Volume 46 Number 182,
July-September 2015
Economic and Social Policy in Mexico:
Disparities and Consequences

Felipe Torres and Agustín Rojas *

Date received: December 8, 2014. Date accepted: April 9, 2015


Mexico’s adoption of an open-economy model to reorient its economic policy precipitated disparate growth and internal wealth distribution, as the control of the macroeconomic environment led to lagging social welfare indicators and increased poverty and inequality. Although Mexican social policy has sought to compensate for the deteriorating living conditions of its population, the scope of this policy is insufficient, insofar as the economic policy in place imposes limits that divert public spending towards certain target groups, leaving a broad swath of the people vulnerable. The data demonstrates that this targeted social policy has proved unable to reverse the disparities derived from the type of economic policy in effect. If we do not correct the factors that govern the current model, we risk gradually undermining the living conditions of the population and even national security.

Keywords: Economic Policy, Social Policy, social spending, poverty, social programs.


At the end of the 1970s, the import-substitution model of economic development drew to a close, or rather, Mexico overhauled the economic strategies that produced this same effect. This choice precipitated a series of imbalances, such as the reversal of the positive growth rates achieved during the so-called period of the "Mexican miracle. In the beginning of the 1980s, the country was forced to confront a serious debt crisis and weak growth, derived from a new economic development model which, based on trade liberalization and deregulation, sought to revamp the failures attributed to the role of the State in the economy, in combination with excessive social spending.

The domestic economic crisis prompted the country to enact economic stabilization and structural adjustment policies based on agreements. Monetary and fiscal policy sought to control runaway inflation, restore the trade balance, and reduce the public deficit. However, the outcome only further destabilized the economy, a reflection of the incapacity of the State to drive economic development, as the cost of the structural adjustments imposed were transferred to families; these circumstances exacerbated social and regional inequalities, manifest in acute poverty and marginalization.

Starting in the 1990s, economic policy in Mexico subordinated national needs to the strategies and dynamics of the global economy, which debilitated domestic growth and failed to mitigate the impact of the open-economy model on the population; social tension and unrest worsened. Moreover, it was beyond the scope of the Social Policy to act as a counterweight mechanism, because the Economic Policy imposed restrictions on social spending that obliged the government to target public resources only towards certain populations, cut back on services, and reduce coverage for the population and territory. In summary: Mexican Social Policy has been sidelined by the interests of the Economic Policy, which fosters income concentration, rather than a more equitable distribution of wealth.

A change of course towards a development project and public investment that fulfill domestic needs with a novel and renewed Social Policy, with enhanced coverage and magnitude, will be vital to achieve economic growth through the appropriate redistribution of income and, in this way, achieve social equality.


The global economy has shifted in permanent ways over the past 40 years. Progress in communication, technology and transportation has shortened distances and lowered production costs, modifying traditional forms of labor organization and the ways in which goods and services circulate and are consumed. This progress has also transformed social organization with respect to its past incarnations, which used to guarantee that better balance would be achieved through Social Policy. Finally, this same progress has altered the role of the government in managing Economic Policy.

Economic Policy is defined as the set of regulations and standards that the State employs to direct and guide the economic dynamics of the country. It also sets the criteria for, according to the National Development Plan, diverse areas of national life and provides the respective instruments for their operation through fiscal, monetary, and foreign policies. From this foundation emerges the Social Policy, as well as a variety of sectoral and regional policies. Social Policy constitutes the means by which the State seeks to redistribute wealth, preserve social welfare, and ensure that the benefits of economic development reach all social levels.

The State typically treats Economic and Social Policy as separate processes. The former addresses economic dimensions, while the latter deals with the social sphere, and the State complies with the laws that have been enacted by coming up with and implementing social programs.

As recent economic history has shown, the prevailing economic development model prioritizes growth-oriented Economic Policy and uses Social Policy to administer distribution mechanisms. In times past, Social Policy was supposed to engender welfare. Now, however, it is the tool the State uses to ex post correct inequalities. In this way, the State now first determines the scope of Economic Policy and only later resorts to Social Policy to alleviate the detrimental effects of the Economic Policy in place.

