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MEXICO IN 1980S-1990S.
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Examines economic, political & social change. Background, leadership, 1994 collapse, consumer prices, employment, debt, land reform, Chiapas rebels, future. Charts & Tables.... More...
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Paper Abstract:
Examines economic, political & social change. Background, leadership, 1994 collapse, consumer prices, employment, debt, land reform, Chiapas rebels, future. Charts & Tables.
Paper Introduction:
MEXICO: ECONOMIC, POLITICAL, AND SOCIAL CHANGE SURVEY & ANALYSIS
Executive Summary
Economic, political, and social change in Mexico were surveyed and analyzed. Largely, the period covered in this survey and analysis covered the past two decades with some projection for the country’s future. Economic, political, and social changes were considered within the contexts of the past (Mexico prior to 1990), the present (Mexico subsequent to 1989 and prior to 1999), and the future (Mexico subsequent to 1998.
The central issues that defined Mexico over the decade or so prior to 1990 were the emergence of the country’s huge external debt problem and the government’s initiatives to reverse prior constitutionally mandated agrarian land reform. These two issues remained salient in the 1990s, as the peso
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Prior land reform efforts in Mexico have been highprofile governmental efforts, but they have been both incomplete and highin rhetoric. Under the guiseof free trade and fair competition, the United States government pressurescountries such as Mexico to adopt policies that will enable Americancorporations to gain access to resources in developing countries.Unfortunately for the small farmers in Mexico, these resources often are onthe lands to which they would gain access through meaningful land reform.It should be noted that the Organization for Economic Cooperation andDevelopment (OECD), the organization that promoted international corporateinterests, however, views Mexico's reversal of the country's earlier landreform as a positive step (Bonilla and Viatte 21). The Mayas in Chiapas State revolted against the federal government ofMexico in 1994. Among other things,the actions of the Mexican government to reverse the land reform of therevolution led to direct actions on the part of opponents. In Chiapas, both Amnesty International and the Roman Catholic Churchreported the violence that occurred in that state, although such reportswere not made by the Mexican government. Further, the Constitution had beenchanged to allow foreign corporations to own up to a 49 percent investmentin these joint ventures (Caron 19). Early data for 1996 reflects a continued increase in Mexicanconsumer prices, although the rate of increase appears to be moderating tosome extent. Both Amnesty International andthe Roman Catholic Church demanded a restructuring of the Mexican politicalsystem to distribute greater political power to the Maya people in Chiapas. It should be noted that the Organization for Economic Cooperation andDevelopment views Mexico's reversal of the country's earlier land reform asa positive step. Asubstantial proportion of the increase in Mexico's external debt duringthis period was linked to an exodus of capital by residents of Mexico.Between 1979 and 1982, the estimate of capital flight from Mexicoprecipitated by residents of the country was US$3 billion (Dornbusch andFischer 837). Where Rapaczynski disagreed with the OECDwas in the assessment by the OECD that the action of the Mexican governmentin reversing prior land reform to provide land property rights to domesticand foreign corporations and to encourage the agglomeration of smallholdings by thwarting the principle of agrarian land reform was a positivestep at the time it was initiated. Other laws were enactedto restrict the size of private land holdings and to prevented corporationsfrom owning any agricultural land (Caron 19). As Olson (22) observed,governments must apply social logic as well as economic logic indeveloping and implementing their policies and initiatives. Such action, however, would have compromisedthe international position of Mexico, an outcome that the Mexicangovernment was not willing to accept. In July 1986, the International Monetary Fund (IMF) agreed to provideadditional credit to Mexico in the amount that the country would lose as aconsequence of falling world crude oil prices. Globalists contend that resourceconstraints have created pressing issues the solution of which are beyondthe means of self-serving nation-states (Gilpin 223). Largely, that top-downapproach to the creation of the Mexican state and Mexican society appearsto be at the root of Mexico's problems. Mexico's land problem was a crucial issue wellbefore the PRI became the dominant political force in Mexico and the landproblem remained an important issue in the country subsequent to 1989. Political