Mexico's economy has structural flaws that won't be resolved with the upcoming renegotiation of the North American Free Trade Agreement (NAFTA), credit rating agency Moody's said Wednesday.
Mexico has for years relied on its poorly-paid work force to compete with other economies, and that is part of what is holding the country back, Moody's said in a report.
When Mexico, the United States and Canada signed NAFTA and put it into effect in 1994, the trade deal was expected to help strengthen the Latin American country, "but Mexico has not attained the stellar growth rates that were anticipated from liberalizing its economy."
What's more, "wage and productivity gaps with the U.S. have widened rather than shrunk," the agency said in a new report.
"Mexico has maintained its comparative advantage 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 U.S. have widened," said Moody's.
"Successful NAFTA talks alone will not fix structural impediments to Mexico's growth," senior analyst Madhavi Bokil wrote.
Mexico's income gap with its North American neighbors will only get worse unless the country takes steps to address the problem, including tackling its huge informal, or underground economy, according to the report.
The three countries plan to start trade talks in Washington on Aug. 16.
Mexico has for years relied on its poorly-paid work force to compete with other economies, and that is part of what is holding the country back, Moody's said in a report.
When Mexico, the United States and Canada signed NAFTA and put it into effect in 1994, the trade deal was expected to help strengthen the Latin American country, "but Mexico has not attained the stellar growth rates that were anticipated from liberalizing its economy."
What's more, "wage and productivity gaps with the U.S. have widened rather than shrunk," the agency said in a new report.
"Mexico has maintained its comparative advantage 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 U.S. have widened," said Moody's.
"Successful NAFTA talks alone will not fix structural impediments to Mexico's growth," senior analyst Madhavi Bokil wrote.
Mexico's income gap with its North American neighbors will only get worse unless the country takes steps to address the problem, including tackling its huge informal, or underground economy, according to the report.
The three countries plan to start trade talks in Washington on Aug. 16.
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