The institutionalization of Social Policy as a tool of Economic Policy is a recent affair. In ancient times, the State (the Greek polis and the Roman Empire), fostered solidarity links between families and communities; the modern State, which has faced such milestones as the black plague, the famines of the fourteenth century, and the legalization of aid for the needy with the Poor Relief Act of 1601, has sought to ease the social upheaval generated by sub-human conditions of subsistence (Thompson, 2002: 19-42). With this, the welfare state formalized Social Policy as State Policy (Flinn, 1970: 8-9; 17-19; Hobsbawm, 1983: 15-29; Rheinheimer, 2009; Villarespe, 2002: 15).

From the 1940s to the end of the 1970s, the economic growth strategies of a good deal of developing countries were based on State intervention in economic activity with an import-substitution model and support for the domestic market (Pérez, 1996: 347-363). Many countries did indeed advance, as reflected in high growth rates for the Gross Domestic Product (GDP), which, in the case of Mexico, at least, exceeded 5% annually.

This model transformed the production system: the country abandoned the agrarian-export model and made industry the motor for economic growth to strengthen the domestic market. The strategy first minimized the role of non-durable consumer goods and then moved towards more complex items, such as intermediate and capital goods. In this way, the social-spatial structure of investments was altered and the number of wageworkers increased as people migrated from rural areas to urban centers and industrial hubs (Guillén Romo, 2001: 20-21). The State played an active role in the economy, principally in protecting and promoting national enterprises, setting tariffs, guaranteeing prices, and providing fiscal support and exemptions; it also created specialized institutions to address a variety of sectoral issues.

In this context, the Welfare State was born, fostering economic development and welfare in nutrition, health, housing, and education (Montagut, 2008: 53-75). To do so, it deployed a nationalist Economic Policy aiming to increase productive capacity and stimulate aggregate demand with fiscal policies and expansionary monetary policies, and boost employment and income. With the provision of affordable basic services, the state also guaranteed social security and mitigated the domestic disparities that affected some regions. Increased public spending made it possible to redistribute resources and achieve social welfare.

Although the Welfare State in general sought to provide universal coverage for basic rights, on the international level, there were three different types of welfare and social protection regimes, each of which coordinated economic and social policies in a particular way. The first of these, the social-democratic regime, sought to guarantee to the entire population, in an institutionalized fashion, the provision of a set of satisfiers, because by ensuring minimum levels of welfare, the idea was to advance towards a model that would demercantilize social services and provide access beyond the restrictions imposed by the market. The second, the conservative regime, sits in contrast with the first, as it stratified and regulated access to goods and services, differentiating their provision by type of occupation, granting privileges to industrial workers through social security. Finally, the liberal model only intervened when it could prove that individuals did not have sufficient resources to access basic goods and services (Esping-Anderson, 1999).

The synchronization between economic and social policy has been altered in the midst of our current economic development. The new free market ideology has caused the two policies that operated in conjunction during the Welfare period and created a relative equilibrium between economic development and social aspirations to become detached. This new relationship reflects a shift towards the open-economy growth model imposed by the economic dynamics of the global order (Chossudovsky, 2003: 319-326; Guillén Romo, 1997; Vidal VIlla, 1998: 105). As such, the hypothesis from which this paper departs is that the nature of open-market domestic economic policy, whose essential strategy is to control macroeconomic variables, gradually reduces social spending, such that Social Policy is rendered incapable of guaranteeing balanced development for Mexico.

Between 1980 and 1982, the dip in international oil prices and the rise in interest rates in the international capital market complicated the macroeconomic environment for a variety of countries, leading to domestic and foreign imbalances, principally in the public budget, job levels, inflation and the trade deficit, and the balance of payments. Furthermore, it made it nearly impossible to sustain economic growth levels, because import-substitution industrialization did not take place within an effective industrial and technology network, which generated low levels of national and intraregional productivity to the detriment of exports.

The nature of the import-substitution model of industrialization inherently affected some sectors more than others. In Mexico, the agriculture and livestock structure fell behind, reducing production of raw materials and basic products and prompting the loss of food self-sufficiency, while simultaneously exacerbating disparities in the Agriculture and Livestock Trade Balance (Guillén Romo, 2001: 24-25; Torres, 2003: 15-52). On top of that, external macroeconomic shocks put the brakes on economic growth and interrupted the continuity of import substitution. The public finance deficit obliged the country to resort to external financing, which cast doubt on the effectiveness of the Economic Policy chosen by the State.