realism holds thatuniversal moral principles cannot be applied to the actions of states intheir abstract universal formulation, but that they must be filteredthrough the concrete circumstances of time and place (Morgenthau 1 ). To external observers, the political system of Mexico may appear topossess few of the characteristics of democracy. But Mexico's new economic system showed itself to bepowerless in the face of external factors beyond its control" (Naim 112). In thefirst-half of the 199 s, Mexico began a program designed to reverse theprocess of traditional land reform. The explanation was that investors had realized the benefits of diversifying the risk in their portfolios by spreading them internationally, and emerging markets provided the opportunity to do so. The Mexican crisis showed that the prospect of high yields rather than prudence motivated this internationalization. The Mexican government qualifies technically inrelation to both criteria; however, there has yet to occur a transition ofexecutive political power in Mexico where the PRI relinquishes power, andthe retrenchment by the Mexican government with respect to land reformlikely will destroy the position of many Mexican peasants. A large proportion of the foreign borrowing in whichMexico engaged in the late-197 s and early-198 s "was wasteful orunjustified in that it primarily financed consumption and government budgetdeficits rather than investment" (Dornbusch and Fischer 837). Further, the contemporary globalization of theeconomies of all countries is not an encouraging sign for effective landreform in Mexico because of the domination of the United States ininternational economic affairs in the contemporary period. As the data presented in Chart 3 [see page 1 ] indicate, unemploymentin Mexico was affected adversely in the year following the financial crash,although the increase in Mexican unemployment was not as severe as were theeffects of the crash on Mexican GDP and consumer prices in Mexico.Chart 2Change in Mexican Consumer Prices: 199 -1996________________________________________________________________% Change + 4 + 3 + 2 + 1 - 1 - 2 199 1991 1992 1993 1994 1995 1996 [Source: "Emerging Market Indicators: Mexico" 124]________________________________________________________________ As the data presented in Chart 4 [see page 11] indicate, Mexico'sbalance of payments was affected positively in the year following thefinancial crash. Mexico's trade balance-net exports (exports minus imports) followed apattern for the 199 -1996 period similar to that of the country's balanceof payments ("Emerging Market Indicators: Mexico" 124). "Mexico's Larger Story." Foreign Policy (Summer 1995): 112-13 .Olson, M., Jr. The Mexican financial collapse of late-1994, indeed, took the worldby surprise. An aid packagefrom the United States government was required. "Radical Reform in Mexican Agriculture." OECD Observer (December-January 1994): 21-26.Caron, J. Thus,Mexico will be forced to face this issue squarely in the future. This agreement by the IMFwas for a period of 18 months extending through the end of 1987.Simultaneously, Mexico agreed to join the GATT (General Agreement onTariffs and Trade). President Clinton then acted on his own initiative to assemble analternative rescue package that did not require congressional approval andthat relied heavily on funds supplied by the United States ExchangeStabilization Fund and by the IMF. As the data presented in Chart 1 [see below on this page] indicate,Mexico's GDP plummeted in the year following the financial crash. Extensive and meaningful, but far from complete, land reform wasaccomplished in Mexico by President Lazaro Cardenas from 1934-to-194 .Mexico's peasants, together with urban workers organized labor unionsaffiliated with the Mexican Revolution Party-the predecessor of the PRI-pushed the government for implementation of the land reform included in theConstitution. The reason for this apparent anomaly was the financialrescue package for Mexico that was structured by the United States (Naim127). The mostserious of these problems involved the landless peasants of Chiapas(Greenberg 24). Lastly, the constitutional changepermitted these farmers to combine their holdings into larger tracts ofland. To such critics, Mexicanpolitical leaders often reply that criticism of Mexico is based onevaluations within a framework of political theories which are notapplicable to Mexico. By January 1995, thetrading level had risen to 5.76 pesos to one United States dollar, and byJanuary 1996, the trading level had risen to 7.54 pesos to the UnitedStates dollar. In 1992, the constitution was amendedto eliminate the right to be granted land by the state upon request and togive title to the farmers currently working the ejido land. The government of Mexican President Salinas renegotiated the country'shuge foreign debt, initiated economic reforms that boosted the country'sprestige with the OECD countries, and negotiated entry into the NorthAmerican Free Trade