Carol Wise

State Policy, Distribution and Neoliberal Reform in Mexico

For nearly a decade, Mexico has embraced a neoliberal development model based on liberalisation, privatisation and deregulation. Yet, contrary to longstanding claims in the economic development literature, this strategy has yet to produce the high levels of growth and income gains that policy-makers had projected at the outset of the reforms. This article suggests that the lacklustre response of the Mexican economy represents more than a longer-than-expected adjustment lag. Rather, through an analysis of state policy in the urban–industrial and rural–agricultural sectors of the economy, the authors locate the sources of slow growth and wage compression in: (1) the particular mix of policies that have been implemented under the banner of neoliberalism in Mexico; and (2) the failure to properly coordinate macroeconomic stabilisation with longer-term goals of market restructuring.

The origins and sustainability of Mexico's free trade policy

Standard explanations for trade liberalization do not fully account for Mexicos turn toward free trade during the 1980s. To a large extent, the initiative came from within the country. Even many Mexican entrepreneurs whose sectors seem likely to lose from increased competition now support trade liberalization. Four conditions lowered the “political cost-benefit ratio” for policymakers and entrepreneurs. First, Mexicos leaders dispersed implementation into several financial ministries, thereby better insulating this policy from lobbying by the likely “losers.” Second, potential losers were less well-informed than were likely “winners.” Third, under these conditions, the liberal ideological biases of Mexican elite policymakers and investors flourished, prompting them to accept a higher political cost than would have been tolerated otherwise. Finally, many Mexicans came to perceive trade liberalization as a necessary tool in the fight against inflation. Each of these hypotheses, however, also flags a possible threat to the policys future political survival.

Stabilization and its Discontents: Argentina's Economic Restructuring in the 1990s

Abstract This paper assesses the Argentine stabilization and market reform strategies since 1989. We argue that Argentina may be penned in by its own success: exchange rate targeting quelled inflation but the resulting real appreciation has limited export and employment growth; microeconomic reforms raised efficiency but have threatened income distribution and hence political stability; exclusive styles of policy-making helped enact reform but have led to corruption and policy insensitivity and contributed to rising social discontent. We close by suggesting how a “second generation” of reforms could tackle these issues and spread the proceeds of reform to a wider segment of the Argentine public.

Liberalization and ethnic conflict in Latin America

Most contemporary analysts explain ethnic identity as a socially rooted phenomenon which can be catalyzed by changes in both economic and political conditions. Taking the 1982 debt crisis as a main triggering event, this article analyzes the relationship between economic adjustment and increasing levels of indigenous mobilization in Latin America. Through a comparison of the Bolivian, Peruvian, and Mexican cases,the analysis reveals wide variation in the types and levels of ethnic conflict in the region. Explanations for these differences center on the timing and content of economic adjustment policies, and on the institutional opportunities available for expressing and channeling economic and political demands. The article concludes that political and economic liberalization are likely to clash when shrinking the state also removes channels for popular participation; moreover, when those that bear most of the adjustment burden are also challengers to national identity, states ignore this challenge at their peril.

The Politics of Peruvian Economic Reform: Overcoming the Legacies of State-Led Development

O N 5 April 1992, Peruvian President Alberto Fujimori dissolved the Congress and suspended all constitutional guarantees, thus rendering Peru the first, among the seven leading countries of Latin America, to initiate a formal break away from the trend toward legally-elected civilian regimes which has been sweeping the region since the early 1980s. Perus rupture of democratic rule occurred during a wave of domestic violence that evolved from, and is the consequence of, at least three major developments. First, there was a dramatic escalation of hostilities by the countrys two main guerrilla insurgencies, active since 1980 (Degregori, 1990;

The Lost Sexenio: Vicente Fox and the New Politics of Economic Reform in Mexico

The 2000 presidential election of opposition candidate Vicente Fox signaled an end to seven decades of Mexicos single-party regime and seemed to herald the advent of truly competitive politics. But by 2003, economic reform had largely stalled, and Foxs party suffered a historically unprecedented midterm loss in the congress. This article analyzes the underpinnings of policy gridlock in the Fox administration. Fox inherited the need for microeconomic restructuring and increased competitiveness, more innovative and pragmatic state policies, the need to pay attention to the countrys sharp income inequalities, and the challenge of crafting a political strategy that could build a middle ground and foster policy consensus. With his partys minority standing in the congress, Fox was constrained from the start by divided government. But more effective statecraft and coalition building would have helped. These will be essential elements for the success of any post-Fox regime.

