Professor Alejandro Diaz Bautista Pesentation UCSD May2014

““Structural Reforms and Long-Term EconomicStructural Reforms and Long-Term Economic
Growth in Mexico”Growth in Mexico”..
Alejandro Díaz-Bautista,Alejandro Díaz-Bautista, Ph.D.Ph.D.
Professor of International Economics at Colef
and
Distinguished Researcher
National Council of Science and Technology
adiazbau@gmail.com
Center for U.S.-Mexican Studies at UC San Diego
Wednesday, May 21, 2014. 12 - 1:30 p.m.
Gildred Latin American Studies Building,
CILAS Library, UCSD.
.

IntroductionIntroduction
 Since President Peña Nieto took office last year, Mexico hasSince President Peña Nieto took office last year, Mexico has
been pushing for an ambitious agenda of structuralbeen pushing for an ambitious agenda of structural
reforms. Mexico recently enacted a structural reform of itsreforms. Mexico recently enacted a structural reform of its
telecommunications and broadcasting industries aimed attelecommunications and broadcasting industries aimed at
increasing competition and investment. A fiscal reform andincreasing competition and investment. A fiscal reform and
a comprehensive financial reform aimed at boosting credita comprehensive financial reform aimed at boosting credit
was proposed by the current administration.was proposed by the current administration.
 The Mexican government recently announced the energyThe Mexican government recently announced the energy
reform that is expected to include significant changes toreform that is expected to include significant changes to
Mexico’s current oil and energy sector, partly aimed atMexico’s current oil and energy sector, partly aimed at
attracting foreign investment.attracting foreign investment.
 Congress passed the basic legislation last year to open upCongress passed the basic legislation last year to open up
the oil and gas industry and spur competition in a telecomsthe oil and gas industry and spur competition in a telecoms
sector dominated by Carlos Slim. But it must still approvesector dominated by Carlos Slim. But it must still approve
the secondary laws to implement those changes.the secondary laws to implement those changes.

IntroductionIntroduction
 The reforms are a result of the Pact for Mexico, by whichThe reforms are a result of the Pact for Mexico, by which
the current administration and the major political partiesthe current administration and the major political parties
pledged to pass structural reforms in such sectors aspledged to pass structural reforms in such sectors as
telecommunications, financial, energy, education and atelecommunications, financial, energy, education and a
fiscal reform.fiscal reform.
 The presentation analyzes the impacts of the structuralThe presentation analyzes the impacts of the structural
reforms in Mexico’s economy during 2014, twenty yearsreforms in Mexico’s economy during 2014, twenty years
after the passage of the NAFTA agreement.after the passage of the NAFTA agreement.
 Mexico’s structural reforms in the areas ofMexico’s structural reforms in the areas of
telecommunications, financial, fiscal and energy sectors aretelecommunications, financial, fiscal and energy sectors are
expected to improve long-term economic growth prospects.expected to improve long-term economic growth prospects.

Fiscal ReformFiscal Reform
 TAX REFORM HIGHLIGHTSTAX REFORM HIGHLIGHTS
 The Social and Tax Reform has several components worthThe Social and Tax Reform has several components worth
mentioning:mentioning:
 1. The health related tax1. The health related tax
 2. Continuing zero percent tax to food and medicines2. Continuing zero percent tax to food and medicines
 3. Harmonization of VAT (Value Added Tax) in all of Mexico at3. Harmonization of VAT (Value Added Tax) in all of Mexico at
16%.16%.
 4. Elimination of special treatment and preferential tax regimes4. Elimination of special treatment and preferential tax regimes
 5.Establishment of limits on personal tax exceptions and5.Establishment of limits on personal tax exceptions and
deductionsdeductions
 6. Tax on stock and capital profits6. Tax on stock and capital profits
 7. Elimination of IETU (Special Tax on Production and Services),7. Elimination of IETU (Special Tax on Production and Services),
IDE (CashIDE (Cash
 Deposit Tax) and new ISR (Revenue Tax) lawDeposit Tax) and new ISR (Revenue Tax) law
 8. Changes to the customs regulation8. Changes to the customs regulation

