Christopher Woodruff is an Associate Professor of Economics and the Director of the Center for U.S.-Mexican Studies at UCSD. Professor Woodruff's research focuses on the challenges faced by small and medium-sized firms in developing and transition economies. Woodruff and several other UCSD colleagues joined Chancellor Fox on her Nov. 30 trip to Mexico, where the Chancellor announced several new initiatives between Mexico and UCSD.

Q: On your recent trip to Mexico with Chancellor Fox, a bold economic initiative was announced. Can you describe the initiative, and how the Center for U.S. - Mexican Studies' will be involved?

Woodruff: During her inaugural address last year, Chancellor Fox said she wanted to focus on three I’s—international, innovation, and interdisciplinary. The Partnership with Mexico represents an effort to do this with Mexico. The Partnership focuses on three broad areas: science and engineering; economic and social policy; and the San Diego-Tijuana region. The initial projects are a major study of air quality along the California-Baja California border, headed by Mexican Nobel Laureate Mario Molina; support for the work UCSD Extension is doing developing a cross-border, high technology corridor; and a project on financial market development in Mexico. Most of the Center’s efforts will go toward the projects related to economic and social policy, which are our traditional strengths. In the first year, this means the project on financial markets. I am currently working with a Mexican government agency to analyze the impact of recent changes in laws governing the popular credit sector in Mexico. This work will be the basis of one part of the project, but the Center will coordinate the broader financial markets project as well. I expect we will play a supporting role for some of the other projects as well, by helping to organize roundtables and conferences, for example.

Q: Can you describe the general focus of your economic research?

Woodruff: I am interested in the constraints faced by small and medium-sized firms in developing economies. How do they obtain capital where they don’t have access to banks? How do they enforce contracts with trading partners when the courts are ineffective? Right now, I have projects in both Mexico and Sri Lanka which may help us to understand how household enterprises make investment decisions, and what the return to capital is in those enterprises. In both of these countries, a third or more of the labor force works in these very small enterprises, so this is an important part of the economy.

Q: To increase global competitiveness, Mexican policymakers support a restructuring of the Mexican economy. This seems like a monumental task.

Woodruff: There is a lot of frustration within Mexico right now about the pace of economic reforms. People’s expectations were very high when President Fox was elected in 2000. Progress has been slow, or non-existent, in some high profile areas—labor reform, tax reform, and reform in the energy sector, to name a few. But I think there has also been quite a lot of steady progress in areas that cannot be changed overnight. Reforms in the legal system that began in the early 1990s are starting to show results. The Freedom of Information Act, passed a few years ago, is a major step forward in transparency. There has been significant progress in the past few years in the development of financial markets as well. Both mortgage and consumer credit markets are growing quite rapidly. And access to financial services is increasing among households that were previously unserved—lower income and rural households, for example. Not much is likely to happen now until after the presidential election next July. There will be an opportunity for major reforms in 2007 after the new president takes office.

Q:. How would economic restructuring in Mexico affect the American economy?

Woodruff: Mexico is our second largest trading partner. It is an important market for U.S. businesses. U.S. businesses have invested heavily in Mexico since NAFTA came into effect in 1994 (and Mexican businesses have invested heavily in the U.S. as well). We know that wage rates in Mexico affect migration flows to the United States. So we have important impacts on each other’s economies. We’re also neighbors. And quite apart from any economic interactions between the two countries, life will be better for people on both sides of the border if we understand each other better.

Q: How will the Center for U.S. - Mexican Studies be involved in the newly established University of California headquarters in Mexico City, Casa de California?

Woodruff: The Casa represents a tremendous opportunity for the Center. The Casa is a beautiful facility and provides us a base of operations in Mexico which will allow UCSD to increase its presence there. We expect to organize many conferences, seminars and other events at the Casa, and use it as a base for maintaining contact with the 1000 alumni of Center programs, roughly half of whom live and work in Mexico City. UCSD will also have a permanent staff member based at the Casa. This may be the most important part of the Partnership. The staff person at the Casa will be responsible to help establish new research links between UCSD and Mexican institutions, for marketing UCSD programs to prospective students, and for maintaining connections with our alumni in Mexico. The representative will report to me as Director of the Center, but will work for the entire campus. So we have some role in the position, but it is really more of a coordinating role.

Q: Is UCSD uniquely poised to develop partnerships with Mexico? Why?

Woodruff: UCSD has had a long history of collaboration with Mexico, in many units across campus. To give only a few examples, the Center for Science Research and Higher Education of Ensenada (CICESE) told Chancellor Fox on her recent trip to Tijuana that Scripps Institution of Oceanography was instrumental in the establishment of CICESE. Faculty from Scripps taught in early programs, helped to train the faculty there, and have collaborated in numerous research projects over the years. The Center for US-Mexican Studies has a visiting scholars program which hosts 12-15 scholars a year, about half of whom are university professors in Mexico. After 25 years, the Center has hosted more than 500 researchers, a large number of whom currently teach in Mexico. In some university departments, as many as 6-8 faculty members are former fellows at the Center. Wayne Cornelius (founder of the Center) is an institution by himself. San Diego Dialogue has played an important role in increasing the communication and understanding in the region. The School of Medicine has had very extensive collaborations over the years. The Rady School already has strong tie to Tec de Monterrey. Mexico’s only Nobel laureate in the sciences, Mario Molina, is now on the faculty at UCSD. It’s a long list. Our history of engagement with Mexico provides a solid base to build an even deeper relationship.

Q: What are your findings on the role of remittances from Mexicans working in the U.S. to people in Mexico?

Woodruff: Most information we have suggests that almost all of the money sent to Mexico by Mexicans working in the United States is spent immediately on consumption goods, or is invested in houses. The amount of remittances which finds their way into investment in small firms is not trivial. Our estimate is that about a quarter of the capital invested in microenterprises in Mexico comes from migrants to the United States. My current research in this area is focused on the link between financial markets and remittances. Part of the mystery of capital (to use the title of Hernando de Soto’s recent book) is that even if all of the remittances are spent on consumption, those remittances can still make capital available for entrepreneurs. If the remittances are deposited in banks or credit unions as they are being spent, the credit unions can lend them to others. We need to understand more about the impact of remittance flows because they are so large.

Q:. How did you become interested in Mexican economics?

Woodruff: I grew up in the mountains of West Virginia. After college, I moved to the flatlands of south Texas. I was desperate for a little topographical variety. I found a group of spelunkers in Corpus Christi, Texas, who went caving and camping on a ranch in the mountains of Mexico about 60 miles south of Laredo. After a few camping trips, I was intrigued enough by Mexico to take a much longer trip by train and bus to the Yucatan peninsula and back. It’s a cliché, but I really fell in love with the country, and the people. I became fascinated by the differences between the stereotypes of Mexican people I had encountered in south Texas and the reality I found when I traveled there. And living in South Texas, I was always puzzled how a river as small as the Rio Grande could divide two countries which were so different from one another.