What We Could Learn From Mexico
The sad spectacle of the U.S. political leadership's fruitless negotiations over the past several months - or is it years now? - to reduce the country's increasingly hard-to-finance budget deficit has prompted some observers to talk about the "Latinamericanization" of the U.S. economy. They refer, presumably, to Latin America's unhappy experience for almost a decade with huge external debt, large budget deficits fueled by too much spending and too few taxes, and closed economies protecting inefficient local industry. Indeed, this characterization of the U.S. economy seems uncomfortably apt.</br></br>However, at least one Latin American country stands out as a model of economic modernization, and the United States would do well to emulate its commitment to budget and tax reform. Mexico - yes, Mexico - has demonstrated greater courage, foresight and political will to tackle its economic problems than has its more powerful neighbor to the north. And it is now beginning to enjoy the fruits of those endeavors.</br></br>Obviously the countries are vastly different in terms of their economic power. Nevertheless, they share startlingly similar problems, which Mexico has done a better job of solving. After a long spending spree, Mexico's budget deficit soared to 18 percent of gross domestic product by 1982. Through a combination of gut-wrenching cuts in spending and far-reaching tax reform, Mexico's budget today is essentially in balance. Mexico delights in pointing out, accurately, that it has put into effect the equivalent of three Gramm-Rudmans. Would that our government could achieve even one.</br></br>The United States runs chronic trade deficits, and protectionist sentiment, especially in Congress, is strong. The most recent manifestation, coming on the heels of many others, is the textile bill. Though vetoed by the president, it reflects a political consensus in this country that certain sectors, both industrial and agricultural, still need to be protected. Compared with a decade ago, restraints on U.S. imports have doubled. At least 20 percent of U.S. imports are limited by some form of non-tariff barrier, thus not only depriving the consumer of cheaper imports but also subsidizing noncompetitive industry.</br></br>Mexico, on the other hand, has dramatically reduced import barriers, transforming itself from one of the most closed economies in the world to one of the most open. Non-oil exports have quadrupled, and Mexico has become a world-class producer of automobiles, automotive parts, televisions, computer chips and satellite and aircraft components.