Political ReformPolitical Reform
 Mexico's Congress gave final approval to a political reform billMexico's Congress gave final approval to a political reform bill
that will help clear the way for the passage of legislationthat will help clear the way for the passage of legislation
needed to implement a major energy reform.needed to implement a major energy reform.
 Setting out details of a law to allow lawmakers to serveSetting out details of a law to allow lawmakers to serve
consecutive terms and establish rules for coalitionconsecutive terms and establish rules for coalition
governments, the so-called secondary laws for the electoralgovernments, the so-called secondary laws for the electoral
reform were given the green light by the lower house in a votereform were given the green light by the lower house in a vote
of 311 in favor and 91 against. The reform now heads toof 311 in favor and 91 against. The reform now heads to
President Enrique Pena Nieto to be signed into law.President Enrique Pena Nieto to be signed into law.
 Mexico's opposition conservative National Action Party (PAN)Mexico's opposition conservative National Action Party (PAN)
had demanded passage of the political reform before it wouldhad demanded passage of the political reform before it would
vote for Pena Nieto's energy reform, which forms the centralvote for Pena Nieto's energy reform, which forms the central
part of his vision to breathe new life into the economy andpart of his vision to breathe new life into the economy and
increase future economic growth.increase future economic growth.

 The electoral bill completes a constitutional reform thatThe electoral bill completes a constitutional reform that
enables the re-election of mayors and congressmen, placesenables the re-election of mayors and congressmen, places
new restrictions on campaign financing, and creates a newnew restrictions on campaign financing, and creates a new
national body responsible for organizing federal and localnational body responsible for organizing federal and local
polls.polls.
 The National Electoral Institute will replace the FederalThe National Electoral Institute will replace the Federal
Electoral Institute. The National Electoral Institute willElectoral Institute. The National Electoral Institute will
oversee all federal elections and control the financialoversee all federal elections and control the financial
resources for political campaigns.resources for political campaigns.
 Each local electoral body will now report to the NationalEach local electoral body will now report to the National
electoral institute, breaking the control previously held byelectoral institute, breaking the control previously held by
state governors and legislative bodies over the votingstate governors and legislative bodies over the voting
process.process.

 The new National Electoral Institute eliminates the control that theThe new National Electoral Institute eliminates the control that the
governors of the states had on local institutes. The new modelgovernors of the states had on local institutes. The new model
seeks to remedy the excesses that many governors committed.seeks to remedy the excesses that many governors committed.
 The time between the presidential election and the inaugurationThe time between the presidential election and the inauguration
will also be reduced to three months from the current fivewill also be reduced to three months from the current five
months. The president elected in 2018 will be decided in a poll inmonths. The president elected in 2018 will be decided in a poll in
early July and sworn in by October 1.early July and sworn in by October 1.
 Another key reform will be allowing the president to establishAnother key reform will be allowing the president to establish
coalition governments with political forces outside the rulingcoalition governments with political forces outside the ruling
political party. The coalition government would have to bepolitical party. The coalition government would have to be
approved by the entire congress but only the senate will have toapproved by the entire congress but only the senate will have to
approve government programs.approve government programs.
 Most of the new electoral laws will come into effect for 2015,Most of the new electoral laws will come into effect for 2015,
during the net intermediate federal elections, while others dealingduring the net intermediate federal elections, while others dealing
with the presidency and senate will only take effect in 2018.with the presidency and senate will only take effect in 2018.

