If Trump closes the door on Mexico, Canada can thrive by keeping it open: Don Pittis

The stereotypical Canadian view of Mexico as a sleepy backwater is just plain wrong. Despite many challenges, Mexico's dynamic economy is on the way to becoming a perfect fit for Canadian business, experts say.

In spite of Trump's protectionist threats, the Mexican economy is poised for a First World takeoff

This Scotiabank branch in the Polanco area of Mexico City is one of more than 800 retail branches in the country, where the Toronto-based bank has about three million customers. (Don Pittis/CBC)

According to Donald Trump's election rhetoric, Mexico was exporting criminals and rapists. Now the president-elect is calling for a border tax on exports of Mexican-made General Motors vehicles.

In Trump's view, the southern neighbour represents a threat, whether it's from teeming migrants crossing the border to compete for U.S. jobs or low-paid workers attracting factory jobs to Mexico.

That's not what the experts say, especially for Canada.

There is growing evidence that Mexico and Canada are ideal trade partners and that Canadian business will benefit by opening doors, not building walls.

Trump tweeted his call for a "big border tax" on GM's Mexican-built vehicles yesterday morning.

GM was quick to respond, insisting that most of its cars sold in the U.S. were made there.

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Ford, meanwhile, announced it was cancelling a $1.6-billion Mexican auto plant while expanding operations in Michigan to build electrics and hybrids.

Trade opportunity

With such a reaction, it might be tempting to suggest that Prime Minister Justin Trudeau follow suit and demand cars sold in Canada be made in Canada.

But in the case of Mexico, there's a better way.

Although the U.S. with its right-to-work legislation could try to compete with Mexico for low-wage jobs, that would be much more difficult for Canada.

And despite the stereotypical view of many Canadians, Mexico is much more than a low-wage economy.
Demonstrators from the countryside march down Mexico City's main boulevard past the sparkling stock exchange buildings, showing two sides of a country in transition. (Don Pittis/CBC)

Handicraft markets on beach vacations may perpetuate a cartoon image of the country, but a visit to Mexico's vibrant and sparkling capital city, undergoing a long-term building boom, offers a very different view.

A new report by the Conference Board of Canada commissioned by HSBC makes the case that Mexico and Canada may be ideal trade and investment partners.

The report sees clear signs that Mexico is on the verge of an economic transition that will only benefit Canadian companies that get involved.

Despite Trump's claims, the number of Mexicans running from poverty to the United States has dwindled. While Spanish speakers continue to cross Mexico to enter the United States from other Latin American countries, an increasing number of Mexicans are finding good work at home.

Mexico gains as U.S. trade partner

In December, news that Mexico had displaced Canada as America's second biggest trading partner got lots of attention in Mexico.

But the reason U.S. companies want to locate there is that the country has become a global manufacturing hub, having free trade deals with more countries than anywhere else.

The median age of Mexicans is 28, compared with 42 in Canada, but the population explosion has ended. A declining Mexican birthrate and increasing job prospects are leading to what the Boston Consulting Group describes as an imminent "demographic dividend."

"Essentially, Mexico could benefit from a similar economic boom to what Canada and the U.S. experienced in the 1970s, when the wave of baby boomers entered the workforce," says the Conference Board report. "As a result, millions of Mexican households will be joining the middle class in coming years which is likely to fuel robust growth in consumer spending."

Mexico is far less vulnerable to external shocks than it was during previous economic predicaments such as the Tequila Crisis in the mid-1990s.

According to a recent report from the rich countries' think-tank, the OECD, the largest part of Mexican growth is being created at home as ordinary people strive to obtain goods and services Canadians have grown to expect.

"Domestic demand remains the main driver of economic activity, supported by recent structural reforms that have cut prices to consumers, notably on electricity and telecoms services," says the OECD November economic forecast for the country.
The Golden Angel of Independence is a proud national symbol in Mexico City. (Don Pittis/CBC)

As Robert Gordon noted in his recent book, The Rise and Fall of American Growth, the one-time adoption of modern technology can create a dramatic economic transition.

Already Canadian companies have begun to offer their experience, notably Scotiabank, with more than 800 bank branches, in a country expected by the International Monetary Fund to outgrow the U.S. and Canada.

But as Mexicans explore middle-class advantages from pets to consumer goods and a wide variety of international foods, there are plenty more opportunities for Canadian companies, says the Conference Board report.

No country's future is perfectly secure. Inequality, corruption and organized crime make people feel unsafe and are bad for legal businesses.

There are signs of a backlash in the coming elections, as Andres Manuel Lopez Obrador (known as Amlo for his initials) takes a page out of Trump's book and runs for president as a populist outsider, promising to stamp out corruption and "Mafia power" and bring real change to the country.

It seems inevitable that change is coming to Mexico, and Canada has much to offer, from education and technology to services and social strategies to specialized manufactured goods and high-quality foods.

Trump's attacks on Mexico have damaged the country's pride, and the president-elect is so disliked that his image was used as a pinata during holiday festivities. Canadian business can win respect, and perhaps opportunity, simply by presenting a friendly and understanding face.

Follow Don on Twitter @don_pittis

More analysis from Don Pittis


Don Pittis

Business columnist

Based in Toronto, Don Pittis is a business columnist and senior producer for CBC News. Previously, he was a forest firefighter, and a ranger in Canada's High Arctic islands. After moving into journalism, he was principal business reporter for Radio Television Hong Kong before the handover to China. He has produced and reported for the CBC in Saskatchewan and Toronto and the BBC in London.