Ancient Mexico Facts

From the 1940s until the mid-1970s, foreign trade took a back seat to domestic production in Mexican economic policy. Following the lead of thinkers such as Raúl Prébisch of the U.N. Economic Commission for Latin America, Mexico pursued import substitution industrialization (ISI), a set of policies implemented by an activist, interventionist state designed to encourage the domestic production of previously imported manufactured goods. Economic growth in the postwar decades was driven overwhelmingly by industrial production for the domestic market, rather than for export. The total value of imports and exports amounted to only 5 percent of GDP in 1946, increasing to 10 percent in 1950, and remaining at around 15 percent throughout the next two decades. From the mid-1970s onward the volume of trade increased dramatically, led first by increasing imports, and then complemented by increasing petroleum exports at the beginning of the 1980s. Mexico ran a trade deficit every year but one from 1950 until 1981. From 1982 to 1988 Mexico began to register trade surpluses, reflecting the drastic cuts in imports (especially of consumer goods) imposed by the 1982 debt crisis. Mexico’s trade balance again became negative in the early 1990s, owing to the appreciation of the peso, but the dramatic depreciation of December 1994 reversed the trend once again.

The United States has long been Mexico’s most important trading partner for both imports and exports, owing to its proximity and the enormous size of the U.S. economy compared to Mexico’s. In the 1940s, the United States accounted for about 75 percent of Mexico’s exports and over 80 percent of its imports. After the Korean War these figures declined somewhat, and the importance of Europe and Latin America in Mexican trade increased. In the early 1980s the United States accounted for less than two-thirds of Mexico’s exports (although, when petroleum is not counted, the percentage was higher) and imports. These percentages began to rise again in the early 1990s. Implementation of NAFTA in 1994 gave further encouragement to U.S. predominance in Mexican foreign trade.

As of 1996 the transformation to U.S.-style retailing was incomplete and unevenly distributed in Mexico. The most important constraint on this transformation is the limited number of consumers with middle-class or higher incomes. Per capita income in Mexico in 1996 was less than US$3,000, compared with over US$24,000 in the United States. Nevertheless, owing to the skewed distribution of income in Mexico, around 10 percent of the Mexican population was significantly wealthier than the U.S. average. All of the modern commercial sector competes for this limited number of consumers.

As a result, Mexico produced two retail worlds that barely overlapped. The wealthy shopped at U.S.-style department stores, malls, and supermarkets, while poorer people shopped in mercados and misceláneas. For example, families in the top income bracket bought about one-half of their food in supermarkets, but families in the bottom income bracket bought almost none of their food in supermarkets. Rather, they made almost all of their food purchases at markets and at small stores, where prices generally were higher, but staple items were available in the small quantities that the limited purchasing power of poor families demands. Most Mexicans did not have large refrigerators or automobiles, essentials for buying food in quantity.

In the future it may be expected that the shift toward modern retailing will continue. But as in the past, the speed of this shift will be limited by the size of the middle-class consumer base and the general level of incomes in the Mexican population. In addition, new retail innovations will eventually take root in Mexico. The most recent adaptation from the north has come in the wake of the North American Free Trade Agreement (NAFTA) with the opening of U.S.-based “big box” discount stores, such as Walmart, Costco, and Price Club, and the entry of new department stores such as J.C. Penny and Dillards. Already by 1996, experiments with direct marketing and home shopping were taking place, although the limited use of credit cards (in 1994 fewer than 5 million Mexicans had credit cards) provided a real constraint. Despite all of these changes, however, it is safe to say that the deeply imbedded tradition of going to the plaza—to buy, to sell, and to socialize—will not soon die out in Mexico.

Until the 1940s, Mexican department stores were native institutions, even if their owners were originally from another country (French merchants were particularly dominant in the early part of the century). They gradually expanded their operations to other major cities, but they were not part of any multinational enterprise. Then in 1947 Sears, Roebuck opened its first store in Mexico City. Sears was an innovator in U.S. retailing, having invented the vertically integrated department store, with manufacturing, distribution, and warehousing all integrated into the operation. When Sears opened in Mexico it replicated this model using Mexican manufacturers. By 1975 it was the second-largest retailer in Mexico, and as of 1996 there were more than 45 Sears stores in Mexico.

Other U.S. models were provided by Woolworths, which opened two stores in Mexico City in 1956; Southland Corporation’s 7-11 convenience stores, which began operations in Mexico in 1971; and the many franchise restaurants that began to proliferate in the 1970s. In the 1980s the Mexican government improved the legal environment for investors, which contributed to a proliferation of franchise stores. In 1993 there were 150 different franchises operating in Mexico, 38 percent of which were fast-food businesses ( McDonald’s opened for business in Mexico in 1985).