Energy ReformEnergy Reform
 Pena Nieto's Institutional Revolutionary Party, or PRI, is relying on PANPena Nieto's Institutional Revolutionary Party, or PRI, is relying on PAN
support to see through the energy reform, which could end a 75-year-oldsupport to see through the energy reform, which could end a 75-year-old
oil and gas monopoly in Mexico.oil and gas monopoly in Mexico.
 The reforms would allow outside companies to participate in oil, gas andThe reforms would allow outside companies to participate in oil, gas and
natural gas liquids (NGLs) production in Mexico. Right now, production isnatural gas liquids (NGLs) production in Mexico. Right now, production is
limited to the state energy producer, Pemex.limited to the state energy producer, Pemex.
 By allowing more participation in the country's energy sector, the reformsBy allowing more participation in the country's energy sector, the reforms
could increase oil production in the country and reduce the trade deficitcould increase oil production in the country and reduce the trade deficit
that Mexico has in every other hydrocarbon and derivative, such as naturalthat Mexico has in every other hydrocarbon and derivative, such as natural
gas, oil products and petrochemicals.gas, oil products and petrochemicals.
 By allowing third parties to fractionate natural gas, the reforms could evenBy allowing third parties to fractionate natural gas, the reforms could even
provide the foundation for a petrochemical resurgence along the lines ofprovide the foundation for a petrochemical resurgence along the lines of
what is already occurring in the US.what is already occurring in the US.

Energy ReformEnergy Reform
 Mexico holds a sizableMexico holds a sizable
unconventional resource base. Withunconventional resource base. With
an estimated 545 tcf of technicallyan estimated 545 tcf of technically
recoverable shale resources, therecoverable shale resources, the
country ranks sixth in the world incountry ranks sixth in the world in
terms of shale gas potential,terms of shale gas potential,
behind China, Argentina, Algeria,behind China, Argentina, Algeria,
the US, and Canada.the US, and Canada.
 New contract models forNew contract models for
exploration and productionexploration and production
companies could include acompanies could include a
combination of profit-sharing orcombination of profit-sharing or
production-sharing agreementsproduction-sharing agreements
with Pemex or the federalwith Pemex or the federal
government, license agreementsgovernment, license agreements
with the federal government, andwith the federal government, and
service agreements with Pemexservice agreements with Pemex
involving only cash payments.involving only cash payments.

Telecommunications ReformTelecommunications Reform
 The reforms would raise or eliminate limits on foreign investment, createThe reforms would raise or eliminate limits on foreign investment, create
two new national television channels and form a new independenttwo new national television channels and form a new independent
regulatory commission along the lines of the U.S. Federal Communicationsregulatory commission along the lines of the U.S. Federal Communications
Commission, with the power to unilaterally punish non-competitiveCommission, with the power to unilaterally punish non-competitive
practices, including withdrawing corporations' licenses. A secondpractices, including withdrawing corporations' licenses. A second
independent commission would be able to order firms to sell off assets inindependent commission would be able to order firms to sell off assets in
order to reduce their market dominance.order to reduce their market dominance.
 The existing commissions that oversee competition andThe existing commissions that oversee competition and
telecommunications have no independent ability to alter permits, ordertelecommunications have no independent ability to alter permits, order
divestment or issue fines. Those powers sit with a Cabinet secretary, adivestment or issue fines. Those powers sit with a Cabinet secretary, a
position that in the past frequently has been accused of bowing toposition that in the past frequently has been accused of bowing to
telecommunications firms.telecommunications firms.
 The reforms would require TV networks to provide their programming freeThe reforms would require TV networks to provide their programming free
to most cable operators, and require cable operators to carry all broadcastto most cable operators, and require cable operators to carry all broadcast
channels, measures seen as essential for opening television markets tochannels, measures seen as essential for opening television markets to
competition. The changes would also block telecommunications andcompetition. The changes would also block telecommunications and
broadcasting companies from indefinitely freezing regulatory decisionsbroadcasting companies from indefinitely freezing regulatory decisions
simply by obtaining a private injunction, a peculiarity of Mexican law thatsimply by obtaining a private injunction, a peculiarity of Mexican law that
has thwarted dozens of attempts to regulate media and communicationshas thwarted dozens of attempts to regulate media and communications
firms.firms.