Agreement (NAFTA) with Canada and the United States.Naim (117) observed that: "Mexico soon became a main beneficiary of theunprecedented surge in private capital flow, a favorite son among the'emerging markets.' Between 199 and 1994, Mexico became the world'ssecond-largest recipient of foreign private investment, after China." According to Naim (126), the Mexican financial crash exposed themotivations underlying the internationalization of investment portfolios.Within this context, Naim (126) added that: The voracious appetite in the United States and other industrialized countries for investments in emerging markets was initially interpreted as a reaction to opportunities created by economic reforms. While this decision calmed markets andgave Mexico a brief respite, the action forced the IMF to extend anassistance package seven times bigger than the normal limit and to commitone-fifth of its liquid resources to save the emerging capital market andits foreign in Mexico (Naim 128). Past land reform efforts in Mexico were aimed at helping thepeasants; however, the changes to the Mexican constitution in the early-199 s appear to have the intent of reversing these earlier land reformefforts in Mexico. "The Roles of the State and the Market in Establishing Property rights." Journal of Economic Perspectives 1 (Spring 1996): 87-1 3.Valdes-Ugalde, F. The Mexican government, however, has no such luxury andmust deal with revolutionaries in the provinces. "Mexican Land Reform to Unite Small Farmers and Big Business." National Catholic Reporter 3 (7 January 1994): 19.Dornbusch, R., and Fischer, S. The majority of Mexican agriculture consists of small land plots,with 58 percent of Mexico's farms smaller than 12 acres in size. J. In the early-199 s, the Mexican governmentinitiated policies to reverse some of the land reform implemented decadesearlier. Mexico, to paraphrase Rapaczynaki has attempted to create a modernpolitical and social structure without first building a strong andeffective economy, the participants in which, will demand the changes inthe political and social structures that they want. Mexico: Economic, Political, and social change Survey & Analysis Executive Summary Economic, political, and social change in Mexico were surveyed andanalyzed. A failure to implement effective agrarian land reform is a majorbarrier to economic development. War and Change in World Politics. In addition to the general performance of the Mexican economy, boththe political right and the political left in Mexico were dissatisfied withthe land reform program implemented by the PRI ("The Peons Turn on Mexico'sEver-Ruling Party" 43). The ejidofarmers also were given the right to sell the land, rent the land, or usethe land for collateral against loans. The Mexican government in the 199 s is encouraging joint venturesbetween ejido farms combined into larger land holdings and Mexicancorporations through the Vaquero Program. "The Changing Relationship Between the State and the Economy in Mexico." Challenge 38 (May-June 1995): 32-36. Economics, Politics, and Social Change in Mexico: The Future Economic, political, and social change experiences of Mexicosubsequent to 1998 are considered in this discussion. A distribution crisis occurs when there is a rapid increase inthe popular demand for material benefits, together with a wide acceptanceof the notion that governments are responsible for a country's standard ofliving. The Mexican government, however,has no such luxury and must deal with revolutionaries in the provinces.Rapaczynski (1 2), writing in the Journal of Economic Perspectives,supported the OECD's general position on land reform within the context ofthe establishment of "well-defined and secure property rights."Rapaczynski (88-9 ) was addressing property rights in a broad context;however, the position of the OECD with respect to land reform in Mexicoclearly fit into this context. Further, the contemporary globalization of theeconomies of all countries is not an encouraging sign for effective landreform in Mexico because of the domination of the United States ininternational economic affairs in the contemporary period. These phenomena have been described as the revolution of risingexpectations, and the extreme optimism of these attitudinal revolutionarieshas been increasingly demonstrated in recent years. To make thispolicy possible, large land holdings were expropriated. "Big Bills Left on the sidewalk: Why Some Nations Are Rich and Others Poor." Journal of Economic Perspectives 1 (Spring 1996): 3- 24."The Peons Turn on Mexico's Ever-Ruling Party." Economist 3 6 (5 March 1988): 43-44.Rapaczynski, A. But the crisis in Mexico has pointed out some shortcomings in the so-called "Washington consensus." Excessive optimism led to excessive speculation for which Mexico was not ready, and the attack on the peso ensued. As a consequence, the provisions of the constitution wereimplemented to a meaningful extent under the Cardenas Government. B. As Olson observed, governmentsmust