5 FEATURES OF SHARED DEVELOPMENT - HISTORY - 2024

Among the main characteristics of shared development, the expansion of Mexican public spending stands out. The shared development economic model was proposed by Mexican President Luis Echeverría Álvarez between 1970 and 1976.

This model was designed to create an economic system that would make an equitable distribution of wealth.

Luis Echeverria Alvarez

Shared development generated a series of policies through which the objectives would be achieved. These policies created trends that characterized this model.

Goods were also subsidized for the population and invested in projects whose profits did not cover expenses.

In order to continue covering such expenses, loans were used, increasing the foreign debt.

Consequently, this measure turned out to be one of those responsible for the progressive undercapitalization of Mexico.

The 5 main characteristics of the shared development model

1- Expansion of public spending

The principle of equitable distribution of wealth led to the design of social projects and programs. This in order to give the people the quality of life they deserve.

For this purpose, the budget for public expenditures was increased. The problem arose when these projects became the perfect setting for hidden deals.

Nor were measures taken to balance and cover the new expenses, such as raising taxes.

Then, the corruption added to the fact that no compensation measures were taken, made public spending turn into a black hole.

2- State intervention in economic affairs

The State began to get involved in economic aspects, in which governments prior to that of Echeverría had not intervened.

They adopted the methodology of buying private companies that had gone bankrupt. These were reactivated by making heavy investments so that they could produce again, only this time on behalf of the State.

These actions were not done after studies that confirmed that it was a good option.

So many went bankrupt right away, and the rest couldn't cover their own expenses, so they became dead weight.

3- Oil as an economic center

The appearance of oil on the Mexican economic map represented a change of perspective.

It virtually appeared to be an infinite mine of riches waiting to be exploited. Faced with this possibility, huge investments were made in this area, which in turn generated huge debts for the nation.

The profits from oil exploitation were the basis for the creation of infrastructure for the nation. But the debts that the establishment of this industry generated were very deep.

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The oil investment, the subsidy of services and goods to the population, and the financing of social projects represented enormous expenses for the Mexican State. Not only for its conception, but also for its maintenance.

The country was not producing enough to efficiently cover all expenses. For this reason they resorted to international loans.

The deals made were not the most convenient for Mexico in the long term. So these debts brought the country to the brink of bankruptcy and decapitalization.

5- The letter of intent

In 1976 and with an unsustainable economic outlook, definitive measures were taken. Mexico, with the backing of the United States, signed an agreement with the International Monetary Fund (IMF).

In this it was established that the IMF was going to grant credits to Mexico to solve its crisis. In return, the IMF established economic parameters that Mexico had to meet.

These include restricted salary increases and rising costs of public services. This agreement was called "the letter of intent."

References

1. Shared development model. Hayashi Martínez, L. economia.unam.mx
2. Shared development. (2017) sutori.com
3. Shared Development. structsocioeconomica.es.tl
4. From shared development to the challenge of competitiveness. (2011) expansion.mx
5. Shared development, the Mexico of the 70s: Paradigmas (2013) moneyenimagen.com