NEOLIBERALISM IN MEXICO: BACKGROUND, CHARACTERISTICS AND EFFECTS - HISTORY - 2024

The neoliberalism in Mexico is the economic system that began to be implemented in the country during the administration of Miguel de la Madrid, with a history that had led to the decline in export tariffs.

The privatizations of companies, which had begun to take place a little before that presidential term, are also part of the change in the economic paradigm.

Signing of the Free Trade Agreement

Likewise, the signing of the GATT in early 1986 and of NAFTA - already with Carlos Salinas in the presidency - are other milestones in this transformation. In general, neoliberalism is defined as the doctrine that advocates the least possible state intervention in economic affairs.

For supporters of this model, the market itself is capable of self-regulation without the need for state regulations, stating that the result will be a richer and more competitive society.

Neoliberalism originated in the 70s of the 20th century. After the great economic crisis of 29 and the subsequent world war, the English liberalism of the 18th century had lost steam. Other more statist systems had taken over.

The appearance of the Welfare State is good proof of this.

Background of Mexican neoliberalism

The Mexican economic model had been characterized for decades by great protectionism and by the weight of the public sector.

Beginning in the 1940s, numerous tariff barriers had been established that protected all sectors from international competition.

Neoliberalism seeks to break that model and create another where protectionism and state interventionism will practically disappear.

Historical origins

The remote antecedent of the attempt to impose neoliberal policies can be found in the 1930s. The president, Lázaro Cárdenas, had continued with the traditional protectionist policy, but he saw a quite important group of opponents appear.

These, in addition to political criticism, also sought to change the economic system. Years later, already in the 70s, the weaknesses of the Mexican economy became more visible.

Among them, the weakness of industry and agriculture stood out, sectors with very little competitiveness. This caused the country to have to apply for international loans, which increased the external debt.

The peso was devalued every so often, especially against the dollar. And inflation became uncontrollable.

Miguel de la Madrid

The generational change in the PRI, the ruling party, also had to do with the arrival of neoliberalism. Some new leading cadres, with a technocratic tendency, advocated leaving behind economic interventionism.

This even caused a sector, led by the son of Lázaro Cárdenas, Cuauhtémoc, to leave the party and found another more leftist.

When Miguel de la Madrid (1982-1988) came to power, the situation in Mexico was very delicate. Inflation had almost doubled in just a few years and unemployment soared to 15%.

The president decided to launch what he called the Moral Renewal of society and proposed a Global Development Plan.

Among its measures was the privatization of companies and economic opening.

Carlos Salinas de Gortari

He was the one who finished implanting neoliberalism in Mexican politics. The privatization process in the country ended (with little transparency) and the macroeconomic numbers improved considerably.

However, he did not get Mexico out of the crisis and the peso continued to appreciate.

International Treaties: GAPP and NAFTA

One of the aspects that has characterized the implementation of neoliberalism in Mexico, and that continues to do so, is its incorporation into various international trade treaties.

The first was the GATT (General Agreement on Tariffs and Trade) and it represented a real change in the economic paradigm in the country. Mexico promised to eliminate tariffs and import permits.

Possibly, the second agreement signed was the most decisive and the one that still continues to be the most controversial. It was the Free Trade Agreement with North America, signed with the United States and Canada.

Through it, a free trade zone was created between the three countries.

There are contradictory data on how this treaty has influenced the Mexican economy. The agricultural sector has been modernized, increasing its competitiveness, but at the cost of increasing social inequality.

Other sectors, such as the automobile sector, have benefited from the transfer of industry from the northern neighbor, given the difference in costs between the two countries.

To this day, Donald Trump's threat to end the agreement has generated much concern in certain Mexican sectors.

Characteristics of neoliberalism in Mexico

The following characteristics of neoliberalism in Mexico can be named:

Restrictive tax policies

Public spending is reduced as much as possible, which creates problems among the most disadvantaged sectors. Similarly, taxes on production are reduced, while those related to consumption grow. In theory, this should attract investment and reduce debt.

Liberalization and privatizations

Protectionist legislation is reduced in any economic sector and most public companies are sold to the private sector.

Dependence on the outside

While the two previous characteristics are common to any country with neoliberal policies, foreign dependence is specific to nations with structural problems. In the Mexican case, a good part of its economy depends on its relations with the United States.

Centralized model

Despite the federal nature of Mexico, almost all experts agree that this particularity has not been taken into account when carrying out economic policies. Decision-making has been totally centralized.

Economic effects

Privatization of companies

One of the first steps taken when moving to a neoliberal market model is the privatization of companies with public participation.

In the Mexican case, the numbers demonstrate this process. While in 1982 there were 1,155 parastatals in numerous activities, six years later only 196 remained.

These companies accounted for 18.5% of GDP, and employed 10% of the population. Some figures close to the government were favored in the privatizations.

Loss of national decision

In Mexico, given its dependence on foreign countries, the State has lost the ability to make decisions about economic policy.

Increase in exports

Especially since the signing of NAFTA in 1994, exports have grown a lot in the country. However, it failed to prevent the loss of industries at a general level. Despite this increase, Mexican GDP is one of the least grown in the region.

Social costs

Mexican neoliberalism has led to a loss of standard of living for the most disadvantaged and workers in general.

Social policies have seen their budget drop dramatically. Much has been noticed in education and health.

Almost 8 million workers are receiving the minimum wage in the country, which is barely enough to survive. With this, the increase in inequality has been an inevitable consequence.

Was neoliberalism successful in Mexico?

There is no clear answer to this question, since each economist answers depending on their ideology. However, the data support that the majority of the country has not benefited from the change in model, creating very significant pockets of poverty.

Inflation has continued to rise during these years, and the economy has stagnated with growth of no more than 2.4%.

As previously mentioned, the reduction in the amounts destined for social services has affected a large number of people. Rising unemployment has compounded the problem.

One of the consequences has been emigration to the United States.

References

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5. Laurell AC. Three decades of neoliberalism in Mexico: the destruction of society. Recovered from ncbi.nlm.nih.gov
6. Weisbrot, Mark. NAFTA: 20 years of regret for Mexico. Recovered from theguardian.com
7. Smolski, Andrew. Privatizing Mexico. Recovered from jacobinmag.com
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