Reform Opens Way for New Telecom PlayersReform Opens Way for New Telecom Players
 Mexico’s Federal Institute of Telecommunications, Ifetel,Mexico’s Federal Institute of Telecommunications, Ifetel,
which assumed oversight of the country’s $30 billionwhich assumed oversight of the country’s $30 billion
telecommunications industry last September, is reshapingtelecommunications industry last September, is reshaping
the country’s TV, cable and telco businesses and openningthe country’s TV, cable and telco businesses and openning
up the field to outside investors.up the field to outside investors.
 New regulations opened the way for new over-the-airNew regulations opened the way for new over-the-air
broadcasters to enter the market, enacted must-carry,broadcasters to enter the market, enacted must-carry,
must-offer rules that apply to the nation’s TV duopoly ofmust-offer rules that apply to the nation’s TV duopoly of
Televisa and TV Azteca, which together have most of theTelevisa and TV Azteca, which together have most of the
market share and also announced auction rules for as manymarket share and also announced auction rules for as many
as two new over-the-air broadcasters, which must beas two new over-the-air broadcasters, which must be
majority owned by Mexican interests.majority owned by Mexican interests.

Reform Opens Way for New Telecom PlayersReform Opens Way for New Telecom Players
 Mexico now has become a focal point for potential marketMexico now has become a focal point for potential market
change after Mexican President Enrique Peña Nieto signed intochange after Mexican President Enrique Peña Nieto signed into
law a new framework for competition in the telecommunicationslaw a new framework for competition in the telecommunications
and TV broadcast industries that has the express aim of limitingand TV broadcast industries that has the express aim of limiting
market power and shifting market share in Mexico’smarket power and shifting market share in Mexico’s
communications and media businesses.communications and media businesses.
 The new law creates a brand new regulatory body, Ifetel, whichThe new law creates a brand new regulatory body, Ifetel, which
will have the ability to apply more restrictive regulations onwill have the ability to apply more restrictive regulations on
dominant competitors or force them to sell assets.dominant competitors or force them to sell assets.
 Two new national television networks will be authorized, andTwo new national television networks will be authorized, and
existing satellite and cable TV companies will be required toexisting satellite and cable TV companies will be required to
carry those signals at no charge to the new networks.carry those signals at no charge to the new networks.
 Foreign businesses will be permitted to own up to 49 percentForeign businesses will be permitted to own up to 49 percent
(up from zero percent) of radio firms, and can increase their(up from zero percent) of radio firms, and can increase their
stake to 100 percent (up from 49 percent) in otherstake to 100 percent (up from 49 percent) in other
telecommunications operations.telecommunications operations.

Financial ReformFinancial Reform
 President Enrique Peña Nieto promulgated the financial reform law, sayingPresident Enrique Peña Nieto promulgated the financial reform law, saying
that it will promote responsible lending which will create true economicthat it will promote responsible lending which will create true economic
growth and greater productivity in Mexico.growth and greater productivity in Mexico.
 He promised that changes to the lending rules would have a favorableHe promised that changes to the lending rules would have a favorable
impact on the national economy by making credit more easily available toimpact on the national economy by making credit more easily available to
Mexicans and local companies, as well as increasing and democratizingMexicans and local companies, as well as increasing and democratizing
productivity, which will facilitate entrepreneurs’ access to much neededproductivity, which will facilitate entrepreneurs’ access to much needed
resources. With “more and cheaper credit,” President Peña Nieto said thatresources. With “more and cheaper credit,” President Peña Nieto said that
small- and medium-sized companies will be able to grow, modernize andsmall- and medium-sized companies will be able to grow, modernize and
generate more jobs for Mexicans.generate more jobs for Mexicans.
 The four central objectives of the new banking law, according to PresidentThe four central objectives of the new banking law, according to President
Peña Nieto, are to boost the Mexican development bank; to improve thePeña Nieto, are to boost the Mexican development bank; to improve the
judicial framework providing more credit at lower interest rates; tojudicial framework providing more credit at lower interest rates; to
increase competition in the financial sector multiplying and improvingincrease competition in the financial sector multiplying and improving
credit options for Mexicans; and to strengthen the soundness of thecredit options for Mexicans; and to strengthen the soundness of the
financial system.financial system.

