Mexican Economic Models (1940-1982) PDF

# Modelos económicos durante el periodo 1940 - 1982 ## Introducción * The government tried to make Mexico a modern, solid and important economy in the international arena. * The most important objective was to integrate Mexico into the group of capitalist developed countries. * Between 1932 and 195...

# Modelos económicos durante el periodo 1940 - 1982 ## Introducción * The government tried to make Mexico a modern, solid and important economy in the international arena. * The most important objective was to integrate Mexico into the group of capitalist developed countries. * Between 1932 and 1950 Mexico entered modernity. Industrialization began with modernity. The industrialization of commerce and railroads ## Contexto Histórico: * During and after World War II, the United States became the largest customer of Mexican products, the main investor and the largest supplier of industrial machinery. * Covers 2 presidential periods: * Manuel Avila Camacho (1940-1946) * Miguel Alemán Valdés (1946-1952) * Focused on three important aspects: the agrarian problem, labor-management relations and socialist education. * The Party of the Mexican Revolution (PRM) is disbanded and in its place arises the Institutional Revolutionary Party (PRI) * The search for national unity. ## La inversión privada increased and so did the growth of industrial and urban development in the country * The automotive, motorcycle, appliance and hotel industries diversified throughout Mexico. * More towns were created and housing units were built for government employees. * The Second Social Security Law was decreed and the Mexican Social Security Institute (IMSS) was created. * The Children's Hospital of Mexico was created. * The construction of more highways that interconnected more important cities in Mexico * Construction of more roads in various parts of the country. * Postal and telegraph services were also expanding. * More dams and irrigation channels were created. * The Ministry of Labor and Social Welfare was founded in 1941. * In the government of Manuel Avila Camacho the socialist education was lost and the National Union of Workers of Education (SNTE) was created. * An intense literacy campaign was carried out. * More schools were created for primary education. * The first facilities of the University City were inaugurated. * Mexico's culture was promoted in other countries and support was given to many artists like Octavio Paz and David Alfaro Siqueiros. ## Sustitución de importaciones * Mexico began to produce articles that were then imported. * It exported products like henequen and petroleum and strengthened its relations with the United States. * The goal was to defend national capital through the application of a protectionist policy while simultaneously opening up to foreign investment. * Goals: * Strengthen the industry with government subsidies. * Develop protectionist policies to prevent products manufactured in other countries from being marketed in Mexico. Therefore, high tariffs were imposed on foreign products. * Maintain a monetary policy to avoid inflation and establish a high exchange rate to prevent imports. * Purposes: * Stop importing manufactured goods. * Manufacture capital goods, means of production, parts, machinery and equipment necessary for industrial development. ## Acciones: Avila Camacho * The private sector benefited, vital for industrial development. * Financing, tax breaks and direct investments from the state were granted to basic industrial sectors and small and medium-sized businesses. * Foreign capital diversified. * The Law of Transforming Industries was created, which exempted from taxes those companies that could demonstrate that they were new or necessary. * The Bank of Mexico was restructured. * Manufacturing industry grew 7.5% in 1940. * The state became the major promoter of industrial development. * The external debt was negotiated with the United States. * Large companies were created. * The peso was devalued in order to limit imports. * It followed a slightly inflationary policy. * The doors were opened to foreign manufacturing and production. * In 1948 GDP grew at a rate of 6% and manufacturing at a rate of 87%. * Migration from the countryside to the city increased. ## Milagro mexicano * A period of accelerated growth that lasted for two decades * The energy sector was developed, **PETROLEUM!** * The construction industry grew: housing, schools, hospitals. * Transformation of social life: * Workers employed in industries. * Increased migration. * The birth of the great metropolitan cities of Mexico. * The emergence of the urban middle class. * Unequal accumulation of wealth in the hands of a few. * Cultural and artistic boom. * Growth of the film industry. * Change of mentality. * Strengthening bureaucracy * The economic growth did not produce improvements in the standard of living of the population. * More than 90% of Mexican homes did not experience a substantial change in living standard. However, a small sector of national and foreign businesses concentrated almost half of the country's income. * The state became the main motor of the economy, prioritizing industrialization. * Public spending was reduced in terms of education, health and urban services. * Mexico became the ideal place