World Savvy Monitor

In the view of most experts, the Mexican economy has underperformed in the era of globalization.  The root causes for this lie in a complicated mix of colonial and Revolutionary legacies, combined with critical failures on the part of the Mexican government to enact effective policies to maximize growth and reduce poverty. Nevertheless, Mexico is more stable and resilient going into the current economic crisis than it was going into previous economic crises in 1984 and 1995. 

Economic inequality in Mexico is, and has always been, striking.  This inequality has been in evidence since colonial times, when enormous advantages were enjoyed by Spanish colonial officials and the Catholic Church.  

• Mexico’s elites have always been closely linked to the government; at most times throughout its history, the state has conferred significant benefits on elite landowners, oligarchs, and plutocrats.  

• The Mexican Revolution in the early 20th Century auspiciously sought to address fundamental inequalities between races and classes, the north and the south, and urban and rural populations.  However, what emerged ultimately created equally-entrenched systems of patronage. 

• When industries and land have been owned by the Mexican state, they have been managed for the benefit of well-connected elites.  

• This did not end with privatization; crony capitalism simply supplemented state corruption and favoritism. 

The result has been a highly unstable mix of concentrated wealth and widespread poverty that has been deleterious to overall economic growth. 

Although Mexico ranks 53rd out of 177 countries on the UN Development Index, putting it at the lower end of the high development category, nearly half of all Mexicans live in poverty, and almost 15% live in extreme poverty.  

• The World Bank notes that Mexico has made little progress toward income equality in the past 10 years.  In fact, the middle and lower income classes had a worse quality of life in 2006 than they had in 1991. 

• Despite the hardships of the middle and lower income classes, the country’s rich have gotten richer.  According to Forbes, of the world’s 793 billionaires, nine are Mexican, including telecommunications mogul Carlos Slim, whose net worth is estimated by Fortune to be $35 billion.  Slim is the third-richest individual in the world, behind only Bill Gates ($40 billion) and Warren Buffett ($37 billion).

In an era in which many countries’ economies grew dramatically through the worldwide expansion of free market mechanisms, Mexico has stagnated.  Unable to enact both the macro and micro economic reforms necessary for it to fully participate in the new global economy, Mexico has been left with the worst of both systems – state control and a free market.  The domestic market was opened up to global competition, but was unable to effectively compete. 

In this section, we will examine how Mexico’s economy has evolved, what has contributed to its disappointing levels of growth and competitiveness, and where its future may lie. 

In this section . . .

History

• Colonial Times
• Independence and Revolution
• Corporatism
• Transition
• The Post-NAFTA Era*
• The 21st Century: New Corporatism

Why Has Mexico Been Unable to Fully Reap the Rewards of Globalization?

• Lack of Economic Institutions and Infrastructure
• Politics
• Cronyism
• Dependence on National Resource Wealth
• Lack of Investment in Human Resources
• Migration
• Ambivalence About Foreign Involvement in the Economy

Prospects for the Future

Next:  Inside Mexico:  Economy:  History