Jorge Moreno: The digital economy and the perennial transformation of the Mexican economy

Jorge O. MorenoJorge O. Moreno Source: Courtesy

The information provided by the INEGI leaves no doubt about it: all major economic indicators of Mexico today they are worse than with their value compared to the previous year. The above, as we have already pointed out in this same space, has been a consequence of the worsening in the management of the current economy. federal administration (a fact widely documented in various media, by various specialists, and by different performance measures) and that the health contingency derived from the pandemic this year accentuated and ended up inducing the worst economic crisis in our recent history.

For example, yesterday, Thursday, November 19, INEGI through the account of Twitter its president Julio Santaella, pointed out that the Timely Indicator of Economic Activity (IOAE) anticipates an annual variation of the Indicator Global Economic Activity (IGAE) of (-) 7.0 percent in September 2020, with an interval of [-8.5%, -5.5%]. For October the point estimate of this indicator is (-) 6.2 percent, with a range of [-7.8%, -4.6%], using your exact notation for these values. This is, the economy keeps falling When compared to the previous year, and the immediate gradual recovery, it will be slow, and, as I mentioned in a preliminary working document together with Cecilia Y. Cuellar (Faculty of Economics, UANL): if there is not a “shock Positive as the early discovery and timely distribution of the COVID vaccine, let alone a change in policy in favor of counter-cyclical measures of government spending (fact, sadly less likely than the former) will probably have permanent negative effects in terms of both formal and informal jobs in both genders.

The new and ever-changing reality invites us to think of alternative mechanisms to activate, transform the existing ones, and create new ones that allow the restructuring of the productive apparatus and of generation of wealth, from the same company. And in this case, the “natural” thing will be to move towards where the slow inertia led us, and the crisis ended up pushing us in an aggressive and abrupt way: I mean a digital economy (ED).

Also known as “internet economy“or”economy of the web “, ED refers to a system of social, productive and consumer institutions, based on the use of digital technology. According to ECLAC (2015), a ED is constituted as an” ecosystem “, in which converge the infrastructure of communication networks, processing services and web technologies, and end users (individuals, companies, and government); in the end, it will be the degree of development and complementation of these components that will define the level of progress of each country.

In this new mode of economy, thes digital networks and infrastructure in communication they provide a global platform on which people and organizations create strategies, interact, communicate, collaborate and seek and share information (Negroponte, 1995).

Mesenbourg (2001), on the other hand, defines that the DE is constituted by three elements: i) the business infrastructure (e-infrastructure) that define the business support resources such as technology, hardware, software, telecommunications, specialized personnel; ii) electronic business (e-business), that is, business processes developed through computer applications or online platforms; and iii) electronic commerce (e-commerce), which refers to the generation of business and transactions for the purchase and sale of merchandise, using the Internet as a means of communication.

Thus, in particular, the electronic commerce is understood as any form of Commercial transaction in which the parties involved interact electronically and not in the traditional way through physical exchanges or direct physical treatment.

Some experts believe that, in a way, electronic commerce began before the Internet, through commercial transactions by telephone, fax and private networks, but the development of the Internet caused it to reach a greater boom. Its most general meaning is “bring the buyer closer to the manufacturer by electronic means“, which implies elimination of intermediaries, cost reduction and a different philosophy in the way of buying and selling, and what is more important, of obtaining information for these procedures.

In the case of the Mexican economy, the economic and technological development of the last decades, despite how limited it has been, has brought with it relevant changes in the way in which economic agents interact to exchange goods and services. In the last two decades, what is known as “the market” has revolutionized towards its electronic modality, allowing the range of available goods to be expanded, as well as information on their quality.

The INEGI shows that electronic commerce as a proportion of GDP in Mexico from 2013 to 2018 grew around 66%, this until before the pandemic was expected to continue with a growing trend due to the growth of internet access in homes. In particular, there is empirical evidence that shows a positive correlation between electronic commerce and internet access (Terzi, 2011). For example, in 2019, around 56% of households in Mexico have internet access, maintaining an average growth of 9.7% in the last four years, which could continue to promote electronic commerce given the increase in the use of these digital media.

The foregoing reflection and analysis shows that e-commerce and the expansion of the digital economy can become a viable source of growth for Mexico, which can benefit the entire Mexican economy through three ways: companies, prices and product range, and total factor productivity (Brynjolfsson and Smith, 1999).

Companies like first way, could benefit from improved efficiency in supply chains, due to the ease of collaboration between them and the corresponding reduction in production costs. The second way It would be the reduction in prices and the increase in the variety of products available to consumers, who would enjoy more competitive means to acquire their merchandise.

Lastly, given that technology increases the efficiency of the capital and labor factors, factor productivity increases and consequently there is a positive relationship with respect to the country’s economic growth. Without being a panacea or total solution, the digital economy turns out to be a growth alternative to the challenges of this complicated 21st century.

The author is a Doctor of Economics from the University of Chicago. He is a Professor-Researcher at the UANL Faculty of Economics.

This is an opinion column. The expressions used here are the sole responsibility of the person signing them and do not necessarily reflect the editorial position of El Financiero.