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U.S. Shale Driving Mexican Renaissance

Walter Russell Mead

A little noted story from the last year is how Mexico has largely avoided the disaster that is enveloping so many commodity-exporting countries around the world—and especially in Latin America.

There are three reasons for this positive and welcome development. First, Mexico didn’t drink the left populist Kool-Aid that has laid low several other Latin countries—Brazil, Argentina and above all Venezuela quickly come to mind. Second, diversification: Mexico opened its economy and built a strong manufacturing sector. Using access to the U.S. under NAFTA and going for foreign investment, Mexico is becoming a major manufacturing center, and is following a development path that in some ways looks more Asian than Latin American. Third, Mexico’s geographical position, and its courageous decision to deregulate the energy sector — something that the Mexican left has hated and feared for years—means that cheap U.S. shale gas is flowing through new pipelines to Mexican electric plants, reducing energy costs and boosting the competitiveness of Mexican manufacturing at a critical time.

This is excellent news for young Mexicans, who can now get good jobs at home without having to immigrate to the U.S. It is also excellent news for the U.S., as the deep integration with the Mexican economy means that prosperity there supports economic growth here. And it is excellent news for Latin America in general, as Mexico points to the way in which Latin American countries can escape the trap of commodity dependence and unequal development that goes with the traditional populist nostrums.

Mexico is no utopia, of course, and lots of problems remain. But the process of democratization and modernization that Mexico has chosen is slowly transforming its prospects.

A little good news in an otherwise gloomy world.

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