Economic Growth and Industrial Policy in Mexico
Cuauhtmoc Caldern and Isaac Snchez
SLOW GROWTH, (UN) EMPLOYMENT AND INSUFFICIENT GROWTH IN MANUFACTURING

After a period of sustained growth, the Mexican economy experienced low economic growth rates or stagnation in a macroeconomic context from the beginning of the 1980s until the present. Graphing the growth rates of real Mexican gdp an average annual growth rate of 0.09% can be observed for the period 1982-1987. Between 1988 and1993 this rose to an average annual rate of 3.14%. For 1994-2000 this rose to 2.91% and finally for 2000-2010 the growth rate was 1.30% annually. For the whole period (1982-2010) the economy only succeeded in growing an average of 2.1% against the 6.33% growth achieved between 1940 and 1970.

Figure 1. Annual Growth of Real gdp and Averages Per Period
Source: compiled by the authors with data supplied by inegi<

Figure 1 shows the stagnation and slow long term growth that took place.10 Despite the significant growth that can be seen in some years, the magnitude of the crisis and the setbacks experienced have reduced the possibility of positive long term impact, the economy continuously growing and slowing down.

Part of the explanation for slow growth in the period is found in external and/or domestic cyclical factors, such as at the beginning of the 1980s, or as occurred recently with the global financial crisis, which began in the second half of 2008 in the u.s.a. However, the slowdown in global growth, according to the theory put forward in the first half, is structural in character and entirely linked to lack of momentum in the growth of manufacturing production and the lack of any kind of endogenous technical progress. Structural factors are to blame for the Mexican economy not growing at the rate it should.

Economic growth in the country has been totally lacking during the previous three decades. It can be observed in Figure 1, that after a period of complete stagnation, growth stability recovers relatively between 1987 and 1994, although it remains insufficient. Afterwards, from 1994 to 2000, annual average growth is reduced, although it increases notably in 1997 and in the last year. This drop continues to the present. After 2001 there is a new period of slow growth, very similar to that which occurs at the beginning of the 1980s.11

Analyzing gdp growth rates per capita an even worse situation can be observed. In the period from 1992 to 1987 the economy slowed down in real terms by 1.81% on average annually, 1982, 1983 and 1986 being terribly critical, when the downturn in the production rate per capita was difficult to recover from. For the period 1988-1993, average annual growth of output per capita was merely 1.5% in real terms, 1.64% from 1994 to 2000 and 0.42% from 2000 to 2010. In this way, average annual growth was 0.46% from 1982 to 2010, very much lower than for the period 1940 to 1970 when it was 3.02%.

10 According to Moreno-Brid et al. (2006:112), maintaining a high rate of long term economic growth should be a priority for the national agenda. Taking into account that the workforce increases on average 2.5% a year, the Mexican economy needs an average annual growth rate of at least 5% and 6% in real terms, just to meet the demand for jobs each year. Economic growth also needs to be stronger if the standard of living of 13 million Mexicans living in extreme poverty is to perceivably improve.

11 In 2010, the economy grew 5.5% as a result of recovery from the abrupt fall the previous year. In 2011 growth was 4.0% and in 2012 it is expected to grow 3.5%, according to estimates by the Secretary of Finance.