Friday, July 12, 2024

Tabasco and Oaxaca surprising leaders in post-pandemic growth

The southern Mexican states of Oaxaca and Tabasco have shown the most economic growth from 2019 to the first quarter of 2023, according to government indicators.

While the poorer states in Mexico’s southern regions tend to lag behind the industrialized north of the country in economic development, data from the National Institute of Geography and Statistics (INEGI) shows that the states of Tabasco and Oaxaca have grown more than any other of Mexico’s 32 states in this time frame — largely thanks to government infrastructure projects.

Public works projects, such as the Olmeca (Dos Bocas) refinery project in Tabasco, helped southern states to lead the way in economic growth, according to INEGI data. (Presidencia/Cuartoscuro)

Tabasco registered the largest increase in post COVID-19 pandemic economic growth, at a rate of 24.3% from the end of 2019 to the first quarter of 2023. This rise can in part be attributed to the construction of the major Olmeca (Dos Bocas) refinery in Paraíso. Over the last three and a half years, the construction sector has contributed to two-thirds of formal employment in the state. 

Neighboring Oaxaca followed with growth of 12.6%, driven by the development of the Interoceanic Corridor of the Isthmus of Tehuantepec project, as well as the flow of remittances from Mexicans working abroad, according to reporting in El Economista newspaper.

In third place was the northern border state of Baja California, which registered economic growth of 9.4%. Its development was bolstered by its existing industrial development and proximity to the United States. Quintana Roo, home to major destinations including Cancún, Tulum and Playa del Carmen, grew at a rate of 7.8%, driven by the construction of the Maya Train and investments in the tourism sector, mainly in hotels.

Despite the positive results, economic experts warned that it is unclear if this period of growth represents a sustainable trend for southern states. Foreign trade and labor market coordinator at the Mexican Institute for Competitiveness (IMCO) Ana Gutiérrez told the newspaper El Economista that the southern region was harder hit by the pandemic, so INEGI’s data could reflect a post-crisis economic recovery, rather than long-term growth.

AMLO on visit to Salina Cruz, Oaxaca
The government has also invested heavily in Oaxaca since the end of the pandemic. Here, President López Obrador inspects work at the port city of Salina Cruz. (Gob MX)

“Due to the pandemic, the southern region suffered a significant drop in economic activity. It had relatively larger declines in some periods compared to the north,” she said. 

Economic analyst Kristobal Meléndez also noted that the growth could be explained by a “rebound effect,” which is frequently seen when the most economically developed countries are compared to those that fall further behind.

“We have seen many cases where developing countries show similar growth to countries like the United States, but this almost always happens after a sharp decline. This type of growth does not mean that the economic policy of the lagging country is on the right track,” he said. 

It is possible that the nearshoring phenomenon will reinforce the regional economic growth gap, as companies are relocating to areas close to the United States border. Based on the INEGI report for the first quarter of 2023, the northern and central regions of the country — including manufacturing hubs like Nuevo León — represented 70.7% of the country’s total economic activity.

With reports from El Economista

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