The Political Impact of NAFTA on Mexico: Reflections on the Political Economy of Democratization

At the time of the decision to negotiate the North American Free Trade Agreement (NAFTA), advocates argued that closer integration with Canada and the United States would have a democratizing influence on Mexicos political regime (Baer and Weintraub, 1994: 174–79; Pastor, 1993: 67). Critics of the deal suggested just the opposite, insisting that NAFTA might perpetuate or even reinvigorate authoritarian rule (Aguilar Zinser, 1993: 203–15; Castaneda 1996). With the breakthrough elections of July 2000 and the transfer of executive power to an opposition party the — PAN, or National Action Party — it is timely to ask: were the advocates of NAFTA right all along? Was NAFTA the impetus for Mexicos long overdue transition to democracy?

Great Expectations: Mexico's Short-Lived Convergence under NAFTA

Upon Mexicos entry into the North American Free Trade Agreement (NAFTA), neo-classical trade theory assumed, first, that it had the greatest potential for higher rates of growth, productivity and overall welfare gains due to its relatively underdeveloped status; and second, that Mexicos adjustment to an integrated, liberal economy would be the most painful but also the most beneficial. It was envisioned that the blending of Mexicos endowment factors - cheap labour, natural resources, and proximity to the US market - with the abundant capital and advanced technology of Canada and the US would maximize on NAFTAs competitive potential over the long-term. However, these expectations have yet to fully materialize. This paper reviews the convergence/divergence debate with regard to NAFTA and Mexico, and analyzes the empirical data that have been used to tout both the benefits and the costs of asymmetrical integration. In light of the standstill in Mexicos per capita growth since 2001, this paper concludes with a critique of the potential role of NAFTA as a development tool and argues that the steep regional asymmetries call for a more proactive continental strategy.

The US as a Bilateral Player: The Impetus for Asymmetric Free Trade Agreements

The signing of bilateral free trade agreements with Israel and Canada in the 1980s marked the first time that the Unites States (US) had departed from its longstanding commitment to negotiate trade agreements solely within the multilateral arena. This willingness to negotiate bilaterally was then extended with the completion of the North American Free Trade Agreement (NAFTA) between the US, Canada, and Mexico in 1992, which also signified the first time that the United States had completed a free trade agreement (FTA) that included a developing country. Since the Office of the United States Trade Representative (USTR) announced its strategy of competitive liberalization in 2002 (Zoellick, 2001; 2003), similar bilateral FTAs have been negotiated between the US and other countries at varying levels of development. Ostensibly, these bilateral deals are with can-do countries, those that are ready to move forward with further trade and investment liberalization despite the stalemate that has plagued the multilateral Doha Round negotiations at the World Trade Organization (WTO).

The North American Free Trade Agreement

Despite the emphasis that Hillary Clinton and Barack Obama placed on the need to renegotiate the North American Free Trade Agreement (NAFTA) during the Democratic Party primary debates in the USA in spring 2008, neither of these presidential candidates was able to elaborate on this proposal beyond the promise of protecting US jobs. Just a quick fact-check would have shown that, although total NAFTA trade now accounts for some 30 per cent of all US trade, the number of jobs gained in the US economy since NAFTA’s implementation in 1994 towers over those jobs lost. Yes, the pain of US unemployment is concentrated in the rust belt (Indiana, Michigan, Ohio, Pennsylvania), where Clinton and Obama were at their NAFTA fighting best, but displaced workers in these areas could just as easily point to the appalling corporate mismanagement that has rendered them, and the auto, steel and assorted manufacturing sectors where they once worked, a shadow of their former selves. As palpable as the domestic fears over job losses in the US may be, NAFTA at this political economic juncture is more or less beside the point. This is because, first, by now 99 per cent of all tariffs on those goods and services covered by NAFTA have basically been eliminated; and second, politicians and policy makers in all three of the member countries (Canada, Mexico and the USA) have failed to institutionalise and update the agreement in ways that address problems that are to a large extent multiplier effects of NAFTA itself. Most obviously, this would include undocumented migration, border security and efforts to promote economic competitiveness as a regional project proper. The USA and Mexico will continue to quibble over cement, avocados, tomatoes and trucking access to the US market, and the US–Canadian conflict over softwood lumber will grind on. Yet, for the most part, NAFTA has been fully implemented and the inability of political leaders in North America to renovate and expand on the accord has meant its eclipse by more recent and compelling global forces. New Political Economy, Vol. 14, No. 1, March 2009