A leading source for news and analysis about Mexico and the U.S.-Mexican border.
By David Gaddis Smith, MexicoPerspective
President Felipe Calderón was smiling this week in Baja California. Despite the perception that many inside and outside the country may have that Mexico is falling apart, Calderón was busy inaugurating health facilities, road works and a vast improvement in the state's aqueduct system, and talking up the country's future.
The violence in Mexico? Not a mention of it in his speeches in Mexicali and Tijuana.
While some may have thought of violence as the elephant in the room, Calderón instead referred to the United States as the pachyderm. The United States "is an elephant that got sick, that fell and fell on top of us, and gave us a recession of more than 6% of GNP in 2009," he told business leaders during a 40-minute speech in Tijuana.
He lauded last year's economic growth of 5.4%, with an increase of 425,000 jobs in Mexico, including 30,000 in Baja California, this year. He said Mexico, by keeping its overall finances and competitiveness sound, is doing OK, pointing to Mexico's record foreign reserves of $135 billion as part of that soundness. He also said Mexico has gone from ranking 73rd in the World Bank's Doing Business index when he began his presidency to 35th. While Mexico recorded 4.6% growth for the first half of the year, that is going to drop in the second half, in part as a result of the Standard & Poor's lowering of the U.S. credit rating.
Other than violence (Calderón declared a day of mourning Friday for more than 50 people killed at a Monterrey casino Thursday), there appears to be at least one more elephant in the room, however. Former Finance Minister Pedro Aspe and and two other members of Evercore Partners in an article this month in Este País write that public operating expenses have grown from 9.5% of GDP 20 years ago to 14.9%. They said Mexico is still far too dependent on oil revenue for government spending and that the extra money Mexico has gotten from increased oil prices has largely gone to operating expenses, such as salaries, rather than into more productive capital improvements. Over time, they write in Este País, this could drive Mexico into recurring deficit spending and cause major economic problems. Previous story on Aspe.
Health care: Who is going to pay?
Calderón got some of his biggest applause Tuesday when he spoke of the nation's move to near-total national health coverage. He called it an investment in human capital. He said that in 2000, only 43 million Mexicans had some kind of health coverage. (Mexico's population is now around 112 million, and Calderón said coverage is around 100 million). Aspe, Fernando Aportela and Arturo Ramírez said in Este País that while the goal may be laudable, "Health spending has increased ... to unsustainable levels." They noted that most of the beneficiaries of the Seguro Popular, or Popular Insurance, health program are exempt from paying fees. Where will the money come from as costs and participation go up? Calderón said Baja California is receiving 2.5 billion pesos ($200 million) a year for Seguro Popular. Calderón also credited Seguro Popular with lowering the death rate for children with leukemia from 7 in 10 to 3 in 10.
Calderón did say that Mexico was doing a lot of capital spending, saying that while in the 1990s 2% of GDP was going into infrastructure, that total is now 5%, including money invested by private industry.
In Baja California, those improvements included improving the capacity of the aqueduct sending Colorado River water to Tecate, Tijuana and Rosarito Beach 30%, from 4 cubic meters a second to 5.33 cubic meters a second. The project is expected to give the three cities the capacity to have the water they need for the next 20 years. The water is pumped up the mountains in La Rumorosa section of Baja California and then runs downhill to the Carrizo Dam reservoir, which was divided in half as part of Tijuana and Tecate's recent border agreement. About 340 million pesos ($27 million) paid for 65 kilometers of pipeline and new hydraulic equipment.
Hospital, cancer center
In Mexicali, Calderón inaugurated the 215-million peso ($17 million), 76-bed Hospital del Niño y la Mujer (Hospital of the Woman and Child) and La Unidad de Especialidades Médicas de Oncología (Cancer Specialty center), whose equipment cost 56 million pesos ($4.5 million).
He also inaugurated improvements to the Mexicali-San Felipe highway. He said he hoped it would bring more U.S. and domestic tourists to San Felipe. Also modernized and widened were 26 kilometers from El Faro to Murguía to Guadalupe Victoria, "a highway that was practically destroyed by the terrible April earthquake last year." The cost was 180 million pesos ($14.3 million).
