Mexic o’s Development in Comparative Perspective

1. Mexico’s Development in Comparative Perspective • Historical experience of colonialism and neo-colonialism • 1st wave of imperial expansion (15th-18th C) • Colonized by Spain • Cortes 1519 • Spanish • Controlled land • Extracted silver "ENTRANCE OF CORTEZ INTO MEXICO," depicting the first meeting of Cortes and Montezuma, November 8, 1519. Color lithograph,1892.

2. Mexico’s Development in Comparative Perspective • Independence from Spain 1821 Mexican Independence, mural by Diego Rivera.

3. Mexico’s Development in Comparative Perspective • “The Porfiriato” • Porfiro Diaz (1876-1910) • Foreign investment • Infrastructure development • railroad • Benefitted mainly wealthy, upper class

4. Mexico’s Development in Comparative Perspective • “The Porfiriato” • Neo-colonialism • De-nationalization • By 1911, US companies owned • 40% of land • 50% of oil industry • Controlling interests in main export sectors • Foreign repatriation of profits

5. Mexico’s Development in Comparative Perspective • “The Porfiriato” • “Dependence” • “One-way” trade partner concentration • Commodity concentration • Growing inequality

6. The Struggle to Overcome Dependence • Revolution of 1910 • Disgruntled members of elite • Those excluded by Porfirio Diaz • Landless peasants • Rebel leader Emiliano Zapata • Workers • Pancho Villa

7. The Struggle to Overcome Dependency Constitution of 1917 Limited power of foreign investors Called for agrarian reform Established rights of workers

8. The Struggle to Overcome Dependency Two different sources of ideas have informed development strategy since “The Porfiriato” Statist Neo-liberal

9. The Struggle to Overcome Dependence • PRI: Institutional Revolutionary Party 1929- • Cardenas (1934-1940) • Pursued statist strategy • Land redistribution—ejidos • Nationalized oil industry—1938 • Established state-run oil company—PEMEX •  video clip

10. Pemex—National oil company of MexicoSymbol of Statist Strategy

11. The Struggle to Overcome Dependency Statist strategy ISI: Import substituting industrialization What is it?

12. The Struggle to Overcome Dependency:Statist strategy ISI: Import substituting industrialization Substitute local production for imports Develop the capacity to produce goods locally that were imported from abroad in the past

13. The Struggle to Overcome Dependency:Statist strategy • Domestic market supplied by • State-owned enterprises • Capital intensive industries • steel, petrochemical • 1940-1970, ~40% of fixed capital investment from government • Foreign direct investment •  limited to 49% stake • But still big increases in US investment • Local private enterprises

14. The Struggle to Overcome Dependency:Statist strategy State supported private investors Subsidized credit Kept wages down Protected local market for new industries Tariff barriers Licensing requirements

15. The Struggle to Overcome Dependency:Statist strategy State supported private investors Protected local market for new industries Tariff barriers Licensing requirements  Why might licensing be considered bad policy?  Neo-liberal critique of ISI

16. The Struggle to Overcome Dependency:Statist strategy State supported private investors Protected local market for new industries Tariff barriers Licensing requirements Why might licensing be considered bad policy?  Neo-liberal critique of ISI : “rent-seeking”

17. Statist Strategy Looks Successful through 1970s Economic Growth in Mexico (percent increase or decrease)

18. Mexico’s patrimony—the oil industry Growing dependence on oil exports (80% by 1982) Growing foreign debt (86 billion US dollars by 1982) Price volatility: price per barrel of oil 1978: $13 1981: $33 1982: $26 mid-1980s: $12 2007: >$60 2008: <$100 Debt crisis and pressure from IMF prompted change in development strategy

19. The Struggle to Overcome Dependency Two types of development strategy since “The Porfiriato” Statist ISI: Import substituting industrialization Liberal EOI: export-oriented industrialization

20. The Struggle to Overcome Dependency: Neo-liberal Strategy • Neo-Liberal strategy • Privatize state-owned enterprises • Except PEMEX • National patrimony Carlos Slim Helu, the telecom tycoon who pounced on privatization of Mexico's national telephone company in the 1990s, became world’s richest man in 2010.

21. The Struggle to Overcome Dependency: Neo-liberal Strategy EOI: export-oriented industrialization What is it? Why might neo-liberals prefer this strategy?

22. The Struggle to Overcome Dependency: Neo-liberal Strategy EOI: export-oriented industrialization Promote exports to core markets through Reduced tariff barriers to allow imports of machinery and inputs to make products for export Tax breaks for factories that export their products Subsidized credit for factories that export

23. The Struggle to Overcome Dependency: Neo-liberal Strategy • EOI: export-oriented industrialization • Joined NAFTA 1992 • Shift to comparative advantage • Fruits and vegetables • More labor-intensive products • In export-processing plants (maquiladoras) • Consumer electronics • Garments, etc.

24. The Struggle to Overcome Dependency • NAFTA—free trade • Hurt Mexican agriculture in 1990s • US corn 7 tons/hectare • Mexico corn <2 tons/hectare • Chiapas corn .5 tons/hectare • Subsidies to US farmers • > $15 billion, 2010 • Corn—biggest recipient

25. Report Finds Few Benefits for Mexico in Nafta,November 19, 2003 “As the North American Free Trade Agreement nears its 10th anniversary, a study from the Carnegie Endowment for International Peace concludes that the pact failed to generate substantial job growth in Mexico, hurt hundreds of thousands of subsistence farmers there and had ''minuscule'' net effects on jobs in the United States.

26. “Western Farmers Fear Third-World Challenge to SubsidiesSeptember 9, 2003 “The world’s wealthiest nations give more than $300 billion of subsidies to their farmers every year, more than the gross national product of sub-Saharan Africa.”

27. “British band Coldplay seeks fair trade in Mexico” Associated Press, September 6, 2003 “Coldplay came to meet with a corn growing cooperative and discuss its belief that opening agricultural markets to free trade drives small farmers out of business. “Mexican corn producers struggle to compete with imports from expansive, government-subsidized U.S. farms

28. The Struggle to Overcome Dependency Neither statist nor liberal strategies fully overcome dependency

29. Dependency Theory: Competition within the Periphery “China’s Eating Mexico’s Lunch”