| | |  News Around the Republic of Mexico | November 2009 
Mexico is Pulling Out of Recession
 Martha Mendoza & Catherine E. Shoichet - Associated Press
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November 21, 2009
 |  | Every time that the U.S. is down, it's going to pull Mexico down... Mexico is in recovery, but it is very slow.
- Alfredo Coutino, Economy.com |  | | |
Mexico City - Rising oil prices and increased exports are slowly dragging Mexico's economy out of a severe recession, but the nation's financial system still confronts fundamental challenges, national leaders and experts said.
"We are expecting in 2010 the Mexican economy will grow by around 3 percent," said Deputy Finance Minister Alejandro Werner, a huge improvement from a 7.5 percent drop in 2009.
The Mexican government planned to release official economic figures Friday that reflect the start of an economic rebound.
But Nobel Prize-winning economist Joseph Stiglitz, in a series of recent speeches, said Mexico's leaders are failing to address serious flaws in their economic system, including many monopolies and a tight-budget spending plan.
"The combination of a very weak recovery in the United States and a fiscal policy that doesn't stimulate the Mexican economy is worrying," Stiglitz said at a financial conference earlier this week.
Mexico certainly took its hits in 2009. The country, which makes money from oil revenues, exports and tourism, was severely hit by the swine flu outbreak, which kept tourists away from the famous beach resorts. And the economic crisis in the U.S. meant businesses and consumers stopped buying from anywhere - including Mexico, which sends 80 percent of its exports north.
But Mexico also planned ahead, hedging oil prices to protect revenue that finances about 40 percent of federal spending.
Sounder fiscal polices, more robust banking systems and bigger stockpiles of international reserves helped contain the damage from the global financial crisis in Mexico and other countries across Latin America, said Luis Alberto Moreno, president of the Inter-American Development Bank.
"Latin America felt the full force of the world market crash," Moreno said. "But unlike in previous crises, now these downturns no longer need translate into lost decades."
Analysts say the rebound is a sign that the government has learned better ways to handle economic problems since the crippling Tequila Crisis of 1995, when the country devalued its currency and inflation soared.
"There's more discipline and more coordination, which was absent in the past," said Alfredo Coutino, Latin America director of Moody's Economy.com.
But he said the country is inextricably tied to the U.S.
"Every time that the U.S. is down, it's going to pull Mexico down... Mexico is in recovery, but it is very slow," Coutino said. "It is weak and it will continue to be weak, because it will mostly depend on external demand, given the weakness of the domestic market."
Mexican President Felipe Calderon declared the recession officially over earlier this month. But he says new U.S. policies in the wake of the recession have hurt Mexico, and he decries so-called "buy American" provisions for projects backed by U.S. economic stimulus spending.
"Protectionism is killing North American companies," he said.
Earlier this year, President Felipe Calderon pledged 2 billion pesos ($147 million) to help Mexico's car makers and other troubled companies avoid big layoffs.
Associated Press writers Alex Kennedy and Elaine Kurtenbach in Singapore contributed to this report
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