For a glimpse of the average American’s understanding ofthe relationship between the United States and Mexico, one only has to watchthe critically acclaimed television series Breaking Bad. Set in Albuquerque, NewMexico, a few hundred miles from the border, the series chronicles the rise andfall of Walter White, a high school chemistry teacher who becomes amethamphetamine tycoon.
Most of the characters on the US side of the border are portrayed with sympathyand depth. The main protagonist’sstep-by-step descentinto the drug underworldunfolds with such subtlety that each individual decision he makes along the wayseems almost reasonable.
Unfortunately, the other side of the border receives moresuperficial treatment. In one scene, two Mexican hit men ruthlessly slaughter a dozeninnocent compatriotswho could bear witness totheir border crossing. In another episode, members of the Mexican FederalPolice are seen assaultinga drug lord in his hacienda,with the implication that they are only doing the bidding of a rival dealer.
“Breaking Bad” isbrilliant television, but it is regrettable that so many Americans see onlythis side of things. Mexico has profound security problems in some regions, butit is also a country that just might be on the threshold of a huge politicaland economic transformation. Indeed, for a couple of years now, Mexico’s GDPgrowth rates have been near the top of the OECD, and recently above Brazil’s.
Rather than continue fighting (as in the US) after a heatedpresidential election, Mexico’s major political parties appear poised tocooperate on a number of critical structural reforms that could energizeeconomic growth for decades to come. The agenda includes an expansion of thetax base to reduce dependency on oil, an initiative to increase competition inmedia and telecommunications, and a constitutional change that will permit thestate-owned oil company Pemex to enter into joint ventures with foreign firms.
This last reform is critical, because much of Mexico’s geology is very similarto that of the southwestern US. In principle, Mexico’s economy should bebenefiting from the same shale-gasrevolution that is providing a huge boost to the US, where natural-gas pricesare now less than one-quarter of what Europeans pay.
Mexico is already enjoying a manufacturing boom that hasincreased its exports to the US, following a long secular decline. With China’swages soaring and rising oil prices driving up shipping costs, production inMexico is suddenly looking much more attractive, even taking security concernsinto account.
Of course, any number of things can go wrong. First andforemost, the political elite might suddenly back away from essentialstructural reforms, and the Mexican business community’s current optimism couldcollapse. It wouldn’t be the first time.
There is also a risk that foreign investors, who alreadyare starting to like Mexico, might come to love it a little too much. A hugeinflux of capital could lead to a significant appreciation of the peso’sexchange rate, causing an increase in Mexico’s currently very attractive laborcosts. Or the US could slip into recession (though modest growth is certainlythe central scenario nowadays).
Then there is the matter of security, which constitutes ahuge tax on business in many parts of Mexico. For example, one importantachievement of former President Felipe Calderón’s administration was to pushthrough a 140-mile highway connecting the interior city of Durango and thePacific port at Mazatlán. Traversingextremely rough terrain with 200 tunnels and bridges, it promises to cut the transit time by three orfour hours. Except for the weather, the highway has the feel of Switzerland.
But the new road has raised concerns, particularly in theUS, that it could serve as a smuggling route for drugs and weapons, so themilitary feels obligedto set up checkpoints. Unfortunately, early anecdotal evidence suggests thatthese safeguards may ultimately slow down traffic by roughly the same amount oftime that the project was meant to speed it up!
Mexican leaders acknowledge the country’s internalproblems, but place three of them at America’s doorstep. First and foremost,the US generates the huge demand for illicit drugs that sustains the entireLatin American mafia, just as the US experiment with alcohol prohibition in the1920’s fueled the rise of gangsters like Al Capone. No one knows precisely theMexican drug cartels’ annual profits, but they certainly amount to billions ofdollars.
Second, the US, with its incredibly lax restrictions on gunpurchases, serves as a veritablearms depot for rich Mexican drug lords. True, they could arguably acquiresimilar weapons elsewhere, but not necessarily as cheaply and conveniently.
Finally, the US could do more to curtail money laundering.One simple step would be to restrict the circulation of $100 bills, which aremostly used in the underground economy.
Many of the problems that characterize the complexUS-Mexican relationship will be ameliorated if Mexico can sustain rapid economic growth. Netimmigration to the US, which has already tapered off, might reverse. The US stands tobenefit as much as Mexico if conditions south of the border begin breakinggood.