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Mexico should look elsewhere

Mexico and NAFTA today

Mexican wages have decreased since the beginning of the 1990s

Wednesday 26 November 2003, by Christopher Montel

A World Bank draft report on Mexico stated this year that NAFTA had brought "significant economic and social benefits to the Mexican economy." In her 11/19 article of the NY Times, Celia Dugger mentions the Carnegie Endowment Report issued on November 18th, which presents a much bleaker picture of the Mexican economy today.

The unilateral liberalisation that the Mexican government has been endorsing in the context of the North American Free Trade Agreement has proved nowadays its limits to bring prosperity and stability in Mexico.

During the end of the 1990s, the triumph of the liberal reforms led to Vincente Fox’s victory in the Mexican presidential elections of 2000, the same year his "close friend" Georges W Bush sneaked into office in Washington DC. Fox promised 6% growth rates and a trickle-down effect of the wealth generated by privatised companies on the bulk of Mexican society. What Mexico got instead was the full-blown consequences of the US recession since March 2000.

Today, several studies support the widespread impression that NAFTA and the auxilliarisation of Mexico on the US economy have been either insufficient to bring Mexico out of its series of crises in the 1980s, or have been downright negative for the Mexican economy and society.

According to the Carnegie Endowment report, NAFTA has failed to bring substantial employment growth, and has generally disrupted the socio-economic fabric of Mexico’s agricultural sector. The independent research institute reports moreover that NAFTA hardly helped employment growth in the US, but its purpose is also to discard the idea that NAFTA has relocated jobs from the US to Mexico.

This report was issued as discussions to extend a free-trade zone between all american continents will soon be held in Miami, between trade ministers from 34 states. Several journalists, including producer Ana Noguiera from the US Democracy now! syndicated radio and TV program, were arrested during security actions against the demonstrations held in Miami on November 25th protesting against the trade talks.

The benefits that NAFTA was acclaimed to bring included the levelling of income disparities between Mexico and the US, and a subsequent decline in the immigration towards the US.

Today, the disparities of income within Mexico and between both countries have never been higher. Wages are now lower than their level when NAFTA was introduced in 1993. As a result of this, poverty and high emigration rates towards the US still plague the Mexican economy and society.

NAFTA has been particularly disruptive for Mexico’s rural economy. On the one hand, the Mexican government opened its domestic agricultural market to US competition faster than the agreement actually required. With the subsequent decrease in food market prices, local farming for crops such as corn have been abandoned. On the other hand, export-oriented industrial farming, based on water and ground polluting agro-chemicals are transforming the Mexican rural society into a proletariat of industrial farm workers.

Exports from Mexico have been increasing by 20% since 1994, and have progressed from primary-based products, which are the most subjected to arbitrary prices on the world market, to manufactured products. But why should this make any sense if you consider that most plants producing these export-oriented manufactured goods belonging to transnational companies? What good is the wealth created if it is not reinvested on the national market, by national industries?

Professor Albert Fishlow, from UC Berkeley, explains both positive and negative consequences of NAFTA on Mexico in terms of the country’s ongoing dependency to the US economy. During the 1990s US growth, which is the longest registered since the 1950s, Mexico indeed enjoyed some scraps of the wealth generated by US companies and reinvested abroad. But by the time recession hit the US in March 2000, substantial growth or development that would have helped Mexico face the consequences of this recession on its own economy had been thwarted by the NAFTA agreements and their zealous implementation by the Mexican government.

Professor Fishlow is amongst many who argue that long-term economic and industrial policy in Mexico must be based more on multilateral exchanges, and should focus on regional development and trade with its Central and Latin American neighbours. Its doubtful the US would let this happen too easily in Miami in the coming weeks, but the golden days are over for NAFTA.

Read the summary of Professor Fishlow’s 2003/3/13 conference on "Mexican Development in the Long-Term: Is NAFTA sufficient?"

Read also the November 18th Carnegie Endowment for International Peace Report on Mexico

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