Tuesday, September 26, 2006

Mexico feeling the pressure of rapid economic growth in India, China

Sources: El Universal (available in Spanish only); World Bank (available in English, Spanish, Portuguese)

A recent report issued by the World Bank documents that rapid growth in the economies of China and India has been positive for much of Latin America, including Caribbean countries such as Cuba, Haiti, and the Dominican Republic. However, Mexico and some Central American countries have been negatively affected.

This disparity between Mexico, the most negatively affected country, and the rest of Latin America and the Caribbean has been attributed to the fact that the greatest growth has been seen in economic sectors in the Asian countries that have been traditionally strong for Mexico, such as electronics and textiles.

The World Bank cautioned against a protectionist response by negatively affected countries, instead urging aggressive strategies across Latin America to take advantage of rapid economic growth in Asia. In particular, the World Bank recommended that Latin American and Caribbean nations focus on rural development and industries based on natural resources in order to promote their economies and respond to global demands.

1. How might Mexico and other negatively affected countries respond to Asian growth without disrupting established economic sectors?

2. To what extent (if any) is a refocus on natural resource development and rural development a red herring in terms of a response that takes advantage of developments in the economies of China and India?

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