apply social logic as well as economic logic in developing andimplementing their policies and initiatives. Rapaczynski contends that a strong market economy in acountry must be developed before such property rights are establishedthrough legal and political action if such action is to be successful. The Chiapas rebels,as globalists, demanded a redistribution of resources and power. The criteria for the existence of democracy whichare most often cited as evidence of an absence of democracy in developingcountries concerns the freedom to change governments peacefully throughestablished processes and the ability of the people who work agriculturalland to own that land. "Phenomena, Comment and Notes." Smithsonian 25 (November 1994): 24-26.Hojman, D. Economics, Politics, and Social Change in Mexico: The Past Economic, political, and social change experiences of Mexico prior to199 are considered in this discussion. The Constitution has beenamended further to allow groups of small farmers to agree to produce on acontract basis for larger firms. Thus far in the mid- andlate-199 s, oil revenues have been disappointing for Mexico. The United States Congress, however,refused to approve the rescue package. Largely, the period covered in this survey and analysis coveredthe past two decades with some projection for the country's future.Economic, political, and social changes were considered within the contextsof the past (Mexico prior to 199 ), the present (Mexico subsequent to 1989and prior to 1999), and the future (Mexico subsequent to 1998. Cambridge, England: Cambridge University Press, 199 .Greenberg, R. Revenues fromthe petroleum sector contribute 6 percent of the country's export earningsand finance approximately one-half of the funding for central governmentactivities. As a consequence, the Mexican pesoexperienced a huge depreciation in real terms from 1982 to 1986-28 percent. Largely, that top-downapproach to the creation of the Mexican state and Mexican society appearsto be at the root of Mexico's problems. By the mid-198 s, thepeasants (relatively large in numbers) began to desert the PRI. The central issues that defined Mexico over the decade or so prior to199 were the emergence of the country's huge external debt problem and thegovernment's initiatives to reverse prior constitutionally mandatedagrarian land reform. The Mexican Constitution implemented following the revolutionguaranteed land to any peasant making a request for land. Conclusion Mexico, to paraphrase Rapaczynaki (1 2) has attempted to create amodern political and social structure without first building a strong andeffective economy, the participants in which, will demand the changes inthe political and social structures that they want. Introduction This research surveys and analyzes economic, political, and socialchange in Mexico. Amnesty and the Church were pursuing a structuralist solution to thesocial and political issues in Chiapas; however, the Mayas were pursuing aglobalist solution. As a consequence of the debt crisis accompanies by capital flight, theMexican government resorted to "inflationary finance"-printing money(Dornbusch and Fischer 839). Federal Reserve Board to raise interest rates or for the Mexicans to devalue their peso. Works CitedBonilla, J., and Viatte, G. Another issue that came back to haunt the Mexican government in the199 s was land reform. Prior land reform efforts in Mexico havebeen high profile governmental efforts, but they have been both incompleteand high in rhetoric. Both economicand political imperatives underlie the need for agrarian land reform inMexico. The Mayan rebels were pressing for a solution to theproblems they faced by taking their case outside of Mexico and into theglobal political arena (Langfield 4). In the absence of meaningful agrarian land reform, however, it isdifficult to justify a claim to a democratic political structure. As a result some retrenchment in emerging nations for the rest of the decade can be expected. Until agrarianland reform measures are fully developed and implemented effectively inMexico, the country cannot claim correctly to be a democratic country. Economics, Politics, and Social Change in Mexico: The Present Economic, political, and social change experiences of Mexicosubsequent to 1989 and prior to 1999 are considered in this discussion. Hope for thefuture of the Mexican economy depends substantially on an improvement inworld oil prices. The findings ofthis research are presented in three major discussions: (1) Economics,Politics, and Social Change in Mexico: The Past; (2) Economics, Politics,and Social Change in Mexico: The Present; and (3) Economics, Politics, andSocial Change in Mexico: The Future. Therealist approach was adopted by the Mexican government. Furthermore, the assistance would have mademoney for the United States government, as the Mexicans would have had topay steep fees for using the loan guarantees. Unfortunately for the Mexican government these issues havenot been resolved through 