Mexico: An Oil Nation in Crisis
Mexico is currently facing one of the biggest economic recessions in the countrys two hundred-year history of independence. Some Mexican policy makers blame the economic crisis on this years decrease in tourism, while others attribute it to the continued dependence of the Mexican economy on the United States, pointing to its neighbors recession as a principal cause for the countrys woes. Nonetheless, Mexicos plummet in oil production and the decline in the price of oil are two main contributors to its present economic downfall. While other countries have begun to pull out of the recession, it appears that the fall in oil production and prices have further led to an ongoing decline in Mexicos economy, which the country's planners are finding difficult to reverse.
Current Oil Situation
Oil is at the heart of the Mexican economy. Profits on
its extraction are the countrys number one revenue,
accounting for approximately 40 percent of Mexicos total
revenues. Due to the decline in the price of oil that began
last year with the escalation of the global recession,
Mexicos oil-dependent economy has suffered grievously. Prior
to the sag in oil prices, when other oil producing countries
were taking advantage of the tremendous peak in prices,
Mexico was hit particularly hard; government officials
reported that last years drop in oil production cost the
Mexican government an estimated US$20 billion in lost
revenues.
This years plunge in oil prices has
resulted in oil export revenues being recorded at only $1.25
billion per month for the first seven months of 2009, a fall
from an average of $1.44 billion per month in 2008. The
falling prices and production rate continue to damage the
economy, and many blame the Mexican government for its
failure to channel new investments in to various
oil-producing fields, along with its mismanagement of
revenues. Mexico feels the pressure to convert its oil
profits into public spending in order to generate immediate
results and to keep a lid on the countrys mounting social
tensions; instead it sometimes foolishly refuses to put
aside some of the profits to ensure financial stability.
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This analysis was prepared by
COHA Research Associate Nancy Cruz
ENDS