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Capitalizing on a Growing Latino Community through Trade

January 03, 2013 By Héctor García, Fellow

Opportunities can only be perceived when we have a vision that makes them pertinent to us. Minnesota’s growing Mexican and other Latino communities represent a significant potential asset to the state’s economy.

However, if we don’t make serious educational and community improvements, we’ll miss that opportunity. Last November, the U.S. Department of Education published reports that rank Minnesota last among all states in Latino four-year high school graduation rates as well as in the gap between Latino and majority graduation rates. Paradoxes can be bridged through the alchemy of a broader vision; what appears now to be a problem can become a solution.

A report by the Fordham Institute, a national leader in advancing educational excellence, recommends that:

“greater attention… be paid to Latin America, especially Mexico. Today’s students will be critical players in working out the terms of accommodation and assimilation between Latin-American culture and Anglo-American culture… world history curricula must now prepare American students to understand the roles of Latin America and the Caribbean… in shaping the present and future of U.S. society.”

Why should Mexico be paid greater attention? Is it not a source of undocumented migration and drugs? Yes, but there is a reality much broader than these two mutual challenges: globalization, which is generating unprecedented opportunity through its international flows of trade, investment and labor as well as a historical paradigm shift.

According to Forbes Magazine, Mexico is “the little darling of emerging market investors.” Mexico’s economic growth in 2012 is expected to be 4%--more than double that of the U.S. By 2020, Mexico is expected to become the world’s 10th largest economy.
Mexico ranks second to Canada in purchases of U.S. goods. Trade between the two countries represents over $1 billion per day and reached half a trillion dollars in 2011. The U.S. exported to Mexico nearly $200 billion in 2011, nearly twice as much as to China, which is our second trading partner thanks to its exports to the U.S. (nearly $400 billion in 2011).

Sales to Mexico are larger than the combination of U.S. exports to the BRIC nations (Brazil, Russia, India and China) or to Great Britain, Italy, Germany and the Netherlands combined. U.S. imports from Mexico have, on average, 40% U.S. content compared to 4% for imports from China. It has been estimated that between 1 and 6 million American jobs depend on trade with Mexico. Mexico has the largest network of free trade agreements with other nations and it is one of the most open of the large economies. This openness and network represent a unique springboard for expansion of American exports.

Mexican and American interests are intertwined more than ever. We manufacture products together and exchange parts and finished products as well as labor and capital, resulting in significant mutual benefit. Mexico and the U.S. are an example, under NAFTA, of globalization’s shift from international competition for supremacy to a paradigm of interdependence and cooperation.

Vital advantages surface under such a paradigm shift:

We are able to think in terms of win-win instead of win-lose and bring NAFTA to greater optimization by moving from the perception of jobs taken away from the U.S. to Mexico to the more objective observation that both countries, along with Canada, are “one economic unit… partners in the global economy,” as Canadian Economist Chris Wilson stated, working towards common economic growth. Sr. VP MN Chamber of Commerce Blazar was recently quoted stating that there are enormous opportunities in Mexico and Canada for Minnesota businesses. Mexico ranks number 1 or 2 as the export destination for more than 20 states; after surpassing Japan recently, it became number 3 for Minnesota. The largest trade corridor in North America, often referred to as the NASCO corridor, links central and eastern Mexico to Texas, the American Midwest and Ontario, Canada and could offer NAFTA products an alternative route to Asia. This corridor could provide the global connectivity Minnesota needs for its multimodal transportation system.

But, what about the Latino students? In the new context, within which these students’ countries of origin increasingly play a pivotal role, they might no longer be burdened by low expectations and assigned inadequacy but empowered to be bridges of culture, language and connections, which would help Minnesota become an important player in the new game of globalization. They would also be able to provide a new perspective that contributes to Minnesota’s enhanced innovation, synergism and response to the challenges, mentioned above, which have developed along the 2000-mile land border between emerging economies and the world’s largest market.

Héctor García is former VP of International & Domestic Emerging Markets for Wells Fargo Bank.

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