Fred DuVal, Democratic candidate for governor of Arizona, thinks Arizona ought to do more of what some other states are doing, promote economic growth by fostering trade with Mexico. He wants Arizona to take advantage of the U.S. relationship with Canada and Mexico by making Arizona a logistics hub for the transportation of goods. DuVal believes Arizona urgently needs to modify its view of Mexico, expand it beyond the current emphasis on border security.
He makes a good point. While border security and immigration matters can’t be ignored, the state’s leadership has mostly dwelled on the negative aspects of the border relationship. While busy pushing legislation such as SB 1070, they may have overlooked potential opportunities offered by Arizona’s location on an international border. For the first half of 2014, exports from Texas to Mexico amounted to $51.6 billion while shipments from Arizona came to $4.0 billion. The July unemployment rate in Texas was 5.1%, Arizona’s stood at 7.0%.
The NAFTA region (Canada, United States, and Mexico) is one of the world’s largest free trade areas, accounting for one-third of the world’s GDP. The U.S. is Mexico’s largest trading partner, Mexico ranks third as a trading partner of the United States. Mexico and America share long-standing cultural and economic ties in the border region. As a consequence of the U.S. financial collapse of 2008, Mexico suffered the deepest recession in Latin America due to its economic links to the U.S.
Mexico’s economy is improving, it is expected to grow 2.4% this year. The administration of Enrique Pena Nieto, which took office in 2012, is making changes to the way Mexico operates. Fiscal reform has started to increase the flow of government revenue. At some time in the future, Mexico will no longer be known as the country with tax income that is the lowest of all developed nations. Moves are underway to shake up the monopolistic telecommunications, broadcasting and stodgy energy sectors. The majority of Mexico’s political leaders are backing the reforms (with varying degrees of enthusiasm) because they see the need to improve the nation’s productivity and spur economic growth.
Along with the border immigration issue, there are other knotty problems. Drug violence has taken a hefty toll in Mexico. The fighting between the drug cartels struggling to control access to the American illegal drug market has cost an estimated 60,000 lives since 2007. The financial stakes are considerable, the cartels are estimated to pull in $29 billion a year from the U.S. market. Illegal drugs are a shared problem, as drugs move north, corrupting cash and firearms flow back to Mexico.
Although Mexico’s per capita GDP is increasing, Mexico receives the largest amount of remittances in Latin America, $27.7 billion in 2013. In the poorer southern Mexican states, remittances cover a high percentage of the population’s consumption and housing expenses. Mexico’s inefficient informal sector still accounts for 25% to 35% of the country’s jobs.
As a matter of foreign policy, the U.S. government seeks to improve cooperation with Mexico in the areas of trade, transportation, economic growth and security. A governor interested in all phases of Arizona’s complex border relationship could prod the state’s congressional delegation to pay more attention to a number of issues affecting Arizona’s future. Has the federal government been successful in keeping the flow of products moving across the border while improving border safety and security? What improvements are needed to border infrastructure? How much has the emphasis on border security impeded normal border crossings and the movement of cargo? What new opportunities are Mexico’s ongoing reforms going to offer Arizona’s economy?