Arizona’s Other Option

By Karl Reiner

Countries get to pick their friends, but not their neighbors. In Europe, France shares borders with Spain, Germany and other countries.  In North America, the U.S. has Canada and Mexico on its northern and southern borders. While the people of Europe learned through hard experience to make geographical proximity work to their mutual advantage, much of the political leadership of Arizona continues to disregard Mexico.  They do not see it as a positive factor in the state’s future.       

The state government has become deeply involved in international border issues. Although suffering grievous financial woes, Arizona wants to build its own border barriers and relieve the federal government of the chore. The state also expanded its role in enforcing immigration laws. To date, much of Arizona’s prickly enforcement initiative remains entangled in the courts.  

Despite the negative views widely held in the state, being located on an international border is not all bad. Trade does help create jobs. Mexico does more business with the U.S. than any other country with the exception of Canada and China.  Trade between the U.S. and Mexico is running at $400 billion per year.  Arizona’s businesses and workers do benefit.  The state’s exports to Mexico in 2010 amounted to $5 billion. Visitors from Mexico spend real money in southern Arizona’s retail establishments.

Years ago, a president of Mexico lamented: “Poor Mexico! So far from God and so close to the United States.”  When the subprime mortgage packages created by the wizards of Wall Street began to implode in late 2008, the resulting crisis hit Mexico hard.  The slump dropped the economy by over 6% in 2009. Due to its economic ties to U.S., Mexico suffered the deepest recession of the North American countries.

Mexico has its share of other economic troubles.  In the last 10 years, Mexico’s income per person grew 0.6% per year, one of the lowest rates in the world.  Its oil sector is a stodgy state monopoly starved for investment.  The country has an ineffectual tax system.  The economy is encumbered by monopolies and cartels.  It is estimated that 31% of Mexican household spending goes for products supplied by uncompetitive markets.  Promoting competition and labor reform will not be easy, but there is a growing movement in that direction.  When implemented, reform could add 2.5% to the Mexican economy’s growth rate.

Although immigration tends to be good for an economy over time, many in Arizona think it does more harm than good.  Immigrants produce little, take jobs and consume public services.  Although migrants did not create the current economic crisis, they become one of the focal points of fear when the country is in deep recession.  

Stricter border security measures and the severe impact of the recession have changed the situation on the border.  Both legal and illegal immigration rates have dropped.  Arrests of illegal border crossers on the Mexican border have been declining, nearing a 40 year low.  

Some analysts believe the view that migration is always a one-way journey to a new permanent home is outdated.  In reality, much international changing of residence turns out to be the temporary movement of workers to locations with available jobs.  The analysts point out that China is becoming a destination for skilled workers.  There are now 71,000 Americans working in China.  They are not expected to remain permanently, they will return to the U.S. at some time in the future.  

Mexico and the U.S. also share the consequences of the illegal drug trade.  Mexico is the staging area for much of the drug traffic entering the U.S.  The illegal drug market in the U.S. is large, having a street value of approximately $65 billion per year. As Americans devour drugs, they finance the Mexican drug cartels.  A steady return flow of cash and weapons moves south. As the drug gangs battle each other and government forces, drug-fueled violence engulfs many Mexican cities.  It has killed over 40,000 people and continues to spread.  The drug violence is estimated to knock about a percentage point off of Mexico’s annual growth rate. In the U.S., the cost of enforcement and incarceration related to illegal drugs continues to grow.   

As Mexico digs out of the recession, its economy is rebounding, growing by 5.4% in 2010. Mexico’s recovery from the slump and its ability to withstand lawlessness show the country has underlying strengths.  While improving border security is an important factor, it is not the only one. Promoting Mexico’s development is equally important to the goal of achieving border stability and economic security.

Geography is not going to change so we ought to accept the fact that Arizona and Mexico share both problems and prospects.  Instead of stoking fear and resentment, the state’s leadership could try its hand at bolstering economic ties.  The 113 million inhabitants of Mexico are not going away.  One way or another, they will affect Arizona’s future.  Arizona should be leading, not hindering, the push for positive change in Mexico.