MEXICAN MIRACLE: BACKGROUND, CAUSES, CHARACTERISTICS, PRESIDENTS - HISTORY - 2025

The Mexican miracle or stabilizing development was a stage in the history of Mexico characterized by great economic growth. Thanks to this development, which took place approximately between 1940 and 1970, the country managed to become an industrialized nation.

After several very convulsive decades, Mexico achieved some stability during the presidency of Lázaro Cárdenas. Some of his decisions in economic matters, such as the legislation on land or the nationalization of oil, were antecedents of the subsequent Mexican miracle.

The president of Mexico MIguel Alemán (left) with Harry Truman, president of the USA (1947) - Source: National Archives and Records Administration

The end of the Second World War also favored the economic improvement of the country. At first, its leaders opted for the so-called outward growth, with a large increase in the number of industrial companies. In 1956, the so-called inward growth began to be promoted, which boosted production for domestic consumption.

The result was a sustained growth that reached up to 7% in some years with an inflation of 2.2%. However, in 1970 the model began to show signs of fatigue. Three years later, with the world crisis of 1973, unemployment began to grow, debt increased, and private investment fell.

Background

After decades of instability, the arrival of Lázaro Cárdenas to the presidency led to the political stabilization of the country. His government undertook a series of economic reforms to improve the situation, including a law on land distribution and another to modernize infrastructure.

Similarly, it nationalized the oil industry in 1938, a year after having done the same with the railways.

Automotive Industry

Although industrialization was quite low, the country did have an efficient automotive sector. US companies such as Ford or General Motors opened factories in Mexico between 1925 and 1938. The investment of these large companies represented a significant economic injection and allowed the financing of infrastructure improvement works.

Starting in 1940, with the presidential term of Ávila Camacho, the Mexican economy began to grow strongly. This brought with it an improvement in the living conditions of the workers and peasants, as well as an increase in the middle class. As a consequence, these sectors strongly supported the ruling party: the Institutional Revolutionary Party.

Second World War

Mexico was favored by the high demand for raw materials and oil caused by the Second World War between 1939 and 1945. Its exports grew considerably, especially to the United States.

Causes

The governments that followed during the Mexican miracle undertook a series of reforms that contributed to the improvement of the economy. The first objective was to develop the domestic market and industrialize the country.

In addition, political stability allowed the creation of some public bodies that helped boost the economy.

Exports of materials

As noted, World War II allowed a large increase in Mexican exports abroad. In addition, its relations with the United States, damaged after the nationalization of oil, normalized, which led to the signing of several agreements that ended the previous quarrels.

Industrialization and agrarian policy

The request for an agrarian reform that favored the peasants had been a historical demand for much of Mexico's history. During the revolution, for example, this demand was at the center of Emiliano Zapata's actions.

With the distribution of the lands decreed by Lázaro Cárdenas, numerous ejidos were created. The legislation tried to alleviate the enormous social inequality existing in the countryside.

Starting in 1940, Mexican economic policy took a total turn. From that moment on, the governments tried to promote the industrialization of the country and abandon a fundamentally agrarian economic structure.

The industrializing impulse increased from 1946, during the government of Miguel Alemán. Agriculture was subordinated to industry and its role became that of supplier of cheap raw materials and food.

The economic transformation, however, also reached the fields. Between 1946 and 1960, the government invested in modernizing agriculture by purchasing machinery and creating irrigation systems. The result was a notable increase in production, although in 1965 there was a major crisis in the sector.

National industry

The Mexican industry was able to adapt to the new times after the Second World War.

At first, exports fell and those countries that had participated in the conflict returned to compete in the market. The government, under these circumstances, developed a plan to increase the development of the industry in the country.

It was Miguel Alemán who implemented the so-called import substitution (ISI). His intention was to create new industries with national capital dedicated to producing for the domestic market those products that, traditionally, Mexico had to buy abroad.

The State, through a series of measures and investments that favored the creation of new industries, took the lead in this plan. In fact, throughout the Mexican miracle, the State was the main investor in the country's economy.

characteristics

The main objectives of the stabilizing development period were to raise the population's standard of living, increase the country's GDP and income, make the economy more diverse, boost industrialization, and promote economic protectionism abroad while liberalizing the market. inside.

Outward growth

Between 1940 and 1956, the basis of the growth of the Mexican economy was the dynamism of the primary sector. Experts call this model growth without development, since there was an increase in the number of industrial companies, but without economic liberalization.

The result of this policy was remarkable growth. In the first stage, the presidency of Ávila Camacho (1940-1946), the GDP increased at an annual rate of 7.3%.

Both Ávila Camacho and his successor, Miguel Alemán, developed policies to favor this growth and to consolidate the domestic market. Between 1947 and 1952, GDP continued to grow at an average of 5.7% per year. In addition, there was an increase in the production of electricity, manufacturing industry and oil extraction.

Inward growth

In 1956, the country's economic model completely turned around. From that year on, a stage was entered in which the so-called inward growth prevailed. The objective was for the Mexican industry to produce everything that was consumed in the country.

This caused the national industry to be very favored, in addition to greater stability in prices.

Population increase in cities

Industrialization caused many inhabitants of rural areas to migrate to the cities in search of better jobs. One of the consequences was the strengthening of the tertiary sector (commerce, services and transportation) since there was more population to serve.

This migration to the cities had some positive effects. For example, newcomers had easier access to education or health than in rural areas.

However, this displacement also had negative consequences. Thus, it only produced an increase in population density, but the industry soon found problems to give work to all those who had arrived.

