43. What is the solution for Mexico to grow and develop?

The solution is employment; it is investment and employment, better organization and take better care of the economic situation.

I am going to tell you a story that approximately 15 years ago one of my sons got me thinking about.  I was talking to them about the German and Hungarian inflation.  After the First World War and the Treaty of Versailles, there was a brutal economic disorder in which inflation was almost 40 per cent.  They said that they were paid and there were wheelbarrows of bills.  This is a story I am not fully familiar with, but anyway, this happened in 1932.  Suddenly a brutal regime with Adolfo Hitler gets into power.  I believe he got there in 1933.  How is it possible that although things were so bad at that time, by 1938 or 1939 they were already declaring war to the world?  What did he do?  He built a war economy in an educated society with industrial culture, where there were people who know how to manage, produce steel, chemistry, and also, Germany was a self sufficient country in many areas.

We have to do the same.  We have to declare war, but instead of a military war, a war against poverty, with uniforms, households, apparel, roads, etc.  We have to get the economy moving.  That is the only solution I can see, that we grow and have jobs, and take care of the domestic economy.

We concentrate on the fact that we export too much or that we import too much.  We should do the opposite; see what we have to do internally, because here we do not have the limits that mandate external savings, namely, that we do not have foreign currencies to do many things.  For example, for housing, I believe that you need ten workers per house.  Well, if we build 800 thousand houses, we are talking about eight million temporary workers and jobs.

If we build roads, we are not importing, we hardly import anything to build houses, the imported content is very small, to build low income housing or roads or hydroelectric stations, well there you have to invest 20 or 30 per cent perhaps on imported goods.  Then that is the investment that we need.   For example, water treatment plants.  There is nothing to import there.  We do there something similar to what was done in Germany, mobilize national funds to put people to work and then to educate your feedback.

Then the people that are receiving that salary act.  The construction industry impacts many other industries.  I believe that globalization is simply one of the new civilization characteristics.  Globalization has always been the result of communications.

If you remember, historically the Mediterranean was globalized, just to give it a name, when navigation started, approximately three thousand or three thousand and some years ago.  The Phoenicians, the Greeks, the Egyptians, the entire Mediterranean, North Africa, Southern Europe were globalized, hence this entire western culture, and from them we receive all our education and culture.

Now globalization is the result of communication.  Telecommunications are also moving at the speed of light and the speed of sound.  Previously they moved by sailing at wind speed, and horsepower and steam power.  People were generally born and died in the same place.

Now, I believe that we are going to be integrated in the same period of time, much more globalized.  I believe that families, people, society or the country have to see how they negotiate with other countries.  We can have free trade whereby we open our door and others do not.  For example, with the United States a free trade agreement was entered, and it has been very good, it has been very positive for Mexico and for the United States, but unfortunately we were able to negotiate only trade and finances but not labor also, so that as in Europe, in the European Union, Spaniards can work in Italy and Italians in Germany; they move freely, but unfortunately that treaty was not contemplated.

However we believe that the Treaty is very good although not all the counterveiling duties were taken into consideration.  But it includes an agricultural problem, that in 2008 when the agricultural sector is opened, we are going to have many and serious problems with the corn and bean producers, and they account for 80 per cent of our production.  Maybe this can be negotiated because they are subsidizing agriculture.

But from there to our doing free trade with any country with nothing but a negotiation in between ... I sometimes say that they should have an expert negotiator, and not only open the country, but have a good negotiator.  Look, here is a very impressive table and that is partially related to that lack of negotiation.

With the United States we have a 61 billion trade surplus, this means that each year we export 61 billion more than what we import and that is very good.  Then the Treaty was good, but despite the fact that in the last two years we have accumulated a 61.332 billion surplus with the United States, at the end of the day we had a 9.4 billion deficit because we buy everything from other countries without negotiation.

For example, part of what China sends is smuggled and we export 997 million, we export 1 billion and we buy from China 16.6 billion.  It is all right to sign a Free Trade Agreement, and I will open my markets, but what will you give me in exchange?

And what happens with these commercial deficits.  Well that they spoil everything and damage the production mechanism.  Regarding trade, free trade, it is quite favorable for consumers, but not necessarily sustainable in the long term, because we have to finance our purchases and they exceed our sales.  Then suddenly we can buy everything and suddenly we run out of money.  This happened to us in 76, 82 and 95.

If we already have such a significant surplus with the United States, we should negotiate with the other countries, because what happens is that on one hand we are importing 70 billion dollars, on the other hand we are supplying the labor.

Of course, we have to import and we have to be efficient and we have to be competitive and this is very good for consumers and the national productive process and employment give us 70 billion dollars.  Then we have to be careful when we enter free trade agreements.  Another example is the automotive industry that is importing heavily; we are consuming more cars in Mexico, producing less and importing more.  Well, all of these issues should be studied.

In discussing these issues of opportunities and situations in Mexico, our country has a 70 billion dollar deficit with all countries except the United States and Central America.  Then, if we look at México, the United States and Canada together, we represent a very good natural block.  We have done very well, but as a commercial block we have a trade deficit with all the countries of the world amounting to 743 billion.

Now, the deficit with China, 217 thousand, with Europe 150 thousand, with the rest of the world 150 thousand, with Japan 95 thousand, etc. Then we have to be careful with free trade, because what is going to happen or could happen is that at present we can import 70 billion dollars from other countries, because we have a trade surplus with the United States, because oil is expensive, because Mexicans working in the United States send 20 billion dollars to Mexico and because e our revenues from tourism amount to 12 billion dollars.

What would happen if the U.S.A economy comes to a halt?  We are going to have problems, right?  This money instead, 70 billion produced here, to create more jobs here, well then we should not open completely and we should carefully monitor the domestic economy.  If we used 70 billion, let’s say half of that, 30 billion in public works, we would experience tremendous growth in the country and many jobs would be created.  Then, we need investment and jobs and obviously education to solve this problem.

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