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Mexico, NAFTA, and Expansion
Toward the European Union
and South America
by
Eduardo Segarra, Texas Tech and Texas A&M
and
Nicolas Gutierrez, ITESM
Mexico: Joining the World Economy
The crisis of 1982 - large public deficit
- lack of foreign investment
- large foreign debt
- high inflation
At this time was when Mexican views with
respect to international relations and
international interdependence began to change
Economic policies of the 1980s in Mexico
----
“Economic Realism,” 1982
“Increased Economic Realism,” 1986
“Economic Solidarity Pact,” 1987
Key components
- liberalizing international trade
- strengthening fiscal policy
- privatization of public sector enterprises
- financial sector liberalization
- liberalization of foreign investment
- deregulation of the economy
Key milestone
- In 1986 (as part of the “Increased Economic Realism”
policy) Mexico joined GATT and became it’s 92nd
member
Since the early 1990s the Mexican
Government has struggled to become
a “facilitator” for economic activity to
take place, rather than being an
“active” participant in economic
activities taking place
Mexico has never seen the enactment of free trade
agreements as “the solution” to it’s economic
problems, but has embraced these as an
important factor which complements the Mexican
government’s overall strategy to induce economic
growth and stability
-
Increase exports
Improve input availability
Increase investment
Generate more and better employment
opportunities
From the early 1980's to today, there is evidence
that the Mexican government has consistently
intensified “international trade liberalization”
efforts during though economic times:
- Crisis of 1982 to 1986 ---- Mexico joins GATT
- Lack of progress in GATT negotiations in the late
1980's ---- leads to NAFTA
- Slow progress in GATT negotiations in the early-tomid-1990's, the crisis of 1994, and Seattle’s WTO
happenings in early 2000 ---- lead to and sped up
Mexico - E.U. FTA and Mexico-Israel FTA
Real GDP Growth, Mexico
Index
125
100
75
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
Year
Time Line of Mexico’s Free Trade Agreements
1992
1994
1995
1998
1999
2000
Chile I
NAFTA
Canada
& U.S.A.
Bolivia
Colombia
Costa
Rica
Venezuela
Nicaragua
Chile II
Uruguay
Brazil
(Autos)
E.U.
Israel
Expected in 2001: El Salvador, Guatemala and Honduras
In the works: Argentina, Paraguay, Peru, Ecuador, Panama,
Trinidad & Tobago, and Japan
Total Trade, Mexico
Billions of Dollars
1993-1999
Billions of
Dollars
300
250
200
150
100
50
93
94
95
96
Year
97
98
99
Growth of Mexican Exports
Within NAFTA
(1993-1999)
1999 = $2.31 billion
1999 = $120.60 billion
To Canada
48%
To the U.S.
181%
Growth of Mexican Imports
Within NAFTA
(1993-1999)
1999 = $2.94 billion
From Canada
150%
1999 = $105.35 billion
From the U.S.
132%
Growth of Mexican Exports
Since Adoption of FTAs
with Latin American Countries
Nicaragua, 1998 14%
Costa Rica, 1995 159%
Venezuela, 1995 157%
Colombia, 1995 23%
Chile, 1992 199%
Bolivia, 1995 131%
Number of Export Companies
In Mexico
38,175
40,000
2,250
30,000
Number
21,447
20,000
1,026
35,925
10,000
20,241
0
1993
Year
Color 1 = Companies with more than $5 million worth of exports
Color 2 = Companies with less than $5 million worth of exports
1999
Annual Average
of Foreign Direct Investment
Billions of
Dollars
12
Accumulated Foreign Investment
January, 1994-December, 1999
$70.86 billion
8
4
0
1989-1993
1994-1999
Year
FTAs’ goals with respect to agriculture
-
Promote growth
Promote rural development
Improve competitiveness
Promote investment and technology transfer
Improve marketing infrastructure
Promote value added activities
Mexican Agricultural Total Trade
with The U.S.
1993-1999
Billions of
Dollars
12
8
4
0
93
94
95
96
Year
97
98
99
Growth of U.S. Agricultural Trade
1993-1998
Percent
75
50
25
0
Mexico
Total
E.U.
Canada
Year
France
Brazil
Australia
Mexican Agricultural Exports
to the U.S.
1993-1999
Billions of
Dollars
6
4
2
0
93
94
95
96
97
98
Year
Growth of Agricultural Exports (1993-1999) = 93%
99
Mexican Agricultural Imports
from the U.S.
1993-1999
Billions of
Dollars
8
6
4
2
0
93
94
95
96
Year
Growth of Agricultural Imports (1993-1999) = 48%
Growth of Industrial Imports (1993-1999) = 115%
97
98
99
Mexican Fruit and Vegetables
Exports to the U.S.
1993-1999
Billions of
Dollars
3
2
1
0
93
94
95
96
97
Year
*January - May
98
98*
99*
Mexican Trade
with the European Union
16,000
Billions of
Dollars
4,379
12,000
4,154
3,069
3,902
2,684
4,131
8,000
11,714
4,000
7,799
9,917
9,058
6,732
7,741
0
93
94
95
96
Year
97
98
Annual Average
of Foreign Direct Investment
E.U.
21.5%
U.S.A.
58.5%
Other
20%
Areas of research needing attention
Linkages of FTAs impacts in agriculture as related
to:
- Income distribution (individual and regional)
- Regional rural development impacts and
prospects
- Technology adoption/environmental
issues/sustainability
- Labor issues and
unemployment/underemployment