Mexico adopted supermarkets soon after they were developed in the United States. In Mexico, as in the United States, the spread of supermarkets developed as an outgrowth of suburbanization, increasing disposable income, and the widespread ownership of automobiles. The first Mexican supermarket, Sumesa, opened its doors in Mexico City in 1946, and word of its clean, well-lit store, attractive displays, and large selection quickly spread. The number of supermarkets grew steadily since then, and by the 1990s there were dozens of chains (including Aurrera, Gigante, and Comercial Mexicana) with hundreds of stores throughout the country. These stores instilled the concepts of self-service and fixed prices in Mexico. They also represented an advance in marketing, since they were an important medium for product branding and advertising.

A similar story can be told concerning shopping malls, which began to proliferate in the United States in the 1960s. The first Mexican shopping malls were the Plaza Universidad in Mexico City, the Plaza Dorada in Puebla, and the Plaza las Quintas in Culiacán, all constructed in 1970. These were all located in suburban areas, thus partially displacing the city center as the focus of urban retailing. Shopping malls are designed to accommodate automobile traffic, to the exclusion of pedestrian traffic, and they are targeted to upper-income level consumers.

Like most developing countries, Mexico gradually adopted elements of consumer culture and retailing technology from the outside. Starting in the 1940s Mexico quickly adopted new commercial formats and techniques as they developed in the United States and Europe, but their penetration into mass consumer culture was limited by the size of the middleand upper-income population. In the period from 1946 to the early 1970s the Mexican economy grew vigorously and the ranks of the middle class grew. By some estimates the percentage of the population with middle-class incomes and occupations doubled between 1940 and 1970. Part of this trend was a shift away from a principally rural, agrarian economy to one characterized by industrial production and large urban centers (by 1960 more than half of the Mexican population lived in towns of 2,500 or more). For many Mexicans, acquiring the accoutrements of U.S. middle-class life became a status symbol and a mark of having achieved respectability. The necessary trappings for this respectability extended beyond clothes, televisions, and automobiles to include the type of store in which one shopped. In the postwar years U.S.-style advertising and marketing methods, often introduced by U.S. companies, encouraged them.

Department Stores to Shopping Malls

Mexican department stores directly copied the style of similar stores in New York and Paris. The Palacio de Hierro, built in 1891 in downtown Mexico City, was the first of its type in the country. Several imitators, such as the Puerto de Liverpool and Casa Boker, soon followed. With their multilevel flagship stores in the heart of the city center, elegant interiors, and glass display cases full of mostly imported merchandise, department stores became the symbolic center of the urban commercial scene. Grandest of all was the Sanborn’s Store in the Palacio de los Azulejos, a converted colonial mansion decorated with blue tiles. These stores introduced Mexican consumers to the practice of selling at a fixed price, rather than bargaining. It took several decades, however, for this practice to spread to the general population.

Street vendors comprised a substantial part of urban commerce in the mid-1990s. The common term for vendors was ambulantes (literally, “wandering”), although this was technically incorrect since only a small percentage of them were mobile. The majority worked out of semi-permanent and permanent stands installed in the street and on sidewalks. All of these types of peddlers brought a particular set of difficulties because of their location in public rights of way. In many of Mexico’s larger cities, such as Mexico City, Puebla, and Acapulco, authorities engaged in a long-standing struggle to remove vendors from streets, plazas, and parks. Although this conflict dates back centuries, its intensity increased starting in the 1970s as the number of vendors increased. Reliable data on the number of street vendors is difficult to come by, but estimates range as high as a quarter of a million for Mexico City alone during the early 1990s.

Most street vendors belonged to vendor associations, which in turn were generally affiliated with a political party. Mexico City and Puebla had particularly activist vendor organizations. The associations were a means of defending turf, both from the authorities and from other vendors, and membership could number in the thousands for the largest groups. The leaders of these groups often extorted sizeable fees from members for “rent” of the sidewalk and for protection. Leaders might seek patrons in the political system, sometimes even congressmen, to stop harassment by city authorities. In return, leaders could provide the patrons with large numbers of supporters for electoral rallies and other mass political activities. Until 1988 almost all vendor associations were affiliated with the ruling Partido Revolucionario Institucional (PRI, or Institutional Revolutionary Party), but after that date a minority of groups affiliated with opposition parties arose.

As of 1996, street vendors were the center of a tug of war between those who wanted to banish them from the streets and those who defended their right to earn a living. The Mexican Chamber of Commerce had long complained that vendors evaded taxes and competed unfairly. Some city residents also had complained about the traffic congestion and litter caused by vendors, as well as the unmodern image they present to visiting tourists. On the other hand, the vendors and their advocates pointed out that they were only trying to feed their families, and that there simply were not enough jobs available in factories and shops. The cycles of repression and toleration by the authorities that the vendors have experienced over the years shows that neither side has been a clear winner. The PRI and government officials, however, have benefited from the political support and graft that the vendors have provided.