Ancient Mexico Facts

During the 1980s Mexican policy makers began to change course on foreign trade. Not only had import substituting industries outlived their usefulness as the primary motor of economic growth in the country, but foreign investment was in short supply in the wake of the 1982 debt crisis. In response, the Mexican government turned to export-led growth, attended by reduced trade barriers, active cultivation of trade partnerships, and a more hospitable legal environment for foreign investors, as a way to restart the nation’s troubled economy.

A milestone in the shift toward trade liberalization took place in the mid-1980s, under the administration of Harvardeducated president Miguel de la Madrid. At the time, world petroleum prices were falling, which gave Mexico added incentive to promote other products on its export menu. Mexico acceded to the General Agreement on Tariffs and Trade (GATT) in 1986 in order to open up new trading opportunities. Under the GATT, Mexico committed itself to reducing tariffs and other trade barriers, especially licensing restrictions. From 1985 to 1994 Mexico reduced its average tariff rate by nearly half, from 23 percent to 12 percent.

Mexico already had an established history of participation in trade agreements before the 1980s. In 1960 Mexico joined the Asociación Latinoamericana de Integración (ALADI) with 10 South American countries, and in 1961 Mexico entered the Central American Common Market. Trade flows between Mexico and the participating countries increased in subsequent years, but trade volumes always remained tiny in comparison with U.S. trade, partly because of the similarities in the types of goods exported by these Latin American countries.

In the early 1990s Mexico entered into free trade agreements with Chile ( 1991), the Central American countries ( 1992), and Costa Rica ( 1994). The most dramatic evidence of Mexico’s new trade philosophy came in the form of the North American Free Trade Agreement, ratified by the United States, Canada, and Mexico in 1993. Despite predictions by supporters and detractors that the effects of such agreements would be substantial and immediately noticeable, as of 1996 there was no consensus concerning the net effects of more open trade policies on the Mexican economy. Other factors, especially the exchange rate, proved much more powerful and evident in the short term, and it is difficult to separate out the impact of trade agreements. Mexico stayed the course of trade liberalization despite the recent economic crisis and its attending political consequences. In the coming years, the permanence of that course will likely be determined by political factors. The advocates of free trade held sway in the Mexican government starting in the early 1980s, but the poor performance of the economy may make them vulnerable in future elections.

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