He also said: "We are spending this year more than 1.5 billion pesos ($119 million) here in Baja for works such as modernizing the Maneadero-Punta Colonet highway, which goes to the south of Ensenada, toward San Quintín; Tecate-El Sauzal, too."
He said his administration has built or modernized 16,500 kilometers of roads in Mexico, more than was built or improved between 1990 and 2000.
His statement that 91 new universities have been formed during his administration also drew applause. He said Mexico was graduating more than 100,000 engineers and technicians a year, which he said was more than Germany or Canada and more per capita than in the United States. It was unclear what type of engineers and technicians nor the level of their education. For example, when there was talk in 2005 that China was surpassing the U.S. in engineering, it later came out that many of those classified as engineers in China were students going through two years of training to become auto mechanics. Still, Calderón said young Mexican engineers in Querétaro were designing the General Electric motor for "the Airbus 380, the biggest plane in the world."
Calderón said there are now more than 40 Universidad Tecnológica campuses in Mexico. He said that a few days prior he had handed out diplomas to the first graduates of one such campus, and that four out of five of them were the first in the history of their families to go to college.
Aspe and his co-writers in El País noted that education costs, most of which go to teacher pay, may be growing beyond the government's ability to pay for them.
Oil and energy production
Calderón addressed the drop in Mexican oil production, primarily due to the drying up of the Cantarell oil field, and said the government found ways to cut spending and become more efficient because of the loss of income that entails. He said closing the corruption-ridden and inefficient Luz y Fuerza del Centro public power company has saved a lot of money. He said the Federal Electricity Commission has signed 300,000 contracts to provide power for customers in the Luz y Fuerza service area. He also said centralizing the purchasing of office supplies for federal agencies has helped cut costs. He also pointed out that gas is much cheaper in Tijuana than in San Diego, saying it was 9.3 pesos per liter in Tijuana and perhaps 13 or 14 per liter in San Diego. (Actually, it is 9.4 pesos per liter in Tijuana, and more like 12 pesos to the liter in San Diego, although perhaps 13 pesos to the liter at the few San Diego County stations selling gas as high as for $4 a gallon.) Frontera's look at Tijuana and San Diego gas prices on Friday.
A little bit of fun
Calderón had a little bit of fun, and when he spoke about the improvements on the highway to San Felipe, he said he could not forget where the road was going, even though he had never been there, as that community on the Sea of Cortez is his tocayo (has his same first name). He also joked in Tijuana that some had said the temperature when he was in Mexicali earlier in the day was 50 C (122 F) when it actually was 40 C (104 F). On Wednesday, temperatures did reach 116 F (46.6 C) in Anza-Borrego Desert State Park in California and, on Thursday, 45.7 C in San Luis Río Colorado (114.2 F) in Sonora state.
Mexico's share of U.S. export market:
Calderón said that before the 2008 world economic crisis, Mexico's share of the U.S. export market was 10%. He said that has grown to 12.7%.
Strategic Economic Zone
Many business people and politicians sought to get Baja California the designation as a strategic economic zone with a reduction in tariffs and other benefits. Calderón did not mention the zone in his speeches, but later told business leaders that they would have to work things out with Concamin (the Confederation of Industrial Chambers of Mexico), which opposes the designation.
El Cubo venue in Tijuana
A space at El Cubo museum in Tijuana's Cultural Center was the venue for Calderón's talk to business leaders, and a dinner he had with them. After his speech, the media had to file out. The site was terrible for acoustics, with Calderón's voice echoing and reverberating. It was after the media left that Calderón answered questions about the Strategic Economic Zone. Outside, the Antorcha Campesina group protested (right photo); one leader said he was beaten by forces keeping people away from the Cultural Center. Story, Frontera.
President Calderón speaks to business leaders in front of the bookstore at El Cubo in Tijuana on Tuesday