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Trade liberalisation in Mexico: rhetoric and reality

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  • Pennelope Pacheco-Lopez

    ()
    (National University of Mexico (UNAM), Mexico City (Mexico))

  • Anthony P. Thirlwall

    ()
    (University of Kent, Department of Economics, Canterbury (Great Britain))

Abstract

Trade liberalisation in Mexico started in a significant way in 1985/86, and was consolidated by the NAFTA agreement 1994. Mexico was expected to benefit in terms of increased export growth, employment, real wages, and above all, a faster rate of economic growth. In practice, there has been a divorce between rhetoric and reality. The growth of GDP post-liberalisation has been only one-half that pre-liberalisation. This paper gives three explanations. Firstly, export growth has hardly changed. Secondly, there has been a sharp increase in the propensity to import (partly related to US direct foreign investment) which has reduced the growth of GDP consistent with a sustainable balance of payments equilibrium on current account. Thirdly, liberalisation has been used as a substitute for a development strategy.

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Bibliographic Info

Article provided by Banca Nazionale del Lavoro in its journal Banca Nazionale del Lavoro Quarterly Review.

Volume (Year): 57 (2004)
Issue (Month): 229 ()
Pages: 141-167

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Handle: RePEc:psl:bnlqrr:2004:23

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Keywords: Agreement; Exports; GDP; Liberalization; NAFTA; Trade;

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References

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  1. Robert A. Blecker, 1996. "NAFTA, the Peso Crisis, and the Contradictions of the Mexican Economic Growth Strategy," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 1996-04, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  2. Anthony Philip Thirlwall, 1979. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 32(128), pages 45-53.
  3. Nora C. Lustig, 1997. "NAFTA: Setting the Record Straight," The World Economy, Wiley Blackwell, vol. 20(5), pages 605-614, 08.
  4. Julio López G. & Alberto Cruz B., 2000. ""Thirlwall's Law" and beyond: The Latin American Experience," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 22(3), pages 477-495, April.
  5. Juan Carlos Moreno-Brid, 1999. "Mexico's Economic Growth and the Balance of Payments Constraint: A cointegration analysis," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(2), pages 149-159.
  6. World Bank, 2002. "World Development Indicators 2002," World Bank Publications, The World Bank, number 13921, August.
  7. David M. Gould, 1998. "Has NAFTA changed North American trade?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q 1, pages 12-23.
  8. Ten Kate, Adriaan, 1992. "Trade liberalization and economic stabilization in Mexico: Lessons of experience," World Development, Elsevier, vol. 20(5), pages 659-672, May.
  9. Mortimore, Michael, 2000. "Corporate Strategies for FDI in the Context of Latin America's New Economic Model," World Development, Elsevier, vol. 28(9), pages 1611-1626, September.
  10. Mario Cimoli & Nelson Correa, 2002. "Trade Openess and Technological Gaps in Latin America: a Low Growth Trap," LEM Papers Series 2002/14, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  11. Anne O. Krueger, 2000. "NAFTA's Effects: A Preliminary Assessment," The World Economy, Wiley Blackwell, vol. 23(6), pages 761-775, 06.
  12. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
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Citations

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Cited by:
  1. Fugarolas Álvarez-Ude, Guadalupe & Matesanz Gómez, David, 2005. "Restricción de balanza de pagos y vulnerabilidad externa en la argentina de los noventa. Un análisis de caso," MPRA Paper 210, University Library of Munich, Germany, revised 2005.
  2. Penélope Pacheco-López, 2005. "Foreign Direct Investment, Exports and Imports in Mexico," The World Economy, Wiley Blackwell, vol. 28(8), pages 1157-1172, 08.
  3. Robert A. Blecker, 2008. "External Shocks, Structural Change, and Economic Growth in Mexico 1979–2006," Working Papers 2008-04, American University, Department of Economics.
  4. Escobar Gamboa, Octavio Romano, 2009. "IDE entrants, exportations et productivité manufacturière : les différentes performances des régions mexicaines," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/3850 edited by Guillochon, Bernard, November.
  5. Octavio R. Escobar Gamboa, 2010. "The (un)lucky neighbour: Differences in export performance across Mexico's states," Papers in Regional Science, Wiley Blackwell, vol. 89(4), pages 777-799, November.
  6. Penelope Pacheco-Lopez & A.P. Thirlwall, 2005. "Trade Liberalisation, the Balance of Payments and Growth in Latin America," Studies in Economics 0506, Department of Economics, University of Kent.
  7. Blecker, Robert A., 2009. "External Shocks, Structural Change, and Economic Growth in Mexico, 1979-2007," World Development, Elsevier, vol. 37(7), pages 1274-1284, July.
  8. Blecker, Robert A. & Ibarra, Carlos A., 2013. "Trade liberalization and the balance of payments constraint with intermediate imports: The case of Mexico revisited," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 33-47.
  9. Ali, Syed Zahid & Anwar, Sajid & Valadkhani, Abbas, 2012. "Macroeconomic consequences of increased productivity in less developed economies," Economic Modelling, Elsevier, vol. 29(3), pages 621-631.
  10. Cruz, Moritz, 2008. "Can Free Trade Guarantee Gains from Trade?," Working Paper Series RP2008/97, World Institute for Development Economic Research (UNU-WIDER).
  11. Robert Blecker, 2014. "Structural Change, the Real Exchange Rate, and the Balance of Payments in Mexico, 1960-2012," Working Papers 2014-01, American University, Department of Economics.
  12. Robert A. Blecker, 2006. "Macroeconomic and Structural Constraints on Export-Led Growth in Mexico," Working Papers 2006-05, American University, Department of Economics.

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