How Rising Temperatures are Cooling Mexico's Economy

Mexico's economic future is at risk due to climate change. Rising temperatures and extreme weather hurt agriculture and GDP. Experts urge CO2 reduction and sustainable practices to avoid a future food crisis and economic decline.

How Rising Temperatures are Cooling Mexico's Economy
Mexican farmer battling the scorching sun, a symbol of the challenges climate change poses to agriculture.

The constant variations in temperature and precipitation, because of global warming, generate adverse effects on the country's economic growth, which will worsen towards the end of the 21st century if urgent measures are not taken, considered the director of the Institute of Economic Research (IIEc) of UNAM, Armando Sánchez Vargas.

During the Seminar on Research Advances (SAVI) 2024, in which the IIEc organized a special session on the occasion of Earth Day, he noted: the economic growth projections for Mexico are not very encouraging, considering the different climate scenarios until year 2100.

When presenting some of the most significant results of his research carried out two years ago — published in the book “Effects of climate change on economic growth in Mexico” — he said that it is proposed that the impact of environmental deterioration will manifest itself with greater intensity in some states due to the heterogeneity between regions, the vulnerability of the population and the levels of investment and employment in each entity.

He reiterated that there is a historical relationship between temperature, gross domestic product (GDP) per capita and growth rate, where an inverse relationship is observed between extreme weather events and economic activity; That is, at higher temperatures, per capita income registers lower values.

“Extreme weather phenomena of temperature and precipitation are registering a negative and statistically significant effect on economic growth and, consequently, on the well-being of countries and individuals,” he said.

He added that the impacts of climate change are heterogeneous between regions, and the least developed communities have generally been the most vulnerable to the onslaught of extreme events.

Sánchez Vargas indicated that climate change negatively alters the primary sector, which is highly dependent on climatic conditions.

“We all know that activities such as agriculture, livestock, or fishing are closely associated with temperatures, which have become a necessary input for production,” he argued.

He stressed that global warming also has negative impacts on the industrial, commercial and service sectors, although in these cases, the consequences of extreme events operate differently, since the main repercussions have to do with labor productivity.

He specified that using two different analysis and verification methodologies (panel and time series) it was possible to establish that when an increase in temperature of 1 percent is recorded, the reduction in national economic growth can be between -0.77 and -1.76 percent.

The above means that by the year 2100 the variation in temperature could affect the reduction of the country's GDP per capita, between -1.96 and -2.03 percent; Likewise, the change in rainfall can slow growth between -1.03 percent and -1.66 for that same period, he noted.

Given the climatic variations that are occurring worldwide, he noted, it is necessary to insist on the importance of policies aimed at reducing CO2 emissions globally, for environmental protection purposes and intending to reduce negative impacts on the environment, economic growth, especially to protect the most vulnerable populations.

In this context, Sánchez Vargas proposed implementing mitigation measures, for example the execution of a territorial ecological reorganization program, better management of solid waste at the city and state level, promoting a sustainable forestry plan, applying agroforestry and silvopastoral systems, in addition to crop rotation.

When speaking, the research professor of the Graduate Unit of the Faculty of Economics of the UNAM, Saúl Basurto Hernández, announced the progress of a study on the impacts of climate change in the agricultural sector in Mexico and agreed in warning that the economic and social projections for the coming years are more than unfavorable.

Based on data from the United Nations, the population is expected to increase by around 4 billion people by the end of the century, which means a high demand for food that currently does not exist, in addition to, according to The latest report from the Intergovernmental Panel on Climate Change, the temperature is expected to increase between 1 and up to 6 degrees Celsius in the next 30 years, which would be catastrophic.

“In the national context, it is estimated that in agricultural lands by the end of the century, temperatures will increase between 0.5 and 6.2 degrees Celsius, something similar to what will happen globally,” he said.

In turn, the IIEc academic, Jorge Zaragoza Badillo, focused his presentation on the hypothesis that the intense economic activity and disorderly urban growth of the Metropolitan Zone of the Valley of Mexico, combined with the dynamics of the population and the density of the manufacturing industry, are the main causes of the formation of heat islands.

It is about doing a reverse causal analysis of the effects of the economy on climate change, feedback, to determine how this activity ends up affecting the climate, and then it does the same with it, he said.

During the meeting, a series of research and academic reflections from different disciplines on the environment, climate change and its impact on society and the economy were presented, on the occasion of the aforementioned anniversary that is commemorated, starting in 1970, on the 22nd of April.