The increase in public spending to correct economic and social disparities was funded by loans granted by supranational financial institutions. The exacerbation of financial disparities forced debtor nations such as Mexico to cover their payments with higher interest rates, inhibiting domestic growth. In the face of rising debt service, some nations defaulted (Damián, 2002: 27). The structural conditions of the crisis in which economies such as Mexico found themselves made it very difficult for these countries to fulfill their commitments and unleashed a fresh cycle of debt, but under nearly permanent adjustment conditions (Girón, 1991).

The stabilization and structural adjustment agenda sought to help production and consumption recover to their earlier levels, but with a development approached governed by the free market, the very school of thought that holds that nationalist policies and excessive State intervention inhibit economic growth. This development approach was moreover legitimized with non-productive social spending, rather than with factors that bring about growth, and capital concentration (Cruz and Polanco, 2014: 9-33).

Under this approach, international financial creditor bodies designed adjustment programs for these unstable and poorly performing economies so as to ensure debt repayment, in the process transgressing and violating national sovereignty (Girón, 2004: 189-208; 2006: 125-142). Consequently, Economic Policy was guided by a mentality of fiscal prudence, financial and trade deregulation, and liberalization, and development plans were adjusted to the directives of the global economy. The role of Social Policy was reduced to trying in vain to contain the adverse effects generated by the economic dynamics of the global order (Franco, 1985: 13-20; Sotelo, 2010).

In the open-economy era, the increased cost of welfare is derived from the change in Economic Policy management and the limitations facing the State in its attempt to counteract economic distortions and inequalities through Social Policy. Starting with the adjustment, the Economic Policy imposed structural limits on the Social Policy, confining its efforts to the poorest populations, and failing to cover basic aspects of welfare and access to food (Arellano, 1985: 41-45; Boltvinik, 2005: 131-196; Campos, 2010: 51; Townsend, 2003: 445-449; Uribe, 2011: 37).

Although during the protectionist phase the Economic Policy did redistribute resources through the Social Policy and certainly made significant advances in social security, because it turned the State into a market regulator and distributor of welfare, nowadays, the State streamlines public resources and has given up control and oversight of the social realm, in the process failing to promote national development (Barba, 2004: 17-24; Gordon, 2009). Current Social Policy is governed by parameters that direct support only towards aiding the poor and combating poverty to make public spending more efficient. This approach comes at the cost of actions that would universalize benefits to broader sectors, and privatizes, deregulates, and decentralizes the actions that should be carried out by the State (Campos, 2010: 51-52).

Likewise, the Social Policy can only implement mechanisms to fight inequality within the framework imposed by a free-market Economic Policy that limits the role of the State and reduces the part it plays in social control, assuming that market efficiency will generate economic and social welfare. The assumption is that the free market will allow the marginalized to access the economic circuits and enjoy the benefits derived from them, which is why coverage only targets the leftover population. Social spending is sacrificed to channel these funds towards activities that foster economic growth driven by private agents.

These guidelines mean that not only is the way in which resources are used modified, but so too is the size of the target population of social programs. In the process, the quantity of resources and number of beneficiaries decline and the private economic agents become suppliers to cover the social demands previously met by the State, even in strategic areas. The scheme has developed based on resource efficiency and maximization, by evaluating the programs implemented to select the most efficient and restructure—or eliminate—those below the minimum parameters set, without ever changing the conditions of inequality (Cardozo, 2005: 172).

The transition from a Welfare State to a minimal State has prompted the streamlining of public resources and a lack of concern for the social sphere. Current Economic Policy in Mexico has produced adverse effects for the national economy that go beyond the scope of the State to generate a development agenda pursuant to the domestic needs of the country. Since Mexico liberalized trade, low economic growth rates have reduced the likelihood that these efforts would have a favorable impact on the most vulnerable populations.

Although the country did make strides in social benefits during the Welfare State phase, the deficits accumulated and the economic crises that have ailed the nation since it transitioned towards a free-market economic model in the context of unresolved structural problems have reduced Social Policy to a mere mechanism to ineffectually contain poverty, because the internal imbalances resulting from the Economic Policy far exceed the capacity of Social Policy coverage, and the country has yet to find a way to compensate for this, as evidenced in the progressive deterioration of individual income.


