Simply Economics, from Mexico

Japan-Mexico Economic Relationship Strengthens, Cuba Implements ’War Economy’

Japan aims to sell more to the United States via Mexico, highlighting the strong economic relationship between the two countries. Meanwhile, Cuba declares itself in a 'war economy' to address its severe economic crisis. Gain insights into the potential for growth and collaboration between Japan and Mexico, as well as the implications of Cuba's economic strategy.Sources:https://expansion.mx/economia/2024/07/02/mexico-aliado-japon-america-latinahttps://www.elespectador.com/mundo/america/cuba-se-declara-en-economia-de-guerra-que-significa/Outline:(00:00:00) Introduction(00:00:37) Japan wants to sell more to the United States via Mexico(00:03:30) Cuba declares itself in a "war economy", what does it mean?

Duration:: 7m
Broadcast on:: 03 Jul 2024
Audio Format:: mp3

Japan aims to sell more to the United States via Mexico, highlighting the strong economic relationship between the two countries. Meanwhile, Cuba declares itself in a 'war economy' to address its severe economic crisis. Gain insights into the potential for growth and collaboration between Japan and Mexico, as well as the implications of Cuba's economic strategy.

Sources:
https://expansion.mx/economia/2024/07/02/mexico-aliado-japon-america-latina
https://www.elespectador.com/mundo/america/cuba-se-declara-en-economia-de-guerra-que-significa/

Outline:
(00:00:00) Introduction
(00:00:37) Japan wants to sell more to the United States via Mexico
(00:03:30) Cuba declares itself in a "war economy", what does it mean?

(upbeat music) - Good morning and welcome to Simply Economics from Mexico. It's Wednesday, July 3rd. On today's show, Japan aims to increase sales to the United States through Mexico while Cuba declares itself in a war economy. Plus, we'll explore what this means for Cuba, this coverage and more up next. I'm David and you're listening to Simply Economics from Mexico. We start off with a look at the strong economic relationship between Mexico and Japan. Japanese companies increasingly view Mexico as a gateway to the North American market, making Mexico the eighth country in the world with the most Japanese companies operating within its borders. For more on the economic ties between the two nations, we turn to our correspondent in Mexico City. What are some of the key points from the recent binational meetings between Mexican and Japanese business leaders? - The meetings highlighted the mutually beneficial relationship between Mexico and Japan when it comes to trade and investment. Koji Shibata, president of the Japan-Mexico Economic Committee, noted that Japanese companies see Mexico as a vital link to access the North American market. At the same time, Mexican companies can leverage their connections with Japan to expand into Asian markets. - Did the Japanese side express any concerns or make requests to the Mexican authorities? - Yes, Shibata urged Mexican officials to cooperate in improving the overall business environment in the country. Specifically, he called for better security conditions so that employees of Japanese firms can work with greater peace of mind in Mexico. Shibata also pushed for more transparency and stability in Mexico's tax regulations, which can impact foreign investors. - How significant is Japanese investment in Mexico and what benefits does it bring to the Mexican economy? - The level of Japanese investment in Mexico is quite substantial. Mexico has more Japanese companies than many other Asian countries like Taiwan and the Philippines. From 2006 through early 2023, Japanese investment in Mexico totaled over $30 billion. This capital infusion also comes with transfers of technology, innovation, and a long-term commitment to developing Mexico's economy. - Which parts of Mexico are seeing the most interest and investment from Japanese firms? - The Bahio region in central Mexico remains a key area for Japanese investment. Out of the roughly 1,500 Japanese companies operating in Mexico, nearly 800 are located in the Bahio. While this concentration isn't a new phenomenon, the current trend of near-shoring is leading some Japanese firms to consider expanding their existing production facilities in the region. - Where do you see opportunities for future collaboration between Mexico and Japan? - There is significant potential for Mexico and Japan to cooperate on developing technological solutions, automation, and new services that can support the industries in which Japanese companies are already invested in Mexico. The strong economic ties and geographic positions of the two countries create a solid foundation for ongoing trade and co-innovation. - Thank you for that insightful report on the economic relationship between Mexico and Japan. It will be interesting to see how this partnership evolves in the coming years. Shifting our focus to another country facing economic challenges, Cuba is currently grappling with a severe crisis, even worse than the so-called special period in the 1990s after the collapse of the Soviet Union. In response, the government has decided the island must adjust to a war economy. For more on what this means, we turn to our correspondent in Havana. Can you explain the key aspects of this war economy approach? - The Cuban government is taking drastic measures in an attempt to respond to the dire economic situation. One key part is adopting a unique pricing policy that will apply to both the state and private sectors. While details are still unclear, there are indications the government will impose price caps on many essential products sold by private businesses, like chicken, oil, sausages, powdered milk, and detergent. The goal seems to be raining in prices that have become unaffordable for average Cubans. - How do these price caps compare to the typical wages and pensions in Cuba? Will they actually make these goods more accessible? - Well, to put it in perspective, the average state salary in Cuba is around 4,300 pesos per month, and pensions are about 1,500 pesos. Under the reported price caps, a minimum wage would only be enough to buy a couple kilos of chicken, a kilo of sausage, one of pasta, and a liter of milk powder at most. So while the caps may lower prices somewhat, many products would still be out of reach for Cubans on state incomes. Apart from the price controls, what other economic measures is the government planning as part of this shift to a war economy? - The government also announced it will be cutting budget items to try to reduce the fiscal deficit, allocating resources on a strictly monthly basis based on actual revenue, and postponing or paralyzing investments deemed non-essential. Some economists are concerned that without investment, there can be no economic growth or development. There are also plans to centralize economic decision making and control. - Cuban officials have acknowledged the country is going through economic complexities. What's behind this crisis? - It's really a perfect storm that has plunged Cuba into its worst economic crisis in 30 years. The pandemic was a huge blow to the vital tourism industry. At the same time, tightened US sanctions have cut off key sources of foreign currency, and the government's own economic reforms like eliminating the dual currency system have so far failed to deliver the intended boost. All of this has exposed deep structural problems in the state-run economy. - Some analysts suggest the government is using the term war economy to justify exerting total economic control over the population. Is the outlook dire? - There are definitely concerns that the government will use the war economy to expand its power and dominance, as it claims this crisis situation requires more planning and control. But with no end in sight to the severe shortages, sky-high inflation, and deteriorating living standards, it's unclear if this retrenchment to greater state control will improve conditions for Cubans struggling to get by. The government has yet to even announce when the new price caps will take effect. A difficult situation indeed for the Cuban people will continue to monitor the economic measures there. Thank you to our correspondent reporting from Havana. And with that, we wrap up our stories for today. Thanks for listening to Simply Economics from Mexico. We'll see you back here tomorrow. (dramatic music) [BLANK_AUDIO]