Mexico, NAFTA, and Expansion Toward the European Union and South America by Eduardo Segarra, Texas Tech and Texas A&M and Nicolas Gutierrez, ITESM

Mexico: Joining the World Economy The crisis of 1982 - large public deficit - lack of foreign investment - large foreign debt - high inflation At this time was when Mexican views with respect to international relations and international interdependence began to change

Economic policies of the 1980s in Mexico -- “Economic Realism,” 1982 -- “Increased Economic Realism,” 1986 -- “Economic Solidarity Pact,” 1987 Key components - liberalizing international trade - strengthening fiscal policy - privatization of public sector enterprises - financial sector liberalization - liberalization of foreign investment - deregulation of the economy Key milestone - In 1986 (as part of the “Increased Economic Realism” policy) Mexico joined GATT and became it’s 92nd member

Since the early 1990s the Mexican Government has struggled to become a “facilitator” for economic activity to take place, rather than being an “active” participant in economic activities taking place

Mexico has never seen the enactment of free trade agreements as “the solution” to it’s economic problems, but has embraced these as an important factor which complements the Mexican government’s overall strategy to induce economic growth and stability - Increase exports - Improve input availability - Increase investment - Generate more and better employment opportunities

From the early 1980's to today, there is evidence that the Mexican government has consistently intensified “international trade liberalization” efforts during though economic times: - Crisis of 1982 to 1986 ---- Mexico joins GATT - Lack of progress in GATT negotiations in the late 1980's ---- leads to NAFTA - Slow progress in GATT negotiations in the early-to- mid-1990's, the crisis of 1994, and Seattle’s WTO happenings in early 2000 ---- lead to and sped up Mexico - E.U. FTA and Mexico-Israel FTA

Time Line of Mexico’s Free Trade Agreements 1992 Chile I 1994 NAFTA Canada & U.S.A. 1995 Bolivia Colombia Costa Rica Venezuela 1998 Nicaragua 1999 Chile II Uruguay 2000 Brazil (Autos) E.U. Israel Expected in 2001: El Salvador, Guatemala and Honduras In the works: Argentina, Paraguay, Peru, Ecuador, Panama, Trinidad & Tobago, and Japan

Growth of Mexican Exports Within NAFTA (1993-1999) 1999 = $2.31 billion 1999 = $120.60 billion To Canada 48% To the U.S. 181%

Growth of Mexican Imports Within NAFTA (1993-1999) 1999 = $2.94 billion 1999 = $105.35 billion From Canada 150% From the U.S. 132%

Growth of Mexican Exports with Latin American Countries Since Adoption of FTAs with Latin American Countries Nicaragua, 1998 14% Venezuela, 1995 157% Costa Rica, 1995 159% Colombia, 1995 23% Chile, 1992 199% Bolivia, 1995 131%

38,175 21,447 Color 1 = Companies with more than $5 million worth of exports Color 2 = Companies with less than $5 million worth of exports

Accumulated Foreign Investment January, 1994-December, 1999 $70.86 billion

FTAs’ goals with respect to agriculture - Promote growth - Promote rural development - Improve competitiveness - Promote investment and technology transfer - Improve marketing infrastructure - Promote value added activities

Growth of Agricultural Exports (1993-1999) = 93%

Growth of Agricultural Imports (1993-1999) = 48% Growth of Industrial Imports (1993-1999) = 115%

Growth 93-98 = 72% *January - May

Growth 93-98 = 53.5%

Areas of research needing attention Linkages of FTAs impacts in agriculture as related to: - Income distribution (individual and regional) - Regional rural development impacts and prospects - Technology adoption/environmental issues/sustainability - Labor issues and unemployment/underemployment