U.S.-Mexico Relations, a ShiftU.S.-Mexico Relations, a Shift
from Security to Economyfrom Security to Economy
 Economics is at the center of the relationEconomics is at the center of the relation
between both countries in 2013 and 2014.between both countries in 2013 and 2014.
 The United States is Mexico’s largestThe United States is Mexico’s largest
trading partner, and the two countriestrading partner, and the two countries
engaged in nearly 500 billion dollars worthengaged in nearly 500 billion dollars worth
of trade in 2012. Much of that trade is inof trade in 2012. Much of that trade is in
what are known as intermediate inputs,what are known as intermediate inputs,
referring to semi-finished U.S. goods thatreferring to semi-finished U.S. goods that
are finalized with Mexican resources, aare finalized with Mexican resources, a
process seen as increasing theprocess seen as increasing the
competitiveness of both countries.competitiveness of both countries.

United States - Mexico Border States
Description:
• 10 border states.
• Nearly 2,000-mile (3,169 km or 1,969 miles) of international
border.
• Population: more than 83 million.

The United States MexicoThe United States Mexico
BorderBorder
 People cross the United StatesPeople cross the United States
Mexico border every day to doMexico border every day to do
business, go shopping, visit familybusiness, go shopping, visit family
members, or simply to enjoy eachmembers, or simply to enjoy each
other’s tourism.other’s tourism.
 This results in around 350 millionThis results in around 350 million
crossings and almost $400 billion incrossings and almost $400 billion in
trade each year, making it the mosttrade each year, making it the most
important border region in the world.important border region in the world.

The United States- Mexico border regionThe United States- Mexico border region
 The ten Border States represent the largest binational regional economy inThe ten Border States represent the largest binational regional economy in
the world, with over 83 million people and a combined economy rankedthe world, with over 83 million people and a combined economy ranked
estimated at number four in the world in economic terms.estimated at number four in the world in economic terms.
 This region has 51 border crossings, 32 bridges and seven federal railwayThis region has 51 border crossings, 32 bridges and seven federal railway
routes, placing it as the busiest border in the world, with over 350 millionroutes, placing it as the busiest border in the world, with over 350 million
people cross the border each year.people cross the border each year.
 The economic slowdown and unemployment are among the issues thatThe economic slowdown and unemployment are among the issues that
currently affect the people on both sides of the border.currently affect the people on both sides of the border.
 The state of Arizona had an unemployment rate of 9.4 percent, Texas, 8.4The state of Arizona had an unemployment rate of 9.4 percent, Texas, 8.4
percent; New Mexico, 6.7 percent, and California, 12 percent (thepercent; New Mexico, 6.7 percent, and California, 12 percent (the
highest), according to the figures from July 2011, compared to anhighest), according to the figures from July 2011, compared to an
unemployment rate of 9.1 percent in the United States during July 2011.unemployment rate of 9.1 percent in the United States during July 2011.
 In July 2011, the northern border states of Mexico were also showing highIn July 2011, the northern border states of Mexico were also showing high
unemployment rates. The state of Baja California had an unemploymentunemployment rates. The state of Baja California had an unemployment
rate of 5.05 percent, Sonora, 5.65 percent; Chihuahua, 6.81 percent;rate of 5.05 percent, Sonora, 5.65 percent; Chihuahua, 6.81 percent;
Coahuila, 6.27 percent; Nuevo Leon, 6.49 percent; and Tamaulipas, 8.81Coahuila, 6.27 percent; Nuevo Leon, 6.49 percent; and Tamaulipas, 8.81
percent (the highest).percent (the highest).

