Mexico: Neoliberalism with a Human Face

By Needler, Martin C. | Contemporary Review, July 1993 | Go to article overview

Mexico: Neoliberalism with a Human Face


Needler, Martin C., Contemporary Review


Like the other countries of Latin America, and indeed of the world, Mexico has taken the path of neoliberalism in economic policy; but - like everything Mexico does - it has done so with a difference, and a very significant difference.

Unlike what has happened in so many countries, where the new policies have met with elite dissent and popular resistance, in Mexico the new policies have been generally welcomed. This is because conditions had become so disastrous that everybody felt that a drastic change was long overdue and was willing to suspend disbelief long enough for the benefits of the new policies to become apparent. In fact, things were so disastrous that improvement was all but inevitable, whether new policies had been adopted or not. Nevertheless, it would be not only ungracious but inaccurate to ascribe the success of the policies of the current administration only to luck; a great deal of skill has been involved, skill beyond the level one has any right to expect, and beyond the level one has seen in action in most of the countries of the world. |The economic managers have been so adept ... that they have earned the right to say to their countrymen "Trust us".'(1)

The situation facing the incoming government of Carlos Salinas at the end of 1988 looked horrendous. Real per capita income had fallen to the levels of twenty years before; inflation was running at more than 150 per cent a year; the country had an external debt of almost a hundred billion dollars. Politically, the situation looked equally disastrous for the ruling Institutional Revolutionary Party (PRI). Salinas had just won the presidency with an official figure of 50.74 per cent of the vote, a majority so bare that it was universally believed to have been adjusted upward so that the government candidate would not take office with the indignity of having had a majority of the voters oppose him, by far the lowest proportion of the vote for a winning presidential candidate in this century.(2) The opposition on the left was led by Cuauhtemoc Cardenas, the son of the most popular Mexican president in living memory.

Of course, it's darkest just before dawn, and the sun rose on a beautiful day for the PRI. By the halfway mark in his six-year term, Salinas had negotiated ten billion dollars off the foreign debt - not a relatively large amount by itself, but significant because it helped to restore creditor confidence and began a flow of repatriated capital. Inflation was brought down to under 15 per cent. The public sector deficit was eliminated. The economy was growing at some 3 per cent a year, fuelled by a sharp increase in exports.(3)

The PRI rebounded from its poor 1988 showing to capture 61.4 per cent of the vote in the 1991 mid-term elections.(4) This was a perfectly plausible result in light of the Gallup poll results on party preferences, which showed the PRI at 68 per cent, its 1988 showing having been 55 per cent.(5) Apparently the PRI does better with Gallup than in the actual election; even so, if the 1988 result was |adjusted' upward for moral effect, it cannot have been by much.

Moreover, it appeared that Salinas had found a mechanism for extending economic improvement far into the future. By reviving an old and half-forgotten proposal for a North American free trade area, he opened new and promising horizons for the Mexican economy. A study by the US International Trade Commission projected that NAFTA would contribute to an increase in annual output of as much as 16.2 per cent in Mexico and might increase employment in Mexico by 6.6 per cent.(6) Another study projected the net gain in employment in Mexico as 600,000 new jobs, substantially more than in the United States.(7)

To a large extent, we are talking about neoliberal policies here. Industries are being privatized.(8) Tariffs and other restrictions on international trade have been cut back drastically, so that what is left is predominantly an ad valorem tariff approximating 10 per cent, on the model suggested by the Cambridge school of economics.

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