico as a whole has an index of 0.70, which puts it in the
same class as the United States or Europe. But there are enormous regional
inequalities within Mexico. The darker areas on the map below have rank-
ings equal
to some European countries, while the lightest areas are the equiv-
alent of poorer, North African countries.
This tremendous inequality is exactly what you would expect to see in a
country in the process of rapid development. Consider the descriptions of
Europe written by Charles Dickens or Victor Hugo. They captured the
essence of nineteenth- century Europe—tremendous growth amid inten -
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sifying inequality. In Mexico, one can find that contrast in Mexico City
or Guadalajara. But one can also see it regionally, contrasting the relative
wealth of Mexico’s north with the poverty of the south. Inequality does not
mean lack of development. Instead, it is the inevitable by-product of devel-
opment.
It is interesting to note in this map, of course, that the areas bordering
the United States and the tourist regions in the south—as
well as Mexico
City—are at the highest levels of development. As one moves away from the
U.S. frontier, the HDI declines. This indicates the importance of the
United States in Mexican development. It also reveals the real danger facing
Mexico—which is an insurgency in the south fueled by its inequality. This
inequality will intensify as Mexico develops.
There is one other important factor driving Mexico’s growth: organized
crime and the drug trade. In general, there are two types of crime. One is
simply distributive and consumptive—someone steals your television and
sells it. The other creates large pools of capital. The American Mafia that
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