Mexico's transition to an open-economy model was marked by the stabilization of macroeconomic variables as a result of the so-called structural adjustment Economic Policy. Since it was implemented, the country has experienced low growth levels and fragile economic stability. Similar to other developing nations, this stabilization, whose priority was to control inflation and the foreign deficit, did not generate the growth dynamics required by the domestic economy; its slowness has translated into a high social cost, but moreover, the persistence of growing deficits in public finance, increased unemployment, and recurring macroeconomic crises that have widened the social inequality gap.

The empirical evidence shows that trade liberalization imbalanced the domestic economy, both in terms of social and territorial factors, reflected in higher wealth concentration, poverty, and inequality, not to mention new multi-dimensional problems on both the individual and social level (Boltvinik, 2005), which go far beyond the economic dimension: organized crime, drug trafficking, social exclusion, or better said, the widespread structural violence currently ailing the nation, among others, are a clear example of this.

The conjunction of negative economic and social outcomes has led to the current social tensions and now constitutes a threat to national security itself. This situation is an expression of the structural limits of the Social Policy. In this way, the social deficits in the country, internal disparities, as well as paralyzed economic growth, are, on the one hand, associated with this new direction of Economic Policy, the open-economy model, and on the other, with the incapacity of Social Policy to respond to the imbalances that have resulted from how the Economic Policy has been managed.

Although Social Policy is the vector that seeks to attenuate the conflicts brought about by social inequality through public spending, this spending is no longer a real priority on the national agenda, because the effectiveness of Social Policy is tied to the success of Economic Policy. Although the Social Policy in place in Mexico does have some specific features that are different from other countries, it has lots common with other open-economy models. The scope and objectives of Social Policy in Mexico have been defined not only as a function of domestic parameters and needs, as they should be, but also as a consequence of the directives imposed by international development. The fact that many nations have gone through similar processes, in terms of deteriorating living conditions, starting in the last three decades of the twentieth century, is proof that the Social Policy shares some features defined by the specific nature of the Economic Policy of each country.

In Mexico, Social Policy has gone through three clearly defined stages (see Table 1), each driven by the dominant economic policy of its time. The first corresponds to the post-revolution period; the second was during the 1940s and up to the 1970s; and the third begins in the 1980s, with the so-called Political Reform of the State, the outcome of the new economic model imposed by the open economy and the overhaul of domestic Economic Policy resulting from structural adjustments (Cardozo, 2005: 170-173; Jusidman, 2009: 200).

The origin of Mexican social policy dates back to the post-revolution period, when the Political Constitution of 1917 was drafted. At that time, the social policy sought to meet the social demands of the Mexican Revolution. The State recognized social rights and implemented measures to reverse the inequalities and social deprivation that afflicted the country, principally in rural areas, and acted as the guarantor of rights.

During this phase, Social Policy was not yet comprehensive, as was the case of the European experience, as it rather sought merely to enforce the constitutional rights beyond their universal coverage. However, because it did recognize basic social rights, this certainly constituted an advance in social justice and was the cornerstone for the conformation of a national industrial development project (Cardozo, 2005:b 171; Gordon, 2001: 26-29).

The second phase appeared with the consolidation of the import-substitution industrialization model starting in the 1940s and lasting up through the 1970s. Whereas in the stage prior, the goal was to ensure the provision of basic social rights, in this new phase, the objective was to bolster industrialization and national technology development (Uribe, 2011: 47-52). The push for a strategic national growth project demanded that new institutions be created to guarantee the functioning of corporate networks and the distribution of profits, as well as other redistributive instruments. In essence, the idea was to produce an institutional-redistributive framework.

This phase coincided with the Second World War, which increased the demand for exported goods, mainly sent to the North American market. This increase allowed the Mexican State to devise an investment plan to build the basic infrastructure needed for the industrialization project and to develop the domestic market, stimulated by greater tax income from trade. This prosperity strengthened the institutional framework enough to provide basic social services to the population.



Because this growth process was so focused on the industrial realm, it led to massive sectoral inequalities, principally affecting the agriculture sector, which, although it managed to achieve surpluses to boost its own development, subsequently began to lag and entered into a crisis. This led to the mass exodus of rural farmers to urban hubs, prompting disparities in city growth. In the 1950s, it was time once again to reform the Economic and Social Policies to respond to the new issues generated by the so-called "wild urbanization process" taking place, mainly in Mexico City, Monterrey, and Guadalajara.