1998, and, as a consequence, they will loom aslarge issues which must be dealt with in Mexico's future. Inthe 199 s, Mexico's political and economic leadership found that,frequently, the world simply does not work as economist postulate that itwill. Mexico had attracted a "lot of acclaim for its economicreforms of the proceeding years, largely following the US-backed model foreconomic development. Foreign corporations are not permitted to ownMexican farm land (Caron 19). To assure that theland was not again concentrated by a few owners, the constitutionestablished the ejido system. A refusal to extend thisfinancial support, President Bill Clinton suggested, would throw Mexicointo a major political and economic tailspin, which would harm the economyof the United States (Naim 128). These two issues remained salient in the 199 s, asthe peso crashed, the economy floundered, and the Chiapas peasants revoltedagainst the central government, largely over political representation andland issues. Afailure to implement effective agrarian land reform is a major barrier toeconomic development. One commonbond among most of these countries is a claim to a democratic politicalsystem. "Third World Debt." Science, 234 (14 November 1986): 836-841."Emerging Market Indicators: Mexico." Economist 347 ( 9 May 1998): 1 6."Emerging Market Indicators: Mexico." Economist 336 (3 September 1995): 124.Gilpin, R. By contrast, Rapaczynski (1 2) holdsthat actions such as those taken by the Mexican government place the cartbefore the horse. These actions on the land issue incited further opposition to the PRIby Mexico's peasants, although the changes were applauded by both foreigneconomic interests and Mexican corporate interests. In essence, the constitutional changesallow Mexican farmers to be returned to the status of tenant farmers. Many relatively less industrialized countries, such as Mexico, areattempting to develop democratic political structures, concurrently withthe development of their economies. Investors were looking abroad for the high returns that they were not getting at home, given the bearishness of financial markets in the United States, Japan, and Europe. In the absence of that rescue package, it is difficult to speculateon just how devastating the effects on the Mexican economy and Mexicansociety might have been. Oncethis stage of land reform had been completed, however, the rate of landreform slowed in Mexico (Valdes-Ugalde 33). Past land reform efforts in Mexico were aimed athelping the peasants; however, the changes to the Mexican constitution inthe early-199 s appear to have the intent of reversing these earlier landreform efforts in Mexico. Olson(22), however, possessed the acumen to point-out that economic logic is notthe only logic that is at work in any country or globally, and that ifsocial logic does not also underlie such initiatives they likely willstumble at best and fail at worst. The land problem, together with the issue of the Mayan rebellion inChiapas state also remain to be solved in Mexico's future. A decline in world oil prices, therefore, compromises thefuture of the economic performance of Mexico. Under the guiseof free trade and fair competition, the United States government pressurescountries such as Mexico to adopt policies that will enable Americancorporations to gain access to resources in developing countries.Unfortunately for the small farmers in Mexico, these resources often are onthe lands to which they would gain access through meaningful land reform. A major economic development inMexico prior to 199 was the emergence of the country's huge external debtin the early 198 s. Land reform will be a central issue in Mexico's future development. Agrarian land reform is a part of the distribution process in asociety. The initial aid packageput together, which in principle did not imply any disbursement obligationon the part of the United States government, was to be collateralized withthe receipts of Mexican oil exports and was contingent on Mexico's adoptionof harsh economic reforms. Through this program, theejidatarios supply labor and land, and Mexican corporations providecapital, technical advice, and market access. This real currency depreciation caused real wage levels in Mexico toplunge, which, in turn, prompted multinational corporations (MNCs) toattempt to establish bases of production in the country to exploit the lowreal wage levels (Dornbusch and Fischer 84 ). Largely, this survey and analysis covers the past twodecades with some projection for the country's future. Under this system, the government owned theland, but peasants were granted the right to both farm the land and to passon those farming rights to future generations. Joining the GATT committed Mexico to theimplementation of tariff reductions and to the introduction of policiesthat would lead a more open economy (Dornbusch and Fischer 841). From 1982 to 1986, the Mexican government reduced expenditures andraised taxes to be able to pay the interest on the country's