Economic Indicators 2013-2015Economic Indicators 2013-2015

Economic Indicators 2013-2015Economic Indicators 2013-2015
 It is anticipated that the Ministry of Finance will cut itsIt is anticipated that the Ministry of Finance will cut its
current growth forecast of 3.9 percent to a rate of 3.0current growth forecast of 3.9 percent to a rate of 3.0
percent, while the central bank revised its projected growthpercent, while the central bank revised its projected growth
from the 3.0 and 4.0 percent, to one between 2.5 and 3.5from the 3.0 and 4.0 percent, to one between 2.5 and 3.5
percent.percent.
 The data on gross domestic product (GDP) in the firstThe data on gross domestic product (GDP) in the first
quarter of 2014, will be known on Friday.quarter of 2014, will be known on Friday.
 We expect a modest recovery of 2.1 percent at an annualWe expect a modest recovery of 2.1 percent at an annual
rate, down from its previous forecast of 2.4 percent, whilerate, down from its previous forecast of 2.4 percent, while
the seasonally adjusted estimate calls for an annualizedthe seasonally adjusted estimate calls for an annualized
quarterly rate of 0.9 percent.quarterly rate of 0.9 percent.

Economic Growth ModelEconomic Growth Model

To understand the economic growth model, let’s look at the
sources of economic growth….where does production come
from?
( )LKAFY ,,=
Real
GDP
“is a function of”
Productivity Capital
Stock
Labor
Real GDP = Constant prices (Inflation adjusted) value of all
goods and services produced in the country.
Capital Stock = Constant price value of private, non-
residential fixed assets.
Labor = Private and Public Sector Employment.
Productivity = Production unaccounted for by capital or
labor.

3
2
3
1
LAKY =
Suppose we have the following production function:
A 1% rise in
employment raises
GDP by 2/3%
A 1% rise in capital
raises GDP by
1/3%
We can rewrite the production function in terms of
growth rates to decompose GDP growth into growth of
factors:
( ) ( ) ( )LKAY ∆+∆+∆=∆ %
3
2
%
3
1
%%
Real GDP Growth
(observable) Employment
Growth
(observable)
Capital Growth
(observable)
Productivity
Growth
(unobservable)

Our model of economic growth begins with a production
function.
Real
GDP
Productivity Capital
Stock
Labor
Given our models production function,
economic growth can result from
• Growth in labor
• Growth in the capital stock
• Growth in productivity
3
2
3
1
LAKY =

We are concerned with capital based growth. Therefore,
growth in productivity and employment will be taken as given
Productivity
grows at
rate
Ag Pop
Pop
LF
LF
L
L 











=
Population
grows at
rate
Lg
Employment
Labor Force
= Employment Ratio
( Assumed Constant)
Labor Force
Population
= Participation rate
( Assumed Constant)
3
2
3
1
LAKY =

3
1
Aky =
Again, the key property of production is that capital
exhibits diminishing marginal productivity, that is as capital
rises relative to labor, its contribution to production of per
capita output shrinks
y
k
Capital stock pe
capita
Output per capita

Lets assume that households save a constant fraction of their
disposable income.
( )TYS −=θ
Saving
s
Income Less
Taxes
Constant between zero
and one
Again, convert everything to per capital terms by dividing
through by the labor force






−=
L
T
L
Y
L
S
θ ( )tys −=θ

c
time
Is a higher steady state worth the transitions structural
reforms?
Growth of per capita
consumption under old
policy regime = 1.5%
Immediate drop
in consumption
as economy
responds to
fiscal policy
change
consumption increases
during transition
period during
structural reforms.
consumption returns to
1.5%

ConclusionsConclusions
 More than a year ago, as President Enrique Peña NietoMore than a year ago, as President Enrique Peña Nieto
started his administration, the domestic and internationalstarted his administration, the domestic and international
press were talking about “Mexico’s moment” and the rise ofpress were talking about “Mexico’s moment” and the rise of
“the Aztec tiger.”“the Aztec tiger.”
 Increasing pessimism in Mexico stems in part fromIncreasing pessimism in Mexico stems in part from
disappointing economic results: Mexico’s GDP growth hasdisappointing economic results: Mexico’s GDP growth has
fallen, from nearly four percent in 2012 to around anfallen, from nearly four percent in 2012 to around an
estimated one and a half percent in 2013.estimated one and a half percent in 2013.
 The negativity also reflects the impatience of pundits andThe negativity also reflects the impatience of pundits and
markets, as the economic dividends from Peña Nieto’smarkets, as the economic dividends from Peña Nieto’s
ambitious structural economic reform agenda have yet toambitious structural economic reform agenda have yet to
appear.appear.