The transition from a country in which people lived primarily in rural areas to a predominantly urban nation significantly changed the lifestyles, family structures, and household consumption of the Mexican people, which in turn transformed social needs and altered minimum welfare patterns. The State set guidelines to meet these needs by streamlining social spending.

These inter-sector disparities quickly exhausted the industrialization model. Excessive State protection, which reduced the competitiveness of national enterprises, and unequal regional distribution of income, were already starting to generate social unrest. These were just a few of the factors that led to the collapse of the prevailing economic dynamics and the destruction of social benefits.

This systematic decline at the population level starting in the 1970s, resulting from low growth rates and exacerbated social inequality, led Mexico to once again change course with its Social Policy. In light of widespread instability, the State devised the Public Investment Program for Rural Development (PRIDER) in 1973, and some time later, the General Office of the National Plan for Depressed Zones (Coplamar), so as to offset the social deficits in rural areas. Similarly, the country opened the Rural Stores System and launched the Mexican Food System (SAM) in 1980, signs of clear concern for the marked increase in poverty in rural zones (Barba, 2004: 27-31; Boltvinik and Marín, 2003: 473-475).

To counteract the effects of debt in the 1980s, Mexico implemented structural adjustment programs, leading to a radical change in its Economic Policy and, consequently, in its Social Policy. This made possible the State Reform, which ushered in the third phase of social policy in Mexico, characterized for being more selective by targeting and streamlining public resources, but above all, for providing individualized social services in response to the hegemony of the open-economy model. In this way, the set of social programs that emerged in the first half of the 1970s, primarily consisting of PRIDER and Coplamar, were later reworked and converted into the Regional Development Programs (Barba, 2004: 29-31).

In the early 1990s, the overarching Economic Policy defined the scope of Social Policy in Mexico, therefore transforming both the content and social goals of the programs in place. Proof of this was the National Solidarity Program (Pronasol), concocted at the end of the 1980s. By the 1990s, it was only targeting a specific population defined as the extreme poor. The program sought to meet the most pressing needs in food, housing, education, and health for the poor urban population, low-resource rural people, and indigenous groups. It also conducted projects in collaboration with program beneficiaries, setting up mechanisms for shared obligations and responsibility. Through this program, the federal government provided technical and financial resources and some jobs, such as community work. Another objective was to improve the agriculture and livestock infrastructure, which had severely fallen behind.

In 1997, Mexico created the Education, Health, and Nutrition Program ( Progresa), which combined support in education, health, and food, to train human capital in communities and poor families. The objective was to break the inter-generational cycle of extreme poverty, which is associated with high levels of malnutrition, infant mortality, school dropout rates, and low likelihood of access to health care. In practice, it was just another targeted transfer program; even so, it was subject to periodic assessments through surveys administered to its beneficiaries.

In the early 2000s, and up until mid-2014, the Social Policy was governed by the Oportunidades program, an outgrowth of Pronasol. It expanded its range of coverage to urban locations, as well as the extreme poor suffering the highest levels of malnutrition, marginalization, and social deprivation. In this sense, it sought to increase the capacities of its beneficiaries and increase the likelihood of achieving better welfare levels through education, health, and nutrition.

More recently, Mexico created the Prospera program, the current federal government's preferred treatment for poverty. Although it maintains the same benefits scheme for those already enrolled in Oportunidades, the most recent iteration of the program adds support with university scholarships, loans, and access to entrepreneurship programs, as well as direct food rations through Cruzada contra el Hambre (Crusade Against Hunger).

Despite the fact that Mexico has implemented programs to fight poverty and reduce inequalities, welfare indicators show systematic deterioration and failure, evident in the unprecedented rise in poverty. This is because the social programs in place arose from the open-economy model, a situation in which Social Policy no longer plays its historic role as a counterweight for the adversities of economic development.


Although economic and social indicators are useful for information and decision-making purposes, the disastrous data reported over the past 30 years have not yet constituted sufficient reason for the State to change the course of its Economic Policy. Unlike in other countries, the open-economy model has become further entrenched in Mexico, exacerbating the disparities in various social spheres.

