Volume 44, Number 173,
April-June 2013
From Recession to Recovery:
Production and Employment in Mexico and The State of Mexico
Pablo Mejía, Sandra Ochoa and Miguel Ángel Díaz
WHAT EXPLAINS THE EFFECTS OF PRODUCTION AND EMPLOYMENT? ( ...continuation )

Cumulative growth of revenue from abroad is shown in Figure 4b. The first important aspect is increased volatility in comparison with other variables. The cumulative decrease has oscillated from the maximum value (October 2008), both on the state and national level. Before reaching its low point in May and January of 2009, this variable had accumulated a loss of more than 33 and 50%, respectively. Despite the magnitude of these figures, starting from their valley points, revenue from abroad on the national and state levels has recovered, accumulating growth greater than 64% and 151%, which in turn has brought these variables to 9.8% and 24.5% above their highest pre-recession levels, respectively.

Table 5 shows that the basic sector has a strong share of national and state gdp, fluctuating around 30% and 31%, respectively.24 Although production in this sector has been declining at a low rate since 2008, it was not until 2009, as the global recession deepened, that the situation in the country worsened to such a point that levels reached -7.8% on the national level and -7.5% in the State of Mexico.

Table 5.

The subsequent recovery of the global economy and the consequent increase in the demand for imports has generated an important spike in the production of commercial goods, which has led the basic sector to grow at an annual rate of 6.8% for the country and 11.6% in the State of Mexico.

In general, the dynamics of these different measures of commerce, both on the national and state level, as well as their relative importance in the corresponding gdp, allows us to make a reasonable argument that foreign commerce has acted as a central mechanism in transmitting the global recession and in the later recovery for Mexico and The State of Mexico, as has been suggested by a variety of studies analyzing the experiences of other regions.

Additionally, fdi appears to have played an important role only during the recession, and not during the subsequent recovery. Specifically, the intensity of the us recession and the elevated proportion of fdi coming from the us economy25 have brought about a drastic decrease in capital flows towards Mexico and its states, which has not been reversed despite the expansion in recent years, as will be shown below.

The maximum level of fdi flowing into the Mexican economy occurred in the third quarter of 2007, followed by a marked decline with key ups and downs, to the effect that by the fourth quarter of 2009, there was a cumulative decrease of almost 70% (see Figure 5 and Table 4). Similarly, fdi in the State of Mexico has seen a drop from its maximum value (reached in the third quarter of 2008), also equivalent to nearly 70% by the fourth quarter of 2010, when it reaches its valley. Subsequent fdi recovery has been erratic and insufficient to return to pre-crisis levels. The growth observed in this variable starting at the valley points for Mexico and The State of Mexico (dated at the fourth quarter of 2009 and 2010, respectively) reaches almost 41% and 51%, respectively, by the end of the sample. Still, as indicated above, the figures regarding losses and gains during the recent recessionf and expansion are not directly comparable to those calculated using a different base.26 fdi data is a clear example of this, as demonstrated by the fact that despite recent increases in fdi, it remained around 50 percentage points below the level achieved in the pre-crisis peak (see Figure 5). Moreover, a visual inspection of the Figure reveals that this variable clearly stagnates starting from when it reaches its lowest values for the two economies in question. As such, the identification of the corresponding valleys must be qualified as preliminary.

24 According to these figures, the basic sector can be considered as an appropriate proxy variable for total national exports, because according to inegi data, the ratio Exports/gdp averaged 31.6% between 2003 and 2010.

25 fdi coming from the us over the past ten years has reached around 60% of the total (Díaz et al., 2011). Still, the statistical data available regarding revenue from fdi shows that the proportion of fdi with respect to gdp, both on the national level and for the State of Mexico, is reduced, even though it has increased substantially in the framework of nafta (Díaz, et al., 2011). During the time period from 2003 to 2010, this proportion in Mexico only reached 2.9% of gdp, while for Mexico State it was only at 2.3%. Evidently, these figures suggest a reduced global impact of the variations presented on the level of fdi in both economies during the last cycle. Statistical information regarding fdi was obtained from the Ministry of Economy (economia.gob.mx).

26 According to data from the Ministry of Economy, peak fdi for the Mexican and State of Mexico economies was 9,902,619.73 and 1,512,650 thousand dollars, respectively. Cumulative growth rates were calculated using the peak and valley values.

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 194 July-September 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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