Economic Growth and Industrial Policy in Mexico
Cuauhtémoc Calderón and Isaac Sánchez

From 1982 to 1987 the fall in gdp per capita was 1.8%, that of industry 0.59% and manufacturing 0.11%, while in the services and agricultural sectors there was a rise of 0.33% and 1.05% respectively. From 1988 to 1993 the growth of gdp per capita was 1.5%, 3.44% in industry, 3.54% in manufacturing, 3.30% in services and 1.41% the agricultural sector. From 1994 to 2000, gdp per capita rose 1.6%, industry 3.92%, manufacturing 4.76%, while services rose 2.58% and the agricultural sector 1.35%. From 2000 to 2009, growth of gdp per capita was merely 0.42%, industry falling 0.21% and likewise manufacturing, 0.96%, while services rose 1.59% and the agricultural sector 1.91%.

Manufacturing and industry generally experience their best growth rates during the following sub-periods: 1988-1993 and 1994 -2000, the same periods in which the total gdp growth rate per capita is higher. This result is not a coincidence. Manufacturing is an indispensable component of economic growth.

The Mexican economy experiences stagnation, both in terms of total gdp and per capita and alongside this there is practically no growth in the manufacturing sector (insufficient momentum) and an increasing informal services sector.12

With the theoretical framework as reference, we know that most trade and services participation, without a rise in industrial manufacturing, leads to reduced growth or rather temporary and fictitious growth, more dependent on consumption goods, intermediaries, and capital, which must be imported to meet the growing demand. Despite their relevance, it is supposed that services do not drive economic growth in Mexico.13

In continuation, it must be stressed that the years in which output per capita shows better performance (1996-200) are also those in which industrial manufacturing gdp registers higher growth rates.

There is a high correlation between the performance of industrial gdp and that of the total economy, the correlation coefficient between series being 0.93, which provides preliminary evidence of the importance of the industrial sector for growth or economic stagnation of output.

Figure 4. Annual Growth of Manufacturing, gdp total and Per Capita
Source: Based on data from the Banco de Información Económica supplied by inegi.

Considering the manufacturing sector exclusively, and comparing growth rates for the period 1982-2009 with those of total output growth for the Mexican economy, there is a coefficient with a correlation of 0.88.

As could be expected from Kaldor’s first law, manufacturing appears to dominate a good part of the country’s economic evolution. Two atypical years are 2002 and 2003, when manufacturing gdp presented negative values while total gdp increased slightly. Prior to this in 2001, the drop in manufacturing gdp was much greater than the drop in total gdp. Similar behavior was observed in 1982, 1983, 1986, 1993 and 2009. In general the economy follows the pace of manufacturing. Something similar occurs with productivity (measured through gdp per capita.)

According to figures available through inegi’s System of National Accounts, between 1982 and 2009, the absolute value of output generated in manufacturing rose from 173,609 million real pesos to 287,694 million pesos, an increase of 165% in 27 years.14 On average annually, manufacturing grew 1.88% for the whole period, -0.11% from 1982 to 1987, 3.54% from 1988 to 1993, 4.76% from 1994 to 2000 and -0.96% from 2000 to 2009, confirming that the period when the manufacturing sector shows the best performance coincides with that in which better rhythm is observed in total gdp and per capita of the economy.

12 According to Samaniego (2008:33) the informal economy has experienced explosive growth, rising from 51.5 to 54.5% between 2000 and 2005 of the occupied population outside of agriculture. Added to this, 44% of workers in the informal sector in Mexico in 2004 conducted activities from their own homes, generally working for themselves, occasionally helped by unpaid family workers. 19.8% own a microbusiness with a premise or vehicle where they work, 9% work as itinerant workers or on improvised stands and 27.2% are salaried employees of companies both in the informal and formal sectors, lacking all types of benefits.

13 A stream of authors believe the contrary. Garza and Sobrino (2009) is recommended as reading, particularly for Mexico’s case, the importance, structure, dynamic and geographical distribution of trade and services summarized in this work.

14 From 1940 to 1970 manufacturing rose 840% in absolute terms, and during the period 1982-2009 contracts relatively or undergoes deindustrialization.