The decision to prioritize inflation control over economic growth is one factor that explains the poor performance of the Gross Domestic Product (GDP). In the period 1990-2012, Mexico's GDP grew an average of below 2% annually, which is certainly not enough to compensate fluctuations in other variables linked to welfare. The unequal distribution of GDP prompted further regional disparities and exacerbated social inequalities around the country. The central region of Mexico concentrates 59.6% of the wealth generated between 1993 and 2012, while the northern and southern regions each have a share of 29.89% and 10.95%, respectively. Of all the states, a mere nine account for 63% of the wealth, but of this group, Mexico City and the State of Mexico alone represent 32%. By contrast, the states of Hidalgo, Quintana Roo, Morelos, Aguascalientes, Yucatan, Guerrero, Oaxaca, Durango, Zacatecas, Baja California Sur, Colima, Tlaxcala, and Nayarit, together account for only 14%, clear evidence of the unequal distribution of growth throughout the territory (see Figure 1).

Demographic growth exhibits a similar distribution. Pursuant to the Population and Housing Census, between 1990 and 2010, the population increased: the number of residents rose by 30 million, even as the birth rate fell (see Table 2).


Figure 1. Mexico: Average Distribution of GDP by State, 1993-2012 (Percentages)

Source: National Institute for Statistics and Geography (INEGI).




Looking at the regional distribution of population, there is a clear concentration in the center of the country, where the demographic density is 59.6%, followed by the northern region with 26.4%, and finally, the south, with 14.3%. The population is even further polarized by state: Mexico City and the State of Mexico are home to one-fifth of the population with 13.09% and 8.92%, respectively, while the states of Campeche, Colima, and Baja California Sur are home to only 0.71%, 0.55%, and 0.46%, respectively (see Figure 2).

Although demographic growth has been slowed somewhat with birth control policies to compensate for the effects of low economic growth, the cost of the structural adjustment has fallen to Mexican households, manifest in unequal income distribution, the unchanging makeup of the wage structure, the loss of purchasing power, the rise in unemployment, the spread of poverty and, moreover, reduced public and social spending and the dismantling of social assistance programs and cutbacks on transfers.

Proof of the repercussions of the imbalance between Economic Policy and Social Policy is the persistent concentration of wealth. Income distribution has remained unaltered since 1990. Data from the National Household Income and Spending Survey (ENIGH) 2012 revealed that currently, the top household income deciles (VIII, IX, and X) account for 62.7% of total current income, while the remaining 70% (deciles I to VII), where two-thirds of the population are, earned only 37.3% (see Table 3). This means that increasingly broad swaths of the population are sacrificing consumption to compensate for spending restrictions, which reduces their welfare in all realms, especially food and nutrition (Torres, 2013: 57-71).

The makeup of the Economically Active Population (EAP) is another factor. Although it has changed since 1995 in terms of the salary composition and structure, it has yet to achieve an acceptable standard of living. The restrictive nature of the Economic Policy hinders the job creation that would be necessary to meet the growing demands of the labor market. This means that the surplus EAP is increasingly participating in the informal economy, where they earn precarious incomes. Between 1995 and 2012, the income of the EAP was on average between two and five minimum monthly wages (MMW). Although in the ten years prior this average income wavered between one and two MMWs, this relative improvement has not been reflected in better welfare, because more than 70% of the employed EAP does not earn above these wage levels, a situation that imposes structural limits in terms of the possibility for reproduction, especially looking at the cost to access minimum satisfiers, which is not compensated for by the transfers of social policy.


Figure 2. Mexico: Average Distribution of the Population by State, 1990-2010 (percentages)

Source: Created by the authors based on information from the Population and Housing Census, various years, INEGI.




While in 1995, 19.10% of the employed EAP was below the income range of one MMW, by 2012, this figure had fallen to 13.93%. The population fluctuating between one and two MMWs then declined from 31% to 23.39%. By contrast, the range of people earning from between two to three MMWs, as well as the group between three and five MMWs, increased significantly (see Table 4).



The overall wage composition of the country was also affected in absolute terms, leading to an increase in the unemployment rate, which has been relatively volatile. In 1995, it reached 6.1% as a result of the economic crisis at the end of 1994, and in later years fell to below 4%, but starting in 2008, due to the effects of the global economic crisis and the intensification of free-market policies, it spiked to above 4.5% (see Figure 3).

