Mexican Economic Development : 1940-2006

Mexican Economic Development: 1940-2006

“The Mexican Miracle”

• 1940-1980– Remarkable growth– Annual Avg. GDP Growth=6.5%

• Reasons for Success– Government stability – Oil Revenue– Emphasis on Industrialization

• Subsidies for domestic industries– Import Substitution

• High tariffs– Nationalization of industry.

• Oil, railroad, electricity, & thousands of companies.

Parastatal

• Company or agency owned (or partially owned) by the government.

• By 1980, the government controlledover 1,000 firms.

• PEMEX (Mexican Petroleum)– Net worth of $415 billion– Employs approx 140,000

Mexican Debt Crisis, 1980s-90s

1. WHAT WERE THE CAUSES?

2. WHY DID THE U.S. WANT TO HELP?

Mexican Debt Crisis, 1980s-90s

CAUSES• Heavy borrowing to industrialize caused Foreign Debt

– Gambled on high oil prices– 1980s: Prices DROPPED

• Import Substitution=Industrial inefficiency– Uncompetitive in global market– Led to a trade deficit

• Runaway Inflation: 1987=159%

Total Debt1970=6 billion 1982=80 billion1976=26 billion 1987=107 billion

(70% of GNP)

Bailout of 1995

• International investors withdrew $5 billion from Mexican market.

• Lacked ability to pay debt.– Borrowed $50 billion from IMF and the U.S.

PRI Becomes Market-Oriented

New policies of Late ‘80s through ‘90s.1. Debt Reduction2. Austerity Measures– Cut deficit in half in 3 years.– Raised taxes– Reduced social services

3. Privatization– Sold parastatals– Only about 100 left today.

4. Opening Up the Economy

• Protectionism to neoliberalism• Import substitution to structural adjustment – Allow FDI.

• 1986: Joined General Agreement on Tariffs and Trade (GATT)– Precursor to WTO.– Diversified exports (not just oil)

• 1992: Signed North American Free Trade Agreement (NAFTA)

North American Free Trade Agreement (NAFTA)

• United States, Mexico and Canada• Eliminate tariff barriers• Greatly reduce

other barriers (i.e., licensing fees and quotas for foreign companies)

Maquiladoras

• Foreign-owned factories in Mexico.

• Goods are imported to Mexico.

• Made in Mexico.• Then exported.• Largely located in

North

Zapatistas• State of Chiapas• Indigenous Mayan farmers

Concerns• Abject poverty• Few elite controlled arable

land (seized ejidos)• NAFTA

– Ended ejidos• PRI “Democracy”• No self-rule

– Elite land owners and PRI

Zapatistas• Zapatista Army of National

Liberation (EZLN)• Subcomandante Marcos• January 1, 1994 (NAFTA

enacted)– EZLN seized 6 towns

• Mexican army clashed with EZLN

• Cease fire after 12 days– Approx. 200-400 died.

• San Andres Accords, 1996– Protect indigenous languages– Greater local autonomy– NEVER IMPLEMENTED

• Few EZLN goals realized