MODERNIZATION, DEPENDENCIA, AND IMPORT SUBSTITUTION INDUSTRIALIZATION Mexico

Financing ISI: Sources of State Revenue  Taxation  Imports and Exports  Income (individual and corporate) and payroll  Sales, property, etc.  Fees  Licensing fees and permits  State-owned industry  Monetary policy (printing)  Borrowing

Financing ISI: Borrowing The question is who to borrow from and how.  Ownership requirements require joint partnerships  Local content requirements stimulate the domestic market for intermediary goods  Restrictions on repatriation of profits

Modernization in Mexico: the Porfiriato Era “Order and Progress”  Economic Modernization  Modernization began in the rural areas  At the beginning of his Presidency imports totaled $20 million and exports $29 million; at the end imports totaled $205 million and exports $293 million  Focusing on the development of rail and telegraph lines to unite the country and facilitate export activities, as well as changes in land tenure to promote private property  Modernization was mainly paid for with foreign investment  Economic modernization favored large landholdings, pushing increasing numbers of landless peasants into the export-led market economy and competitive wage labor

Dependency Theory and ISI: Revolutionary Mexico  Dependency Theory in Mexico, though popular academically, never had much political sway.  ISI was associated with the revolutionary project as a means of benefiting clients of the PRI, sustaining their rule  Small Farmers  Unionized urban workers  Unionized public employees  Business Elites

Dependency Theory and ISI: Revolutionary Mexico Encouraging rural support  Agrarian reform: Article 27 of the Constitution allowed for the formation of ejidos  In total over 170 million acres were distributed from large estates to over 3 million peasants  By 1940 approximately ½ of cultivated land was held by ejidos and the number of landless rural laborers declined by almost 25% Encouraging urban support  Legal protections for unions and union members  Preferential access to social welfare programs

Dependency Theory and ISI: Revolutionary Mexico Encouraging domestic businesses  Low rates of taxation  Subsidize production inputs  Targeted barriers to market entry  Targeted import and export restrictions  Manipulation of exchange rate policy  Restrictions on FDI

Questions  What role do political motives play in the economy? To what extent do/can domestic political circumstances influence the national economy?  How should we understand the legacy of ISI? Debt and populism? Or industrialization and infrastructure improvements?  Dependency theory raised questions about distributive justice that remain valid. Do we have a way to address them?

A Note on Policy Papers  Problem: slow and/or unequal economic progress under capitalism.  Policy options:  Modernization  Export-oriented growth  Dependency  Import Substitution Industrialization NOTE: you must argue in favor of a policy