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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