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Mexico and France

 J Brauer | © Stone Garden Economics

On 28 November 2013, the Institute for Economics and Peace published another one in its growing series of country reports on the relation between peace and prosperity. As in its previous reports on the USA and the UK, the Mexican Peace Index report once again shows important regional variations within a country. In Mexico, the states of Yucatan and Campeche in the southeast for instance are both relatively peaceful and prosperous. In contrast, states more affected by illicit drug-related “wars,” mostly but not only in the north and northwest, and bordering on the United States, are both less peaceful and less prosperous. Indeed, since 2007, drug-trade related homicides have numbered in the tens of thousands and now breach at least some scholars’ definition of genocide and mass killing.

The definition of peacefulness used, however, is that of negative peace, that is, the relative presence or absence of violence. Thus, a particularly welcome aspect of the MPI is that it also reports on a new measure, the country’s positive peace index (PPI). The PPI measures a country’s strengths in regard to peacefulness rather than the strains put on peace. Rather than measuring homicides, other violent crimes, terrorism risk, or military expenditure and arms trade, for example, the PPI measures well-functioning government, equitable resource distribution, free flow of information, sound business environment, the level of available human capital, the acceptance of the rights of others, corruption levels, and the state of relations with other countries.

As it turns out, the PPI numbers for Mexico are encouraging. Perhaps surprisingly, Mexico is a rather more peaceful place, and this finding should encourage the country’s government to push even harder to deal with the drug gangs, free up unduly compliant media, and deal with corruption in a decisive manner. In fact, the IEP’s report comes at a good time as Mexico’s energetic President, Enrique Peña Nieto, has began to grapple over the course of his first year in office with a number of factors that have constrained Mexico’s economic prospects.

2013-12-02 Mexico France

France (top) and Mexico (bottom). Per capita GDP in inflation-adjusted purchasing-parity power dollars, 1950-2011. Sources: Penn World Table (blue) and World Development Indicators (red).

The chart to the left displays some economy-wide data for Mexico (the bottom lines) and contrasts them with those for France. Measured in purchasing-power parity, or international, dollars (I$), the data are triple-adjusted for population growth, price inflation, and foreign-exchange rate differences. This means that the data are at least roughly suitable to compare the two countries.

According to the Penn World Table data (PWT, now actually supplied by the University of Groningen in the Netherlands), in 1950 both countries started out not overly far apart in terms of average economic production per person. But by 1980, the average French person produced about twice as much as the average Mexican (I$20,000 as compared to I$10,000), and this in spite of the oil price booms in the mid and late 1970s which much benefited Mexican gross domestic product (GDP).

Moreover, for the next 20 years, 1980 to 2000, Mexico stalled. Its average production per person barely changed, although a revival is apparent as from 1995, when it shook off its 1994 currency crisis and joined NAFTA, the North American Free Trade Area. In contrast, by the year 2000, France’s GDP per person had increased to about I$30,000.

Since 2000, however, the situation appears to have reversed. Average GDP in France in 2000 was I$28,772 and this grew to I$31,438 in 2011 according to the PWT data, an improvement of 9.3 percent over 11 years. In contrast, Mexico’s growth was 16.1 percent over those 11 years, from I$10,944 to I$12,710. The growth rates according to the World Development Indicators data, the red lines in the chart, were only 6.2 percent for France and 7.8 percent for Mexico. (Dealing with such data source differences is a professional hazard.) Either way, Mexico has done better than France. Mexico also weathered the 2009 world economic recession better than did France: In 2012, according to the Organization for Economic Cooperation and Development (OECD), a data gathering agency, Mexico’s unemployment rate was only 5.2 percent; France’s was still 9.1 percent.

In a word, Mexico has a lot of good things going for it. Here’s hoping that its President will persist and push hard for reform. It would be a shame for the country to fall flat on its face once again.

J Brauer is Professor of Economics, James M. Hull College of Business, Georgia Regents University, Augusta, Georgia, USA.

 

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