external debt. The OECD, situated in Paris, has the luxury ofpontificating about the economic efficiencies of throwing Mexican peasantsoff their land. Theglobalists in Chiapas enlisted the aid of the wider body of nations, and inthe process threatened Mexico's political stability. Mexico's economicperformance is tied closely to the world price of crude oil. The peasants holding thefarming rights, however, could not sell the rights, rent the land toothers, or use the land as collateral for loans. All it took to reduce the interest of investors in the benefits of international diversification was for the U.S. The Mexican government likely would have preferred to havequashed the Chiapas rebels. "Chiapas Rebels Ready For More War, Leader Says." Globe and Mail (2 November 1994): 4.Morgenthau, H. The Mexican financial crash in late-1994 had dramatic effects on fourof the country's macroeconomic measures-GDP, consumer prices, unemployment,and balance of payments. While Mexico'strade deficits over the period were somewhat less than the country'scurrent account deficit, the pattern was nearly identical to that for thecurrent account deficit illustrated in Chart 4.Chart 3Change in Mexican Unemployment: 199 -1996________________________________________________________________% of Labor Force + 1 + 8 + 6 + 4 + 2 - 2 199 1991 1992 1993 1994 1995 1996 [Source: "Emerging Market Indicators: Mexico" 124]________________________________________________________________ The Mexican peso has taken a beating in the wake of the late-1994financial crash in the country. "Dutch Tulips and Emerging Markets." Foreign Affairs 74 (July- August 1995): 28-44.Langfield, M. E. Theresults was that, by the beginning of the 199 s, the PRI no longer had astranglehold on the national and state governments, although it remainedthe party in power nationally and in most state governments ("The PeonsTurn on Mexico's Ever-Ruling Party" 43). Largely as a consequence of the economic difficulties faced by thecountry, Mexico's middle-class (relatively small in numbers) began todesert the ruling party-the PRI-in the early-198 s. In Mexico in 191 , 26 families owned 8 percent of the country'sland. As a consequence, real wage levels decreases by 4 percent (Dornbusch andFischer 841). New York: Knopf, 1988.Naim, M. Within the context of Olson's line ofreasoning, Paul Krugman, writing in Foreign Affairs, observed that: The world appeared to be at the start of a new era in international capitalism in 199 , as communism was defunct and most of the world's developing nations seemed committed to free markets as the way to economic development. Mancur Olson (5-1 ), writing in the Journal of EconomicPerspectives, defined the economic logic that must underlie the initiativesof government in efforts to create and effective market economy. The circumstances, resources, andsocietal values of many of these countries tend to vary widely. The OECD, situated inParis, has the luxury of pontificating about the economic efficiencies ofthrowing Mexican peasants off their land. By May 1998, the trading level had increased further to8.68 pesos to one United States dollar ("Emerging Market Indicators" 1 6).The peso appears to be stabilizing, but at a level far higher than thetrading level that prevailed prior to the late-1994 financial crash.Chart 4Change in Mexican Balance of Payments: 199 -1996________________________________________________________________US$ (billions) + 1 - 1 - 2 - 3 - 4 - 5 199 1991 1992 1993 1994 1995 1996 [Source: "Emerging Market Indicators: Mexico" 124]________________________________________________________________ Mexico's new economic system proved to be all but "powerless in theface of external factors beyond its control" (Naim 112). A restriction on the size of combined farm land holdings remains;however, Mexican corporations now are permitted to own farm land, which hadbeen prohibited in the past. Investment poured into these nations, allowing their leaders to pursue economic reforms. The effects of the crash on these four variablesare illustrated in Charts 1 through 4, which may be found on the next fewpages. The peso was trading at the level of 3.34pesos to one United States dollar in May 1994. Earlydata for 1996, as indicated in the chart, reflects the beginning of arecovery for Mexican GDP.Chart 1Change in Mexican GDP: 199 -1996________________________________________________________________% Change + 6 + 4 + 2 - 2 - 4 - 6 199 1991 1992 1993 1994 1995 1996 [Source: "Emerging Market Indicators: Mexico" 124]________________________________________________________________ As the data presented in Chart 2 [see following page] indicate,consumer prices in Mexico skyrocketed in the year following the financialcrash. Politics Among Nations: The Struggle for Power and Peace 8th ed. "The Political Economy of Recent Conversions to Market Economics in Latin America." Journal of Latin American Studies 26 (February 1994): 191-219.Krugman, P.
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