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AmericasMarch 6 2006

Job creation is a work in progress

Luis Ernesto Derbez, Mexico’s foreign minister, tells Karina Robinson of the lessons learned by the outgoing administration of Vicente Fox.
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Amid the grandeur of the dining room of the Mexican embassy in London’s swish Belgravia, foreign minister Luis Ernesto Derbez fumbles with a resealable Ziploc plastic bag as he takes out the vitamins his wife has lovingly placed there.

Produced by multinational household goods company SC Johnson, which has expanded from its original factory in Milwaukee, Wisconsin, to more than 70 countries, the bag can be seen as a metaphor for the biggest challenge facing relations between Mexico and the US: Mexican emigration to the US.

SC Johnson employs many Mexicans in its Greater Milwaukee facilities – Mexicans have emigrated to Milwaukee since the 1920s – while its Mexican subsidiary received an award for corporate social responsibility last year. Even though it was the fourth year in a row that the subsidiary received the award, SC Johnson Mexico and other companies, both foreign and domestic, cannot offer enough jobs to locals to stem the migratory flow.

The statistics – many of them very rough – are daunting. About 11 million Mexicans live and work illegally in the US, says Mr Derbez (SC Johnson’s employees are, however, all legal). Several million enter illegally every year. The US economy’s boom, especially in the construction and agricultural sectors, depends on the inflow of cheap, unregistered labour that has, among other things, kept inflation under control and boosted company profits.

Employment matters

The US has created two million jobs in the past couple of years, while Mexico needs to create one million new jobs a year. But even in 2005, one of Mexico’s best in terms of GDP growth rates, fewer than 600,000 jobs were created.

“Migration is going to be the most important topic and it has been for the past 20 years,” says Mr Derbez. “It is not a foreign affairs problem, it is an internal affairs problem – an employment problem.

“The US will have to realise it either develops the region or it will continue to have a problem,” he adds. It is estimated that 350,000 Central Americans use Mexico as a transit point to cross the border into the US and about four million of them live there illegally.

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Over breakfast with a couple of selected journalists from sister publication the Financial Times and then on his own, Mr Derbez evinces a thorough understanding of the intricacies of migration: “It has taken me four years to see all these aspects,” he says. Paradoxically, and after first calling it “stupid”, he now welcomes the ostensibly damaging Border and Immigration Enforcement Act of 2005, US legislation that classifies undocumented immigrants as “criminals” and seeks to build a wall along the Mexico-US border.

Crossing borders

Fifty-nine-year-old Mr Derbez says it has allowed the issue of migration to be put “on the table again”, at a time when the US obsession with security and the war on terror meant it was off the US agenda. The act also addresses migration in general – an acknowledgement that the problem is not only with Mexico. Approved by the House of Representatives, it is now in the Senate where several amendments that are more constructive have been touted. These include a plan to ‘normalise’ existing undocumented residents.

Looking professorial with a buttoned cardigan under a suit to ward off the chill of a London winter, Mr Derbez says he will go back to teaching part-time at the Technological Institute of Monterrey, one of Mexico’s elite institutions, after the general election in July. This rather limited scenario does not ring entirely true for the 14-year veteran of the World Bank, but he is understandably wary of saying more. Last year, his candidacy for head of the Organisation of American States was perceived as premature as he was still dealing with the challenges of Mexico’s foreign policy. US secretary of state Condoleezza Rice – formerly a supporter – and other foreign ministers reportedly pressured him to withdraw.

To the criticism that Mr Derbez’s failed application has wrested authority away from him, he answers that people should not just say things, but analyse the fact that on his current European tour he has been received by all his foreign minister peers and when he goes to China he sees Chinese premier Wen Jiabao.

He has also been criticised for his chairmanship of the World Trade Organisation’s Cancún meeting in 2003, when talks broke down. Others argue he simply realised there was no point in wasting any more time on discussions as an agreement was unachievable.

In the final five months of the Vicente Fox administration, the Mexican economy looks reasonably healthy, with inflation under control and a 2005 budget deficit of a negligible 0.09% of GDP. But finance minister Francisco Gil Díaz’s remark earlier this year – “I’m not a good finance minister. I’m a lucky finance minister” – is indicative of what commentators and analysts argue.

Petroleum fillip

Mexico has been boosted by being the world’s ninth-largest exporter of crude oil at a time of record oil prices. Oil revenues are responsible for between 30% and 40% of government revenues in recent years. Added to this is the fact that the US consumption of 90% of Mexico’s exports makes its own economic boom crucial.

But the Fox administration failed to push through Congress most of the reforms necessary to increase the Mexican growth rate and ensure the economy functions better in a globalised world. Some say this National Action Party, or PAN, administration was too politically inexperienced – after rule by the Institutional Revolutionary Party, or PRI, for 70 years – to know how to make deals.

Others say this is what democracy is about: a minority government will always have a problem carrying through its programme.

“The consolidation of the division of power was fundamental but what did not happen was [creating] the ability to negotiate between the parts – congress, judiciary and the president,” says Mr Derbez, referring to the fact that under PRI rule the former two bodies were only nominally independent. “What I learned is a minority cannot impose its will on a majority. I also learned you cannot go for convenience alliances [based] on each issue. There should be a constant alliance, a general one [with one of the other big parties] with a programme.”

Asian promise

Mr Derbez, minister of economy until he took up his current role in 2003, says China is the biggest opportunity for Mexico, not a threat, despite it having taken market share away from Mexico in a number of areas. For resource-rich countries in Latin America such as Chile it has brought obvious improvements in the current account and in growth (see Viewpoint, page 10), but for Mexico, which does not have the same raw material advantage, Mr Derbez believes the trick is to focus on where it can compete (development of its role as an entrepôt between Asia and the US, and tourism), where it can complement it (logistics, autoparts, electrical goods) and, finally, to acknowledge where it cannot compete (textiles, shoes).

As for Mexico achieving a seat in 2002 as a non-permanent member of the United Nation’s Security Council, which entailed clashes with the US on Iraq, Mr Derbez notes it allowed the rest of the world to see his country acting internationally and decisively, while opening doors to relations with other important countries such as China.

Under the Fox regime, which prides itself on being anticorruption, gifts are out of the question. But surely someone could give the minister an elegant little pillbox? The image of his scrabbling to take pills out of a Ziploc bag as he discusses weighty matters with Ms Rice is surely not the right one. Mexico’s prestige is at stake!

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