Another factor that explains why the wage composition has not done more to improve the welfare of Mexican households resides in the loss of purchasing power, a consequence of salary containment and adjustments used to achieve the objectives of the macroeconomic strategy. Salary containment below inflation is the structural cause that explains the loss of purchasing power and restrictions on household spending, which fell 42% in real terms between 1990 and 2012 and explains the parallel rise in poverty and extreme poverty (see Figure 4).


Figure 3. Mexico: Unemployment Rate, 1990-2013

Source: INEGI.



Figure 4. Mexico: Evolution of Purchasing Power, 1990-2013

Source: Created by the authors based on information from the National Commission
for the Minimum Wage (Conasami) and INEGI.


According to data from the National Council for the Evaluation of Social Development Policy (Coneval), between 1992 and 2012, the number of people living in poverty, measured by income, increased significantly: food poverty rose 24.27%, capacity poverty increased 27.59%, and income poverty jumped 37.97%. However, one of the most detrimental consequences of the current Economic Policy is the 19.70% of the national population that lacks sufficient resources to access a Basic Food Basket (BFA), which has caused disparities on multiple levels and is a clear sign of economic inequality (see Table 5).

Although the Mexican State, in its efforts to resolve the domestic disparities generated by asymmetric economic development and its current management of the Economic Policy, has implemented mechanisms to redistribute income through social spending, these measures are insufficient in light of the structural imbalances, slow growth, and increasingly serious social deprivations facing the country.

Any potential for the Social Policy to compensate for these effects is undermined by cuts made to public spending and social spending, especially because the Social Policy now takes second billing to the Economic Policy within the national development agenda. Although in the 1990s the country experienced annual growth above 20%, by the beginning of the twenty-first century, growth was not exceeding 15%. In 2010 and 2011, the country barely achieved 10% growth, and in the past two years growth has not surpassed 7.5% (see Figure 5).

This is a reflection of the limitations that the current Economic Policy has imposed on the Social Policy and the incapacity of the latter to compensate for social ailments. One result of this is the reduced provision of public goods and services, which have been gradually reworked into individual transfers. Responsibility has shifted towards the private sector, which now offers the principal welfare services. This is a response to the greater demand resulting from demographic growth, but it is limited to a small number of population groups that already have additional resources to access these services.




Figure 5. Mexico: Evolution of Public Spending and Social Spending, 1990-2013

Source: Created by the authors based on the Sixth Annual Report of the
Felipe Calderón Hinojosa administration, and the Second Annual Report from
the administration of Enrique Peña Nieto.



Trade liberalization and structural reforms have constituted a watershed moment in the course of the Mexican economy, as the role of the national government has become limited, due to the neoliberal policies imposed. The direct effects of this situation include Economic Policy reform, which led to the streamlining of Social Policy in response to cutbacks in public spending. With that, the State abandoned its role as the promoter of development, a role it had maintained during the import-substitution industrialization model. The nature of the open-economy model, applied through the State's management of Economic Policy, has reduced the coverage of social services, as it is obliged to maximize resources and restrict the benefits that the equitable distribution of wealth would bring.

Although efforts have been made to alleviate the effects of the debt crisis through a stabilization plan, the empirical evidence shows that the economy, on the contrary, has become less stable. Paralyzed economic growth and the costs of this destabilization have fallen on the shoulders of households, with the consequent result that the number of people living in poverty has risen. Income concentration, the unemployment rate, macroeconomic imbalances, and recurring crises, together with rising poverty and social inequality, are all signs that it is time to change the course of the national development project towards more fair distribution that would bring substantial improvements to welfare standards.

The current global-order Economic Policy has proven itself incapable of creating the conditions for welfare, and moreover, it has actually neutralized any positive effects of the Social Policy, which nowadays is limited to trying to contain the social unrest among the marginalized population of the country, even as social violence has risen to unprecedented levels, derived from the implementation of an economic model that fosters concentration. Proof of this is that although Mexico now allocates more resources to fight poverty and social inequality, paradoxically, the levels and magnitude of these two phenomena have both increased. In this way, the historical reality demands an immediate overhaul of the Economic and Social Policies; otherwise, the social costs will continue to rise and Mexico will have to foot the bill, to the detriment of its own national security.


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1 This paper is the result of the PAPIT IN300815 project, "Regional Dimensions of Food Security in Mexico."

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 48, Number 191, October-December 2017 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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