Volume 43, Number 170,
July-September 2012
Economic Growth and Industrial Policy in Mexico
Cuauhtémoc Calderón and Isaac Sánchez
The Principles of the Washington Consensus and industrial policy in Mexico ( ...continuation )

Short term macroeconomic policy succeeded in maintaining inflation at levels less than a single digit, at the expense of maintaining the peso-dollar exchange rate appreciated, with poor results in terms of driving exports and employment. The principal flaw in the Mexican liberal orthodox economic model lies in its structural incapacity to generate economic growth, mainly in the industrial manufacturing sector and therefore in its inability to generate employment and raise productivity. This is also explained by the trade and industrial policies applied during the period, based exclusively on market efficiency criteria and on cost-benefit calculations to remove so called distortions in the market. The trade and industrial policies implemented by these governments, from Salinas de Gortari to Felipe Calderón have been passive, and their only objective has been to remove barriers that prevent resources being efficiently assigned in the markets, within the framework of a “free market” economy. These policies have sought to remove all State regulations, State monopolies, private monopolies, tariffs etc. in a scenario of global competition in the markets. All of these neoliberal governments rejected the idea of industrialization as the basis for economic development, and so forsaking the great objective of economic development for Mexico. All adopted a passive trade and industrial policy that simply left the development of manufacturing industry in the hands of market forces “free play”.

These governments have allowed “market forces” in the context of globalization and regional economic integration, to decide which companies remain and which disappear. A misleading and discretionary “freedom” makes decisions on the industrial future of the country.23 It is no longer the National State that determines the direction of the economy, but rather the global market that blindly assigns those segments of industry that will be located within our national territory. In such a way that while the Mexican State is subsumed under the logic of the global market, it will be incapable of implementing active trade and industrial policies that promote economic development. The slow economic growth that the Mexican economy has been facing for the last 24 years is the result of insufficient growth in manufacturing industry.24

During the last 29 years, two contrasting phases can be defined: (1) 1982 to 1993 is a phase of economic development cut short, in which active industrial policies emphasizing the need for structural change for greater trade openness were still being applied, along with targeted promotion and conditioned by priority industrial branches and regions (with pronacife25 and profiex26 ). Unfortunately, there were not sufficient resources to see them through and some macroeconomic policies worked against them. (2) 1993 to 2005 when active industrial policy disappears and nafta is implemented, which gave a strong boost to maquila industry, to intra-industrial trade and foreign investment.27

From 1993 to date, the main instrument used by the authorities to promote industry has been to promote trade openness and sign trade treaties, in the understanding that the State should step back from economic activity and only create conditions for the efficient operation of the market, removing all kinds of distortion.28

The main objective of the new industrial policy is to achieve efficient operation of the markets and promote competition, given that it is believed that this is the best route to enable private initiative to make decisions concerning investment, production and employment. As a result of the structural reforms and signing nafta, the Mexican State ceased to fulfill its role as promoter of economic development. State action was reduced to create conditions for the “efficient” operation of the market through deregulation, lack of protection, privatization, rules, private property rights and human and physical infrastructure, not all of which was negative. It is recognized that the State has its faults, however it should be noted that the mark et al so has them. Above all, it should be recognized that Mexico is a developing economy that needs an active industrial policy as a base for a new economic development model.29

23 On this important point, it is important to compare Mexico’s industrial performance with that of other Latin American countries, in the interest of better evaluating the results. The authors are working in this area and recommend that the following works are consulted: Kupfer et al. (2009) for the case of Brazil and Azpiazu and Schorr (2011) for the case of Argentina.

24 When speaking of Mexico, we refer to a country that has virtually stopped growing and also that has built up old social distortions that have been successfully removed (Pipitone, 1994: 391). A country in which 40% of the poorest families absorb 14% of national income, as opposed to 52% of income appropriated by 20% of the richest families. A country plagued by structural problems such as informality, subsistence agriculture, corruption, a colonial legacy, etc.

25 The National Program for Industrial Promotion and Foreign Trade was adopted on July 3, 1984 as sectorial program of the Federal Executive within the National Development Plan. It is an interesting program that aims to strengthen the domestic market, and improve the integration and efficiency of national industry with the aim of facing a global economy in constant change.

26 Program for the Integral Promotion of Exports while arose in March-April 2005

27 For a complete analysis of industrial policy during the period 1988 to 1994, see Clavijo and Casar (1994) especially Chapter 1of Volume 1. See also Máttar and Peres (1997) where the National Program for Industrial Modernization and Foreign Trade is analysed, 1990-1994 and the Industrial Policy and Foreign Trade Program of 1996. Dussel (1997) presents and analysis of the Mexican manufacturing sector and industrial policy implemented from 1982 to 1994.

28 An excellent balance of Latin American liberal reforms can be found in Ramos (1997). In Mexico’s case, the trade and macroeconomic policy of 1985-1995 is described. In his opinion, the liberal reforms were partially successful in areas such as economic openness, reform of the pensions system and tax reform. The most expensive were the anti-inflationary and financial liberalization policies.

29 Rodrik (2008) clarifies this point, indicating that the correct model for industrial policy is not based on an autonomous model that applies Pigovian taxes and subsidies but rather in strategic collaboration between the private sector and the government, the aim being to reveal the principal obstacles to productive restructuring and the type of interventions necessary. The task of industrial policy is to gain information on the private sector on the externalities that are important and the solution, to apply pertinent measures and contribute to greater efficiency.

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 194 July-September 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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