Economic Growth and Industrial Policy in Mexico
Cuauhtémoc Calderón and Isaac Sánchez
Industrial Trajectory in Mexico 2006-2012

The trade and industrial policy applied by Felipe Calderón’s government follows the same liberal and orthodox precepts of previous governments. It has applied a passive policy that seeks to remove distortions in the market, based on free market principles, and is based on cost-benefit analysis. Like his predecessors he rejected the key objective of industrialization as a foundation of economic development. However, Felipe Calderón’s government has adopted and defended the principles of the Washington Consensus, and of the ultra- liberal economy, in a more radical way than his predecessors.

According to the Ministry of the Economy, the industrial and trade policy of the current government proposes essentially to resolve distortions in the market, monopolies, oligopolies, incomplete markets, asymmetric information and coordination of agents.

However, these liberal economic principles are based on a series of programs promoting industry, both horizontal and vertical in character seeking above all to strengthen Direct Foreign Investment (dfi). There are four distinct policies to attract dfi: the first type of policy applied combines protection, financial and fiscal incentives to promote transnationals in new strategic sectors. An example of this is support directed towards the automotive industry and the “emerging” aerospace industry. 30 The second type of policy consists of a number of measures originally directed towards specific sectors. This is the case with support for locating transnationals in the electronic, software and computing industry. The third type of policy is geared towards the highly concentrated activities of large scale and network economies, such as electricity, telecommunications, oil and natural gas. In the case of Mexico, most of these sectors are in the hands of the State, except telecommunications. In the case of such sectors, government support basically consists of developing flexible regulatory frameworks that promote and strengthen competition agencies. And under the pretext of driving competition, the government seeks to privatize and remove what it calls distortions in the sector, contravening the very principles of our Constitution, specified in Article 27.

The fourth type of territorial policy is that with support measures for the so called clusters, particularly small and medium sized companies, or activities in which a large number of small firms operate, basically under the leadership of large transnational companies. 31


The Mexican economy has experienced a yearly average of slow economic for almost thirty years now. During the period 1982-2010 the economy only grew 2.1%, very much less than the rate obtained during the stabilizing development period or during the shared growth stage. The situation is worse in terms of gdp per capita, given that in the same period average annual growth registers 0.46%. High unemployment and the precariousness of employment is associated with this meager economic growth: between 1982 and 2008 only 354,306 jobs were created annually on average in the formal sector of the economy and between 2000 and 2010 the number of precarious jobs increased by more than six million.

There are two possible causes for this disappointing economic performance. The first is the national economy’s incapacity to form an endogenous nucleus of technological momentum in the manufacturing sector. Industrialization was never completed, which generated a structural deficiency hindering growth beyond certain limits. The growth rate has lowered in manufacturing and with it productivity has waned and consequently global growth. The second is related to the liberal structural reforms applied in the mid-1980s, before the depletion of the old economic model based on the State and industry as driver of growth. These reforms represented a turn towards a market economy and passive trade and industrial policy whose only objective was to remove the distortions to the market that have seriously damaged the country’s potential for growth.

The failure of the trade and industrial policy of liberal governments, from Carlos Salinas to Felipe Calderón, is evident because they have not succeeded in driving economic growth, nor the employment necessary to maintain the wellbeing of the population. These governments abandoned the idea of the State and active trade and industrial policy as levers for economic development.

To drive growth in the Mexican economy, not only is an active, strategic trade and industrial policy required, but also this policy must exist within the frame of a broader economic policy that promotes economic development in Mexico. That is to say, one that promotes structural change whose objective is the following: improve income levels, overcome the huge differences in income between regions and sectors inside the country, and consequently eradicate economic dualism.

The challenge lies in building a new economic development model, where the industrial sector have a strategic role, principally manufacturing, as the driving force behind a healthy performing economy. A new economic model for economic development is required that enables the country firstly to repair the damage of the current model and then to find its way back to sustained economic growth. The new, active trade and industrial policy as a lever for economic development should recognize the importance of the market in assigning resources, but also the State as promoter of economic development.

30 Transnationals have produced automobiles in Mexico for 85 years and recently the government has put measures in place so that maquilas and transnational aerospace companies are set up in national territory. Until now the maquilas have driven this sector. According to the Mexican Federation of the Aerospace Industry, intra industrial exports rose 28% in 2011 compared to 2010. Investment in this sector (above all foreign) has been 4.2 billion dollars since 2009. Today this industry has 238 firms, generates 37,000 jobs and only 30% of intra-industrial exports are of national origin.

31 There is vast literature on the subject, but a good summary for Latin

America and Mexico is found in Altenburg and Meyer-Stamer (1999). An example of this type of policy for Mexico’s case is presented in Hualde and Gomis (2007).