External Factors and Internal Limitations Affecting Economic Growth
The regional economy is facing difficulties due to external factors determining its economic standing and internal limitations hindering growth. Low growth rates result in increased unemployment and social tensions.
Historical Migration as a Partial Escape Now Under Threat
In the past, migration served as a partial escape route for individuals seeking better opportunities. However, this avenue is now under threat due to the policies implemented by former U.S. President Donald Trump.
Regional Economic Deterioration and State-by-State Analysis
The National Institute of Statistics and Geography (Inegi) has reported that the national economic situation’s impact is already evident in Mexico’s states. Nineteen states are experiencing deterioration, particularly in industrial activity.
- Quintana Roo, Chiapas, Coahuila, Tabasco, and Guerrero have shown the worst results.
- Consumer spending is down, prices are rising, and major projects offering employment have either concluded or been suspended.
- Businesses face difficulties accessing bank credit.
Despite these challenges, states like Puebla and San Luis Potosí have demonstrated growth in investment and economic development, driven by the established automotive industry in both regions.
Hope for Future Investments and Current Positive Results
Many states anticipate future investments through industrial relocation occurring globally. There have already been positive outcomes, as evidenced by the growth in Foreign Direct Investment during the first quarter of this year.
Dependence on Federal Transfers and Remittances
States lagging behind heavily rely on resource transfers from the federal government, allocated for public spending. These states dedicate minimal resources to economic promotion, leading to withdrawals of investments in the agricultural sector and maquiladoras.
- Lack of infrastructure and water resources further exacerbates the situation.
Moreover, remittances sent by emigrant workers play a crucial role in the family economy, especially in Chiapas, Guerrero, Michoacán, Zacatecas, and Oaxaca. Paradoxically, Chiapas, known for its diverse climates, abundant water resources, and quality soils, depends on remittances which account for 15% of its Gross Domestic Product (GDP).
Remittances Under Threat
The economic slowdown in the United States, coupled with Trump’s policies such as deportations, remittance taxes, and increased shipping costs, now threaten remittances. Trump stated, “If you prevent immigrants from legally sending money home, you dry up a vital source of income for the Mexican economy.”
Lack of State-Level Development Organization
At the state level, there is a deficiency in organizing the development of their potential. State governments must provide essential services such as healthcare, education, social security, water, and infrastructure.
Key Questions and Answers
- What are the main challenges facing the regional economy? The regional economy is affected by external factors determining its economic standing and internal limitations hindering growth, leading to low growth rates, increased unemployment, and social tensions.
- Which states are most affected by the economic downturn? Quintana Roo, Chiapas, Coahuila, Tabasco, and Guerrero have shown the worst results due to deteriorating industrial activity, decreased consumer spending, rising prices, and suspended or completed major projects.
- How do Puebla and San Luis Potosí maintain economic growth? These states have demonstrated growth in investment and economic development, driven by the established automotive industry.
- What role do remittances play in the economies of certain states? Remittances are crucial for family economies, particularly in Chiapas, Guerrero, Michoacán, Zacatecas, and Oaxaca. In Chiapas, remittances account for 15% of the GDP.
- How are remittances currently threatened? The slowdown in the U.S. economy, along with Trump’s policies like deportations, remittance taxes, and increased shipping costs, pose threats to remittances.
