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Mexico’s Growing Wealth Gap Stifles Economic Progress

Mexico’s Growing Wealth Gap Stifles Economic ProgressMexico’s Growing Wealth Gap Stifles Economic Progress

The southern state of Guerrero is a state in Mexico where inequality is a way of life. The plight of lifelong resident, Martin Visoso, is typical. Martin left his seasonal farming job to earn more money, making soccer balls. And he’s still extremely poor.

At that rate, a person making seven soccer balls a day earns less than $3.50, not even enough to buy a single McDonald’s Big Mac, CCTV America reported.

The rural state of Guerrero generates on an average of around $3,500 a year for every person who lives in the city. In the urbanized federal state of Mexico City, the GDP per capita is more than $16,500 a year—a difference of more than 340%.

Overall, Mexico’s wealth gap is one of the worst in the Americas—here the wealthiest 1% own nearly half the country’s wealth.

As the gap widens here and in the Organization for Economic Cooperation and Development countries, the study suggests it could stifle economic growth beyond national borders. In today’s interconnected global economy, stagnation in one country can affect others.

In some rankings, Mexico is the world’s 12th largest economy. Mexico is a country of amazing contrasts and nowhere is the division between the wealthy and the impoverished more starkly illustrated than in the capital, Mexico City.

A wealthy district—with private schools offering tennis, basketball, and a well-maintained pool—right next door to a barrio which only has a misshapen football ground. Sometimes only a wall or a highway divides people whose incomes are a world apart.

“Mexico is also one of the most unequal countries in the world,” he said. “Significantly, much of that wealth is concentrated in just a few multimillionaires.”

Telecoms tycoon Carlos Slim, 76, is one of the richest men in the world, with a net worth of $46 billion.

Meanwhile, the Mexican central bank said it will have to continue its restrictive monetary policy to prevent a notable increase in consumer prices due to a weak peso. This will weigh on private consumption–an important pillar of economic growth. Mexico’s GDP growth is expected to slow further in 2017.

Analysts at BNP Paribas expect real GDP growth in Mexico to slow from about 2% this year to close to 0% in 2017, as BNPP suspects balance-of-payment conditions will deteriorate more than most observers seem willing to admit.

 

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