The global crisis of 2008 in South Korea and Mexico: the role of internal market and regional trade
José Luis León-Manríquez, Metropolitan Autonomous University-Xochimilco
Published: Wednesday, August 31, 2011
This paper is aimed at analyzing how Mexico and the Republic of Korea reacted to the Great Recession in 2008-2010. While the mechanisms of crisis contagion were very similar for both countries (trade and financial channels), the responses were quite different. In its economic policy, Korea endorsed the Keynesian consensus that most countries in the world crafted. In turn, Mexico stayed in the orthodox, liberal policies that has undertaken since the early 1980s. At the end of 2009, Mexico's GDP recorded -6.5%, while the ROK could maintain a modest growth of 0.2%. This paper’s thesis is that economic performance of the ROK and Mexico during the global crisis can be explained by two main factors. The first has to do with different degrees of development and support of the domestic market as a means of economic recovery. While Mexico was unable to move away from the economic orthodoxy prevailing since the 1980s, South Korea quickly implemented counter-cyclical, Keynesian-style measures. The second factor is linked to the broader contexts of economic integration –namely NAFTA and East Asia. Despite plummeting imports from the United Sates, the Chinese and Asian markets remained very active for Korean exports. Mexican exports to the U.S. were quite stressed by decreasing demand, and Mexico did not have a China-like resource to offset the negative impacts of the crisis in North America. From this viewpoint, regional integration becomes a factor that either hinders or facilitates economic recovery.
Download File: Jose_Leon_SRG-r2-bue.pdf