for foreign investment. * Economic sovereignty was lost: Mexico reached modernity. ## Modelo de desarrollo estabilizador * Adolfo Ruíz Cortines (1952-1958) * **Economic:** * *Stabilized Development:* * *Control of Inflation:* * *Management of National Resources:* * *Devaluation of the Peso against the Dollar:* * *Foreign Investment and Manufacturing:* * *Agrarian Reform: Land Distribution:* * *Infrastructure:* * **Political:** * *Consolidation of the PRI:* * *Controlled Democracy:* * *Relations with USA*: * *Austerity and National Unity:* * *Declaration of Assets by Public Officials:* * *Women's Vote at the Federal Level:* * **Social:** * *Educational Expansion:* * *Labor Improvements: Rights* * *Labor Problems: Strikes:* * *Public Health and Housing* * *Emergence of the Middle Class* ## Adolfo López Mateos (1958-1964) * **Economic:** * *Nationalization of the Electric Industry*: * *Public Investment:* * *Increased Expenditure and Foreign Debt:* * *Price Stability:* * *Agrarian Reform: Expansion* * *Social Welfare Programs:* * **Political:** * *Authoritarian Model: PRI*: * *Dependence on USA* * *Non-Intervention: Relations with Cuba* * *Centralization of Power: the State over Institutions* * *Nationalization of Companies* * **Social:** * *Repression of Strikes*: * *Creation of the ISSTE* (Social Security Institute) * *Urban Growth*: ## Gustavo Díaz Ordaz (1964-1970) * **Economic:** * *Growth of GDP, Low Inflation* * *Promotion of Energy* * *Stagnation of Agricultural Development* * **Political:** * *Political Stability*: * *Powerful Bureaucracy* * *Media Controlled by the Government* * *Authoritarian* * **Social:** * *Repression of student movements* * *Inequality and Social Discontent:* * *Social Control* * *Social Movements* ## Aplicación del modelo * **Objectives:** * An economy free from bottlenecks such as inflation, a balance of payments deficit, devaluations and other variables that achieve macroeconomic stability. * Raise the standard of living of the population, especially that of farmers, workers and certain sectors of the middle class. * Continue to increase national income. * Accelerate the process of diversifying productive activities in the economy. * Advance industrialization, giving priority to basic industries * Achieve a more balanced regional development. * **Measures** * Increase in credits to the private sector. * Facilitate foreign investment * Promote the production of intermediate goods and the production of capital goods. * **Crisis:** * In 1972, of the 101 most important industrial companies in the country, 57 had foreign capital participation. * Decline of national private investment. * Increased public spending through foreign loans (increased debt). * 1976 devaluation of the peso by 50% in relation to the dollar. ## Modelo de desarrollo compartido * Six-year term of Luis Echeverría Alvarez * **Focus**: populist and his great inclination towards state interventionism sought to achieve more equitable and accelerated development. * **Political:** * *Revolutionary Nationalism*: Echeverría sought to strengthen the role of the state in the economy and promote industrial and agricultural development. * *Social Justice and Redistribution of Wealth:* Reduce social inequality. * *Legitimacy Crisis*: The government had lost its base of legitimacy after the 1968 crisis. * *Foreign Relations*: Echeverría adopted an active and autonomous foreign policy, seeking to diversify commercial relations and reduce economic dependence on the United States. * **Economic:** * *Industrialization*: The diversification of the country's industrial base was promoted through the National Industrial Development Program. * *Agriculture* Policies were implemented to improve agricultural productivity through the use of technology and the expansion of irrigation infrastructure. * *Inflation and Price Control*: Public spending expansion and subsidies to strategic sectors caused inflation. * *The 1973 Oil Crisis* had a dual impact on the Mexican economy, benefiting Mexico as a producer, but negatively affecting the industry and transportation sectors. * **Social:** * *Education*: The budget allocated to public education was significantly increased, new schools and universities were built, and scholarship programs were expanded. * *Health and Housing*: Programs aimed at improving the health and housing conditions of the most vulnerable population were implemented. * *Agrarian Reform*: An agrarian reform was carried out. ## Contexto Histórico: * As a consequence of the 1968 repression, there were many disappeared and political prisoners. * INFONAVIT and FONACOT were created, which provided loans for the construction of houses and the purchase of furniture for workers. * Among the most important movements, those of railroad workers, electricians, telephone operators, automotive workers and metallurgists stand out. * Peasant movements became more important, the agrarian conflict was one of the causes of the economic crisis in which the country fell. * Proliferation of socialist movements that trigger the "Social War" ## Objetivo: * Modernize industry to increase productivity. * Generate progress for everyone equally: it intended to share the fruits of progress among all members of society through a more equitable distribution of income. ## Objetivos, measures and