Research Topics

The article analyzes Mexico under globalization, particularly on the free mobility of capital. It argues that globalization has detrimentally impacted the productive and external sectors, causing the economy to become excessively reliant on volatile capital inflows from abroad. The Mexican government—instead of undoing the structural problems that lead to external deficits—implements policies that resolve the short-term liquidity needs and go against economic growth, as if they are promoting capital inflows. The national currency has appreciated greatly and acts only in favor of the financial sector and in detriment of the productive and the external sector.
 
The Mexican economy has fallen into a context of high external vulnerability since it rests on capital inflows. Capital inflows are highly fragile and volatile. They depend not only on internal problems, but also on the world economy and expectations. For this reason, the reliance on capital inflows to appreciate the peso is unsustainable.
 
Given the meager growth of the world economy and trade, globalization is being questioned and various countries are implementing industrial and protectionist policies. If Mexico continues to bet on outward growth through nearshoring, it will have no chance of overcoming the problems it faces.
 
Mexico cannot continue with an economic policy that does not generate endogenous conditions to growth and that has made the economy dependent on the behavior of international financial markets which generate recurrent crises.

The post-1945 mode of global integration has outlived its early promise. It has become exploitative rather than supportive of capital investment, public infrastructure, and living standards.

In the sphere of trade, countries need to rebuild their self-sufficiency in food grains and other basic needs. In the financial sphere, the ability of banks to create credit (loans) at almost no cost, with only a few strokes on their computer keyboards, has led North America and Europe to become debt ridden—a contagion that now threatens to move into Brazil and other BRIC countries as banks seek to finance buyouts and lend against these countries' natural resources, real estate, basic infrastructure, and industry. Speculators, arbitrageurs, and financial institutions using "free money" see these economies as easy pickings. But by obliging countries to defend themselves financially, they and their predatory credit creation are helping to bring the era of free capital movements to an end.

Does Brazil really need inflows of foreign credit for domestic spending when it can create this at home? Foreign lending ends up in its central bank, which invests its reserves in US Treasury and euro bonds that yield low returns, and whose international value is likely to decline against the BRIC currencies. Accepting credit and buyout "capital inflows" from the North thus provides a "free lunch" for key-currency issuers of dollars and euros, but it does not significantly help local economies.