Trade Liberalisation in Mexico: Rhetoric and Reality
This paper examines the process of trade liberalisation in Mexico, particularly since the mid-1980s and the signing of the NAFTA agreement, and its impact on economic performance. The average growth of GDP of the Mexican economy since liberalisation has been only one-half the rate pre-liberalisation and we attribute this deteriorating performance to a rise in the income elasticity of demand for imports (partly associated with an increase in foreign direct investment with a high import content) which has not been compensated by a sufficiently fast growth of exports, leading to severe balance of payments difficulties. Mexican exchange rate policy has not helped the situation.
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