The 1980s Mexican Political Economy
Reinterpreted through the Hypothesis of Financialization
Violeta Rodríguez

The most persuasive indicator of Mexico's financialization is the growth in the financial sector's profitability in the 1980s. During this period, Mexico's financialization progress evolved from its stage of distributional conflict to that of leveraged buy-outs. This transition shared the same principal characteristic as in other countries, namely increased financial restrictions to expand the productive process.

However, one of the differences to other countries43 was that in Mexico this restriction did not derive from high salaries paid to managers and dividends for shareholders; by then public finances were already the main source of financing for the productive process. Hence the restriction placed on expanding the productive process was the same that faced public expenditure and was derived from global financialization that had reduced sources of credit in Mexico, thus increasing its cost. The ensuing limitation of funds became so severe that Mexico was forced to privatize and then close the formerly government-run companies.44

Another difference is that the distributional conflict was not between workers and shareholders/managers. The stage was divided into two parts: firstly, the distributional conflict was between businessmen and wage-earners and the government. The former—in particular the owners of the privatized companies—increased their assets because they benefitted from the increasing inflation brought about by the adjustment to official prices. This adjustment allowed said companies to survive; nevertheless, they operated on a reduced scale compared to their previous existence as government enterprises. Within this framework of productive contraction, wage-earners and the government reduced their participation in assets due to the wage control, and because the public budget absorbed the costs of the banking system's modernization and also the losses incurred by the greater volatility introduced by financialization—as evidenced by the repeated financial crises.

Secondly, the distributional conflict took place between non-financial domestic agents (businessmen, wage-earners, and government) and the holders of dollars and securities. The latter group improved their asset balances because in the context of diminished production and less employment, the government-led social pact required workers and businessmen to raise their prices and salaries below the rate of exchange and the interest rate. Since the monetary and exchange-rate policies indeed caused these latter two variables to have a trend of real growth, the assets not received by the workers and businessmen ended up as funds for use by the financial sector. That outcome of the distributional conflict laid the foundations for Mexico to inaugurate, in the mid-1990s, the consumer debt stage, which is mainly characterized by—and requires—an increasingly negative imbalance of the non-financial private sector.

Banco de México (various years), Informe Anual, 1970-2009, Mexico.

Chesnais, F., “La teoría del régimen de acumulación financiarizado: contenido, alcance
e interrogantes”, Revista de Economía Crítica, no . 1, Valladolid, España, abril, 2003, pp. 37-72.
Chesnais, F. and D. Plihon, Las trampas de las finanzas mundiales, Akal, Spain, 2003, 204 p.

Correa, E., Crisis y desregulación financiera, S. XXI Ed., Mexico, 1998, 205 p.

Demir, F., “Financial Liberalization, Private Investment and Portfolio Choice: Financialization
of Real Sectors in Emerging Markets”, Journal of Development Economics, 88(2), USA, March, 2009, pp. 314-324.

43 Specifically like the US, as referred to by Palley, 1990: 42-45.

44 Rodríguez (2011) describes and supports this hypothesis in greater detail.