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Mexico Outfoxes Chavez With Free Trade

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Posted 11/18/2005 | Latin America: With all the wounded puffery of a bully, Venezuela's Hugo Chavez last week singled out the president of Mexico with the hoary epithet of U.S. "lap dog." It's proof he's losing his own war over free trade.

Ahead of July's Mexican presidential election, the four-point rise in the polls of Vicente Fox's PAN party on the heels of the Chavez outburst signals it's clearly backfiring. Mexicans are rallying around their president.

Chavez attacked Fox precisely because Mexico is one of the world's leading emblems of free trade. It has signed 27 trade pacts, more than any other country except Chile, and not just with the U.S. and Canada. It's also doing business with heavies like Japan, the European Union, South Korea and rising stars like Chile. It's about to sign another with Central America.

Mexico is a growing player on the world stage and has shown that free trade is two-way empowerment, not lap dog servility.

Mexico is hardly less Mexican now that its citizens can buy giant packages of paper towels from new Costco outlets at home. What's significant is how Mexico's own reach has expanded. Its North American neighbors can now buy products like fresh salsa flown in from processing plants in Irapuato. Meanwhile, Corona Extra has overtaken mighty Heineken as the world's best-selling beer.

Mexico is also showing itself to be something of a free-trade pioneer. In 1994, when the North American Free Trade Agreement was signed, the U.S. and Canada were seen taking a risk by signing a trade deal with then less-developed Mexico.

Naysayers warned that Mexico would drag the bigger economies down. At the same time, they claimed free trade would impoverish Mexico as big corporations somehow took over.

Instead, Mexico's gross domestic product has doubled to $1 trillion.In terms of GDP per capita, Mexico's was $6,090 in 1995 while Venezuela's was $5,640. By 2002, Venezuela's under Chavez was $5,380 and Mexico's under Fox was $8,970.

Markets tell an even stronger story: In 1987, the capitalizations of the Mexican and Venezuelan stock markets were roughly the same at $10 billion, according to Venezuelan investment banker Miguel Octavio. Today, Mexico's market cap is close to $164 billion, while Venezuela's is less than $5 billion.

In 1980, Mexico and Venezuela each had oil-dominated exports of about $20 billion. Today, Mexico exports more than $222 billion a year, with only 11% of it oil. Venezuela, by contrast, exports a mere $45 billion, 80% of it crude.

The rest of the world has noticed and followed Mexico's lead. A Google search of "free trade" shows an array of pacts under negotiation or being signed all over the world. Participants include Israel, China, Chile, Australia, Panama, Oman, Japan and South Africa.

One of the most impressive involves seven nations of South Asia. Those seven, led by India, began steps toward a South Asian Free Trade Agreement to be called SAFTA.

This weekend at the Asia-Pacific Economic Cooperation summit, Mexico, Peru and Chile were leading a charge to unblock trade measures for a world pact that, in the end, will simplify global trade.

This is no secret to Chavez, a far-left demagogue who seeks to isolate the hemisphere from free trade.

In addition to insulting Mexico, he's begun to intimidate pro-free-trade Colombia, and there may be rumblings against other states such as Canada.

Given that Chavez claimed Fox's free-trade statements were an "aggression," it's no surprise he considers free trade an act of war. He defines his "revolution" solely in terms of opposition to the U.S., and there's one little secret about free trade that must freeze his mind: a recent Economist survey showing that states that had free trade or were pursuing free trade were the most U.S.-friendly in the hemisphere.

Suddenly it becomes clear what Chavez's real game was in attacking Mexico.

For his part, Fox said he had better things to do than argue with Chavez. As Mexico's leader headed to South Korea to stand up for free trade at the APEC summit, it's also clear his country is winning a fight against Chavez just by trading goods.

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