Renegotiating the North American Free Trade Agreement (NAFTA) will not offer a solution to Mexico's biggest barriers to growth. Though NAFTA has enhanced Mexico's export competitiveness and increased its integration with the US economy, stellar growth rates expected from economic liberalization have evaded the nation, according to Moody's Investors Service.

In a new report titled ‘Successful NAFTA talks alone will not fix structural impediments to Mexico's growth’, Moody’s says the current export-focused growth model reliant on access to the US market through NAFTA has failed to offer a cure for Mexico's low productivity, low wages and low growth over the last three decades, even outside periods of economic crisis or recession.

Mexico’s comparative advantage has been maintained through negative real wage growth, at the expense of income levels. As a result, instead of converging through trade, wage and productivity gaps with the United States have widened. That gap will expand if the country shows stagnation in productivity, the report says.

If Mexico’s structural reforms agenda continues further, it may offer a counterweight to the trade risk the country faces. Uneven regional growth opportunities and a highly informal economy are responsible for its low productivity and wage growth. (DS)

Fibre2Fashion News Desk – India

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