On the other hand, agriculture and livestock showed signs of stagnation due to the lack of workers.

Presidents

In total, there were five presidents who ruled during the Mexican miracle. Each of them served a six-year term.

Manuel Ávila Camacho (1940 - 1946)

The presidency of Manuel Ávila Camacho developed almost completely during World War II. The president was able to take advantage of the need for raw materials and oil in the United States to negotiate agreements that closed old frictions. Among them, those caused by the nationalization of oil carried out by Cárdenas.

In the interior, Ávila reached agreements with the business elite in order to develop the economy. The president managed to keep the price of the products frozen in exchange for ensuring the companies a rescue by the government in case of bankruptcy.

Likewise, Ávila Camacho legislated so that workers had a decent salary and were covered by social security.

During his presidency, the State was very interventionist, without allowing a liberalization of the economy. This caused an increase in the number of industries, although not competitive among them.

Miguel Alemán Valdés (1946-1952)

Alemán Valdés was the first president of the post-revolutionary period who had not participated in the revolution. It was also the first belonging to the Institutional Revolutionary Party.

In the economic sphere, he developed a continuity policy. This was characterized by nationalism, by the industrializing impulse and by the substitution of imports.

The main consequence was a large increase in internal trade, leaving international trade aside. In addition, the peso was highly devalued against the dollar, which made importing products very expensive.

On the other hand, his presidency was also marked by the increase in inflation, the increase in public spending and the decrease in social spending.

Adolfo Ruiz Cortines (1952-1958)

At the beginning of his term, Ruiz Cortines intensified the nationalist policy that his predecessor had followed. However, there was a large increase in food prices and the government was unable to compensate for it. This brought about a strong increase in inflation.

This circumstance caused a change in the economic model. The president proposed adopting a system that he called Stabilizing Development, which was maintained until the 1970s.

His first decision was to devalue the currency until its value reached 12.50 pesos per dollar. After this, it boosted exports and further reduced imports. Its objective is that everything that is consumed is produced in the country.

With these measures, inflation was reduced and the so-called inward growth period began. Despite the good initial figures, liberal economists say that these measures ended up causing the crisis that the country suffered later.

Adolfo López Mateos (1958-1964)

When López Matero took office, he encountered very low inflation and rising growth. The State continued to financially support companies, both national and foreign, that invested in the country. In addition, he dedicated himself to improving transport infrastructure.

However, during his presidential term, the debt increased and episodes of corruption increased.

Gustavo Díaz Ordaz (1964-1970)

The last aforementioned aspect, political and business corruption, was becoming more and more evident to the population. In addition, there was a perception that the government only acted to benefit its own.

Meanwhile, the middle class began to have financial problems. For their part, the workers and peasants saw their quality of life declining more and more.

Rural areas were losing population as a result of the exodus to the cities, which caused a decline in agricultural production. To try to alleviate the loss of importance of this sector, the government supported the manufacturing and tourism industries. However, the deficit grew and the State had to resort to external credits.

Not even the celebration of the Olympic Games, in 1968, and the World Cup, in 1970, meant an improvement in the situation. The growing discontent sparked social protests that were harshly repressed by the government.

The hardest episode was the one known as the Tlatelolco massacre, in October 68, when a student demonstration was dissolved by gunfire. The number of deaths was, depending on the sources, between 44 and 200.

End of the miracle

In 1970, Mexico was going through a very serious economic situation: the accumulated debt caused a great crisis, aggravated by the increase in the price of the dollar. Nor was the political and social situation better, with the appearance of guerrilla movements and a considerable increase in poverty.

Advantages and disadvantages of the model

The Mexican economic growth during the miracle is undeniable. In addition, this was maintained for many years in a row and Mexico came to obtain one of the best GDP on the planet.

However, the model followed also had disadvantages. Some of them caused the country to go through a serious crisis after 1970.

Advantage

The continued growth of GDP allowed the Mexican government to dedicate large sums to carry out reforms in public services. These were noted in education, health and social security. In addition, these benefits did not remain only in the cities, but also reached rural areas.

On the other hand, the Mexican miracle brought political stability to the country, at least until the end of the 1960s. The unions were satisfied with the approved measures and, therefore, the conflict decreased. The government's response was to increase investment in public banking and thus ensure better access to social benefits.

Other aid that made it possible to improve the country's situation were those granted to those interested in opening new businesses.

Finally, the stabilizing development model allowed an expansion of domestic markets and a control of prices, something that benefited the lower classes.

Disadvantages

The economic model on which the economic miracle was based allowed sustained growth over time and an increase in the industrial fabric. However, these achievements were due to a protectionist and highly interventionist policy that paid no attention to foreign trade. Exports were declining, with which hardly any foreign exchange entered.

On the other hand, the primary sector (resources and raw materials) was delayed compared to the tertiary sector, in which industrial activity is found. The negative point was that the industry cannot function without raw materials, so there came a time when production slowed down.

Another negative aspect of this model was the lack of investment in new technologies. Instead of promoting research, the rulers decided to buy this technology abroad.

References

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2. Peoples Summit. Stabilizing development or the Mexican miracle. Obtained from cumbrepuebloscop20.org
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4. Salvucci, Richard. The Economic History of Mexico. Retrieved from eh.net
5. Boundless. The Mexican Economic Miracle. Retrieved from oer2go.org
6. Globalizing Mexico. Crisis and Development - The Mexican Economy. Retrieved from globalizingmexico.wordpress.com
7. University of Texas Press. The Mexican Miracle. Recovered from is.cuni.cz