Another outlook into energy‐growth nexus in Mexico for sustainable development: Accounting for the combined impact of urbanization and trade openness

Abstract

This study corroborates the importance of United Nations Sustainable Development Goal 7 (SDG‐7), intended to ensure access to affordable, reliable, sustainable energy for all, and SDG‐8, designed to promote decent work and sustainable economic growth. This article is motivated by the highlighted SDGs and empirically explores the long‐run and causality relationship between energy consumption, urbanization, trade openness, and economic growth for annual frequency data from 1965 to 2021 for the case of Mexico. To this end, we leverage the use of fully modified ordinary least squares, dynamic ordinary least squares, and canonical regression estimation methods, while for the direction of causality, the gradual shift and wavelet coherence methods are used. According to the Autoregressive distributed lag (ARDL), the bounds test traces a long‐run relationship between the outlined variables over the sampled period. Empirical evidence validates the energy‐induced growth hypothesis. This result resonates with the causality analysis, where energy consumption drives economic growth one way in Mexico. This suggests that Mexico cannot embark on energy‐conservative policies, as such actions will hurt economic progress. In addition, unidirectional causality is seen between urbanization, trade openness, and economic growth. These findings have far‐reaching implications for economic growth and macroeconomic indicators in Mexico. More insights are highlighted in the concluding section.

Food System vs. Sustainability: An Incompatible Relationship in Mexico

“…The demand for food is shifting towards increased consumption of meat, dairy products, and other intensively produced foods, which has serious implications for the sustainable use of natural resources [14]. For Mexico, GDP increased from 1.1% in 2008 to 2.2% in 2018, and this is, interestingly, correlated to the water scarcity crisis and GHGE [2,55].…”

“…Mexico is one of the world's leading food producers, especially regarding products for export such as avocados, tomatoes, chili peppers, and berries (among others), for which Mexico provides more than 40% of the global production [1] and is the world's 12th biggest exporter [2]. Nevertheless, more than 50% of the food consumed in the country is imported [3], especially basic food such as corn, beans, and wheat, more than 70% of which comes from imports, generating an important agri-food vulnerability and dependency [4][5][6].…”

Practical Strategies for The Economic Development of Mexico: Nearshoring Trend

“…What has been exposed throughout this investigation can be established that the causes of the dispute over hegemony over international trade between China and the USA are due to the following: a) China's preponderance in global exports with 14.2% and the USA with 8.3% in 2019; b) China serves as the first trading partner of 70% of the countries in the world; c) The USA has a trade deficit with China of more than 300 billion dollars each year; d) Chinese investments derived from the three silk routes reduce the competitiveness of the USA; d) China and Russia propose two international payment systems to avoid the hegemony of SWIFT; e) China catapults as the second most crucial economy based on GDP. (PINWEST, 2022) Additionally, the aspects that explain Mexico's attractiveness for business relocation are a) the increase in Foreign Direct Investment, b) the tariff benefits that companies located in Mexico can access due to the Free Trade Agreements that have been signed (Ornelas & Turner, 2024), c) the Minimum Wage to be paid in manufacturing companies is low compared to other countries (Azar et al, 2023); and d) stable exchange rate due to the increase in remittances, tourism income, oil income and the difference in the interest rates of the central bank of Mexico with inflation (Adebayo et al, 2023).…”