 As the North American Free Trade Agreement (NAFTA)As the North American Free Trade Agreement (NAFTA)
celebrates its 20th anniversary, many observers forget justcelebrates its 20th anniversary, many observers forget just
how much Mexico has changed in the last two decades.how much Mexico has changed in the last two decades.
 Mexico was once hidden behind high tariffs, quotas,Mexico was once hidden behind high tariffs, quotas,
subsidies, and hundreds of state-owned enterprises.subsidies, and hundreds of state-owned enterprises.
 Mexico’s economy is now one of the most open in theMexico’s economy is now one of the most open in the
world. Mexico boasts free-trade agreements with over 40world. Mexico boasts free-trade agreements with over 40
countries and the trade-to-GDP ratio, a common measurecountries and the trade-to-GDP ratio, a common measure
of economic openness is above 60 percent, surpassing theof economic openness is above 60 percent, surpassing the
United States, Brazil, and even China.United States, Brazil, and even China.
 And whereas oil once represented over 75 percent ofAnd whereas oil once represented over 75 percent of
Mexico’s exports, today it is manufactured goods thatMexico’s exports, today it is manufactured goods that
produce three out of every four export dollars in theproduce three out of every four export dollars in the
country.country.

 A large part of North America’s economicA large part of North America’s economic
dynamism stems from its interdependence.dynamism stems from its interdependence.
 Since NAFTA entered into force, intraregionalSince NAFTA entered into force, intraregional
trade has multiplied, from around $290 billion intrade has multiplied, from around $290 billion in
1993 to over $1.1 trillion in 2012.1993 to over $1.1 trillion in 2012.
 Roughly half of this trade crosses the U.S.-Roughly half of this trade crosses the U.S.-
Mexican border each year. The nature of thisMexican border each year. The nature of this
back and forth has also changed, as new supplyback and forth has also changed, as new supply
chains have taken root throughout the region.chains have taken root throughout the region.
 The structural reforms elevate the expectations ofThe structural reforms elevate the expectations of
(GDP) growth of the national economy over the(GDP) growth of the national economy over the
medium and long term, a factor thatmedium and long term, a factor that
distinguishes Mexico from other emergingdistinguishes Mexico from other emerging
nations.nations.

ReferencesReferences
Arrow, K. (1962). "The Economic Consequences of Learning by Doing."
Review of Economic Studies XXIX(80): 155-173.
Jones, C. (1995). "R&D Based Models of Economic Growth." Journal of
Political Economy 103(4): 759-784.
Jones, C. (1999) "Growth: With or Without Scale Effects?" American
Economic Review Papers and Proceedings, 89, 139-144.
Kremer, M. (1993). "Population Growth and Technological Change: One
Million B.C. to 1990." Quarterly Journal of Economics 108: 681-716.
Lucas, R. E. (1988). "On the Mechanics of Economic Development." Journal
of Monetary Economics 22: 3-42.
Mankiw, N., D. Romer, et al. (1992). "A Contribution to the Empirics of
Economic Growth." Quarterly Journal of Economics 107(2): 407-437.
Romer, P. (1986). "Increasing Returns and Long Run Growth." Journal of
Political Economy 94(2): 1002-1037.
Romer, P. (1990). "Endogenous Technological Change." Journal of Political
Economy 98(5): S71-S102.

Professor Alejandro Diaz Bautista Pesentation UCSD May2014

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Professor Alejandro Diaz Bautista Pesentation UCSD May2014