1. Mexico Section 2 Political Economy and Development http://www.agraria.org/cani/chihuahua.JPG

2. The State and Economy Early Industrialization: foreign investors control key industries State Capitalism: Capitalism with the state as a primary investor Agro-Export Model: Begin exporting major natural resources but eventually import more than they export Import Substituting Industrialization (ISI): huge success for 30 years; the government wants to make the imported products domestically When ISI fails in the 70s, it leaves a large disparity between the rich and poor, foreign debt, and devalued peso Oil: In response, massive amounts were exported. The revenue funds social and economic programs. When oil prices drop, Mexico has an economic crisis. Deregulation: Government gives away its control of certain industries. They are bought and controlled by few, wealthy investors. This shifts power from central to local governments.

3. State Capitalism Response to prior foreign investors The people wanted the government to have this control and responsibility over the economy Government encourages private investment by making it “safer” http://upload.wikimedia.org/wikipedia/commons/5/50/Mexico_flag_300.png

4. Agro-Export Model – used during the Porfiriato Export all agricultural products, minerals, petroleum Import all other manufactured goods Import cost > Export revenue http://www.downtheroad.org/Publishing/1TheRoadnoEnd/Images_Files/4Zacatecas/Plow.JPG

5. Import Substituting Industrialization (ISI) 1940-1982 Build up internal infrastructure to manufacture goods Use credit and tax incentives, low inflation rates Subsidize worker’s food, transportation, housing, health care to allow cheap labor Government builds mills, power generators, ports, oil infrastructure which are protected by tariffs Successful campaign until oil prices dropped http://www.guymonok.org/Images/Tortilla.jpg

6. Effects of the ISI Buildup of Mexican manufacturing Un-proportional higher standard of living  Oligarchs of Mexican agricultural economy = large, commercial farmers  Oligarchs of Mexican business = corrupt politicians who abused power Policies are created in favor of certain powerful groups who control large sectors of the economy Less motivation results in a slowing of the economy Migration to the cities (Mexico City 1.5 -> 8 million) Population Increases dramatically  Higher standard of living  Religion

7. Effects of the ISI Continued Informal Sector: the people selling churros and tacos The people who suffer:  Peasant farmers  Ejido community farmers  Urban poor Rural Guerrilla movements  Unhappy with disparity in incomes, quality of social care Advanced manufacturing = Foreign investment and imported technology http://www.coles.com.au/images/cmi/library/recipe/large/mexican_taco_dinner.jpg

8. Oil 1970-1982 In early 1970’s, with increased social instability “agro-export” model gives way to “export-all-our-oil” model. International oil prices rise, Mexico profits. Private sectors borrow heavily. Amassed huge foreign debt, peso value declines. Oil prices drop, sparking economic crisis. Wealthy Mexicans send money out of the country, capital flight. Mexico couldn’t pay interest on foreign debt. Cut off social programs, dissatisfaction in government rose. http://www.hydrocarbons-technology.com/projects/Salamanca/images/img3.jpg

9. “Mexican Miracle” After Cardenas left office policy makers moved away from developing ejidos to developing a strong entrepreneurial private sector in agriculture. Aimed to provide food stuffs for growing cities, raw materials for industry, and foreign exchange for exports. Government encouragement through investing in transportation networks and irrigation plans; assistance was provided to large land owners predominantly. 1940-1950 GDP grew at an annual avg. of 6.7% and Manufacturing increased at an avg. 8.1% 1950s manufacturing achieved a 7.3% growth and 10.1% growth in 1960’s. Economic performance referred to as the “Mexican Miracle”

10. New Strategies and Democratic Institutions 1988 Carlos Salinas (PRI) elected. Economy deregulated, key industries opened to private investors. Corruption decreases with less power in hands of government officials. Government decentralized. NAFTA created. Political accountability focal point of reforms. PRI loses executive post for first time in 71 years. http://www.subneo.net/prensa/03-04-26/ver01b.jpg

11. Society and Economy Wealth disparity. Urbanization. Reduced quality and availability of social services. Malnutrition. Wages low, taxes increase. Cost of living increases. http://www.refugeesinternational.org/files/2292_image1_GU_041202_03.jpg

12. Mexico and the International Political Economy Changed foreign policy to attract outside investors after oil crash of ’82. General agreement on tariffs and trade (GATT), to promote trade.

13. North American Free Trade Agreement Created in 1993, trade agreement between Canada, US, and Mexico to open trade barriers. Risks: Domestic producers in Mexico worry about competition from US. Peasant farmers suffer from lower prices in US. Loss of sovereignty. More risk from changes in US economy. US culture influence Mexican culture. Susceptible to political exploitation. Benefits: $50,000,000,000 from US. Fostering political accountability. Increased scrutiny by other countries of Mexican affairs. Mexican economy boosted, while poor still suffered. Strong ties with US. http://www.aiig.com/images/logos/nafta-customs.jpg