Three Reasons Washington Should Care About Mexico's Meltdown
Economies around the world have been hit hard by the coronavirus pandemic. In the United States, we have seen a GDP contraction of 9.5 percent, compared with the last quarter, putting an end to the economic boom of the past few years. Europe expects to see its economy contract by 8.3 percent this year, and Japan’s is predicted to shrink by a similar percentage.
Governments across the world have dedicated massive financial resources to keep their economies afloat in the face of a threat that is simultaneously exogenous and endogenous. By doing so, they have inflated their national debts, but have a much better chance of an early recovery from the crisis. For example, the Congressional Budget Office recently announced that new government spending — up from 79 percent last year — will make U.S. government debt surpass the size of the entire U.S. economy in 2021.
Mexico is an outlier. Like other countries, it has been hit hard by the pandemic with more than 76,000 dead, a number that some experts believe should be multiplied several times, given widespread under-reporting. The Mexican economy saw a contraction of 18.9 percent in the second quarter of 2020, and conservative estimates predict a 10 percent or higher drop in GDP for the year. Just to be clear, that means the disappearance of 1 in 10 dollars in national production in 2020. More than 12 million jobs have been lost since the beginning of the pandemic and, although July brought a strong recovery in employment data, today there are 5.5 million more people unemployed than there were in March.
About the Author
The Mexico Institute seeks to improve understanding, communication, and cooperation between Mexico and the United States by promoting original research, encouraging public discussion, and proposing policy options for enhancing the bilateral relationship. A binational Advisory Board, chaired by Luis Téllez and Earl Anthony Wayne, oversees the work of the Mexico Institute. Read more