Tue | Aug 22, 2017

Walter Molano | Mexico: Resilient exporting powerhouse

Published:Friday | October 7, 2016 | 10:01 AM
Republican presidential candidate Donald Trump, right, walks behind Mexico's President Enrique Pena Nieto after delivering statements in Mexico City on August 31, 2016. The policies espoused by Trump are seen as a potential cataclysmic event for Mexico were he to become president.

Last week, a new film directed by Jorge Michel Grau was released in Mexico City. It chronicles a set of events that occurred after the devastating earthquake of September 19, 1985.

More specifically, it is the tale of a handful of individuals who found themselves in a tall building, which suddenly collapsed. The movie follows the heroic efforts to rescue the survivors and their attempts to confront the ordeal. The earthquake measured 8.0 on the Richter scale and casualties exceeded 5,000. Large swathes of Mexico City were destroyed, and scores of buildings collapsed.

Three decades later, however, there are no physical traces of the devastation, even though the psychological scars are more difficult to erase.

Besides the retelling of an important event, the movie is an allegory of the nation's endemic resilience. Time and time again, Mexico has unexpectedly imploded, only to rise stronger and more resilient.

There are at least four cataclysmic episodes in Mexican history. The first one was almost five centuries ago, when Hernan Cortes and his marauding band of delinquents conquered the Aztec Empire, subjugating an advanced civilisation to poverty, misery and slavery.

Although the indigenous population never went on to regain their former glory, the territory emerged as the central jewel of the Spanish Empire. Mexican silver and gold allowed the Hapsburg dynasty to wage its endless wars against the nascent Protestant religion and defend its vast European possessions.

The second cataclysmic event occurred soon after independence. Unlike the United States (US) independence movement, which was a struggle for greater political liberty, Mexican independence occurred because Spain was invaded by France. Fearing that they would lose their privileges to new French overlords, the colonists reluctantly rebelled. However, their conviction was low, evidenced by their pledge of fidelity to the Spanish King.

The Mexican independence process was disorganised, as the colonial leaders lurched towards creating a national identity. Grappling with a huge expanse of territory that ranged from the southern border of current-day Oregon to the northern edge of Panama, it was easy pickings for the territorial ambitions of the US.

In 1846, the US launched a war of aggression that wrested a huge swathe of land that today is known as the American Southwest and West Coast. Acting on the principals of Manifest Destiny, the US government had little justification for the invasion. It sparked outrage among segments of the population, and it led Henry David Thoreau to begin his work on civil disobedience.

This, in turn, served as the inspiration for future civil rights leaders, particularly Gandhi and Martin Luther King. The nadir of the episode was General Winfield Scott's invasion of Mexico City. The US occupying force remained in place until the Mexican government finally capitulated and agreed to turn over the captured territory.

This is where the word 'gringo' came from. The occupying American soldiers wore green uniforms, and Mexican protesters would shout "green go home". Henceforth, Americans have been considered to be gringos.

Yet, out of the deep humiliation of the Mexican War emerged a new and more prosperous country. Massive foreign investment into railroads, oil and agriculture converted Mexico into an exporting powerhouse.

Less than a century later, the country would face another devastating collapse. Although the economy had flourished under the technocratic leadership of the so-called cientificos, the prosperity of President Porfirio Diaz was limited to a narrow class of elites.

Large numbers of peasants, workers and ranchers were deeply displeased and they eventually engulfed the country in one of the bloodiest revolutions of the 20th century.

Yet, out of the rubble came a new unified state, with a strong institutional framework. With the government controlling strategic sectors, such as oil, electricity, banking and transportation, the private sector redirected its efforts into manufacturing.

This process culminated with another collapse during the 1982 debt crisis and followed by the 1994 Tequila Crisis, but it also allowed the Mexican economy to fully concentrate its efforts on NAFTA.

Soon, Mexico may face another cataclysmic event.

The next US president will most likely alter the existing trade treaties with Mexico. As the MXN is already foretelling, the looming episode could be devastating.

Yet, it could be another chapter in Mexico's dialectic journey.

Out of the ashes of the next transformation, Mexico could graduate from being a provider of intermediate goods to the US to becoming an industrial giant on the global stage. It could be the catalyst that Mexico needs to become one of the planet's industrial leaders, along with the US, Germany, Japan and China.

As the movie 7:19 shows, Mexico has the will and capacity to overcome obstacles that come its way.

- Dr Walter T. Molano is a managing partner and the head of research at BCP Securities LLC.

wmolano@bcpsecurities.com