characteristics: * It was not a stabilized development, but: * End social inequality. * Revive economic activity. * Increase public spending. * Correct the shortcomings of the stabilizing model, but without eliminating it entirely. ## Medidas: * Boost national development. * Improve education through educational reform and promote science and its dissemination. * Equitably share income. * Expand the Mexican market. * Develop tourism. ## Characteristics: * Petroleum as the main economic activity. * Expansion of social spending. * Better distribution of income. * Strengthening the mixed economy system. * Use of natural resources. * State participation in the processes of production and distribution of goods and services. ## Modelo: Quanza para la producción. * Six-year term: Jose Lopez Portillo (1976-1982) * **Political** * Absolute administration: decisions were authoritarian. * The PRI maintained its hegemony in power. * López Portillo assumed the presidency with a speech of renewal and change. * Relations with other Latin American countries were strengthened and a more active foreign policy was sought. * Plan for energy resources. * **Economic:** * Growth of the economy: driven by petroleum in 1976. * Mexico was a leading oil producer in the world. * Foreign investment rose and infrastructure projects were implemented. * **Social:** * The Mexican population grew rapidly, with a 3.5% annual growth rate. * Urbanization increased. * There were social and labor movements, especially in the education and trade union sectors. ## ¿En qué consiste? * Between 1940 and 1950, Mexico supported its economy on a conservative model that promoted industrialization. Petroleum was the most important. * This model directed state credit towards priority projects that were a source of significant income. ## Introduction * The president (Portillo) was very optimistic with the different oil fields that had been found in Tabasco and Chiapas. ## During his tenure, Portillo sought to correct the economic inequality in Mexico, which is why he developed the model: "Alliance for Production." ## Context: * **Oil Crisis:** Due to the oil shortage caused by the Iran-Iraq War in 1979, Lopez Portillo nationalized the Mexican oil industry. * **Nationalization of the Bank**: In 1982, Lopez Portillo decided to nationalize the Mexican banks, thereby acquiring various private banks. * **External Debt:** Mexico accumulated considerable external debt.. * **Unequal growth**: * The gap between rich and poor grew. * Social tension: * Student protests and reprisals by student and trade union groups. * **Economic crisis:** * By 1982, Portillo's six-year term ended with a serious crisis, the external debt reached unsustainable levels, forcing the country to devalue the currency and restructure its debts. This event marked the beginning of the decade of economic crisis in Mexico. * **Pope's visit:** John Paul II arrived in Mexico as an illustrious visitor. ## **Goals and objectives** * **Objectives:** * Promote foreign investment. * Equitable distribution of wealth. * Promotion of employment. * Modernisation and diversification of the economy. * Economic stability. * Economic growth. * Development of the agricultural sector. * Encourage industry. * Develop energy and natural resources. * **Goals** * Promote economic and technological development of the country. * Improve living conditions of the most deprived population. * Generate employment and reduce unemployment through investments in infrastructure and the promotion of business investment. * Reduce dependence on a single sector. * Reduce inflation and maintain a balance in public finances. * Increase productivity and access to credit and technology for farmers. * Make efficient use of Mexico's natural resources. ## Data: * The six-year term of José López Portillo recorded the highest average annual GDP growth rate, at 6.57%, while that of Miguel de la Madrid was the lowest, at 0.22%. ## The initial success of the Alliance for Production model led to 8% annual GDP growth. * International banks became interested in the model, offering loans to the government, believing that Mexico had repayment capacity thanks to its great oil wealth *However, by 1982, at the end of Portillo's six-year term, 55% of the population lived in poverty, earning below the minimum subsistence line. ## Actions: * Meeting the demand for food, injecting capital into the agricultural sector. * Reorienting industrial production towards basic consumer goods (processed food, clothing, footwear, etc.), leaving durable goods (appliances) in the background. * Expand the coverage of social services. * Modernize the government apparatus to make it more efficient. * The international banking sector opted to invest in Mexico. * A large part of the industry, such as the petroleum industry, was modernized ## Failures: * Excessive dependence on oil: When oil prices fell in the 1980s, Mexico suffered a major economic crisis. * Excessive public spending. * Corruption and embezzlement of funds. * Uncontrolled inflation. * Lack of economic diversification * Depletion of oil reserves: investments were not made to replenish oil reserves. * The external debt that was unsustainable in the long term, which represented a problem for the economy. * Loss of confidence in the government and the model.