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Mexico: A Tough Year Ahead
 Emilio Godoy - Inter Press Service
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January 06, 2010
 |  | This year will be extremely difficult, with recovery expected to be very slow and it is likely to feature low job creation and lower wage increases.
- Enrique Dussel |  | | |
Mexico City - Steep price hikes for goods and services and higher taxes foreshadow a new year fraught with economic difficulties for most Mexicans.
Mexicans faced new year announcements of price rises for gasoline and other fuels, natural gas, electricity, fees for procedures at government offices, public transport and telecommunications, as well as an increase in value added tax (VAT) and income tax (ISR), among others, which add to the traditional burden of January, after the outlays for the festive season.
This year "will be extremely difficult, with recovery (from the economic crisis) expected to be very slow, especially after a disastrous 2009, and it is likely to feature low job creation and lower wage increases," Enrique Dussel, coordinator of the China-Mexico Studies Centre at the Economics Faculty of the National Autonomous University of Mexico, told IPS.
The government of conservative Mexican President Felipe Calderón decided to raise the retail prices of fuels, electricity and liquefied natural gas, used mainly in homes for cooking and heating water, in order to boost depleted public revenues.
By raising the price of gasoline in December, Calderón broke a national agreement in favour of the family economy and employment, reached in January 2009, which stipulated fuel prices would be frozen for one year.
The government is seeking to mitigate a 23 billion dollar public deficit.
Meanwhile, the leftwing administration of the Mexican capital decided to increase the price of transport on the city metro system, as well as local taxes and charges for administrative procedures, to shore up its own finances.
The cost of the basic basket of goods went up by 30 percent in Mexico City in the first few days of January, according to surveys, with essential items like rice, beans, lentils, maize, eggs and sugar becoming more expensive.
"The middle class will face economic strangulation, with job losses, lower consumption and payments falling due for mortgage and consumer loans," Alfonso Ramírez, founder and head of El Barzón, an organisation of users of financial services that arose after the 1995 crisis which decimated savings in current accounts, told IPS.
In 2009, Mexico was one of the Latin American countries hit hardest by the global economic and financial crisis, which originated in its northern neighbour, the United States.
The poverty rate increased from 31.7 to 34.8 percent, according to the Economic Commission for Latin America and the Caribbean (ECLAC). Over 400,000 jobs were lost, GDP shrank by between seven and eight percent, oil prices - the government's main source of revenue - fell, and inflation rose to nearly four percent.
Last November Calderón announced the recession in the country was over, but it is unclear what indicators his statement was based on.
Prospects for this year are not auspicious. The authorities expect the economy to grow by three percent, and say inflation will be higher than five percent.
But they also hope 400,000 new jobs will be created.
Although the government uses the slogan "Living Better" in its official advertising, few Mexicans are experiencing this in real life.
Emerging from the recession "does not mean much to the vast majority of the population, who are hit by price hikes in goods and services without any compensation in terms of income or job opportunities," the newspaper El Universal said in its editorial on Monday.
A recent poll by another newspaper, Reforma, reported that 42 percent of interviewees said economic growth and more employment would be the best gifts in 2010.
Respondents in a similar poll carried out by El Universal said they believed the economic situation this year would be worse than in 2009.
Late last year the minimum daily wage was raised by nearly five percent to about five dollars a day.
"The employment and wage situation is particularly worrying, as for years now it has seemed that things couldn't possibly get worse, and yet they continue to do so," Dussel said.
Over the last decade, Mexico's economy has grown by an average of 1.8 percent a year, one of the lowest growth rates in the region.
"We are going to experience another wave of extremely high food prices, and the government has no plans to cope with this," Ramírez said.
In March, El Barzón will be holding a National Consumers Convention in the Mexican capital which will focus on food prices and the cost of financial services.
As 2010 began, industrial import tariffs were lowered to an average level of 5.3 percent, among the lowest in Latin America, according to the World Trade Organisation. Mexico is therefore more exposed to the influx of manufactured goods from abroad.
The tariffs will be reduced to an average of 4.3 percent by 2013, according to the government's trade liberalisation plans.
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