Industrialization in Mexico

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The industrialization in Mexico was the basis for the development of Mexico from developing country to developing country . Although it made good progress at times, the starting conditions for setting up an own industry were extremely unfavorable.

Starting conditions of the industrialization process

Before the arrival of the Spanish colonizers , Mexico was home to various high cultures, which already had highly developed craftsmanship. However, the colonial era did not allow for any further development in the direction of industrialization . Since Spain was only interested in the extraction and export of Mexico's raw materials (mostly precious metals), only those economic sectors were promoted that were directly related to (above all silver) mining. In addition, the inadequate infrastructure , the limited availability of labor and the prohibitions imposed by the colonial power hindered positive development. The fact that Spain with its colonies always had a safe market for its goods also impaired the beginning industrialization process of the colonial power. Therefore, no new technologies and products were manufactured in Spain, which meant that Mexico could not hope for possible support either. The beginning of industrialization in England was the main trigger for the independence efforts of the Mexican ruling class in the second half of the 18th century. By breaking away from colonial power, the Mexicans hoped for not only political and financial independence, but also the development of new economic activities.

When the hoped-for independence was finally achieved in 1821 , expectations were high. However, the framework conditions for a reorganization of the economy of the newly independent Mexico were extremely unfavorable. The lack of alternative strategies, the political instability and the war-related destruction in the country were to blame for the continued concentration of economic policy on silver and agricultural exports. The first attempts to promote industrialization were made with the opening of the Mexican ports (1821), the establishment of a kind of development bank (1830) and the establishment of the Direcció General de Industrias (1842). Due to the reform laws of President Benito Juárez , 1857, the economic situation in the country improved slightly. He took the church's huge property and appropriated it to the state. In addition, he drove the rationalization of the state apparatus and created the basis for a national education system. But since the reforms also supported the export of agricultural products and the country fell back into the old pattern, these had not only positive consequences. Except in the textile sector, no notable branches of industry could develop in Mexico, as there was a lack of capital and entrepreneurial mentality. Textile production, which was already flourishing around 1800, doubled between 1854 and 1877.

Economic growth and revolution

The reign of the dictator Porfirio Díaz , who was in command from 1876 until the outbreak of the revolution in 1910, had an extremely positive effect on the economic situation of the republic. The political stability during his tenure increased the confidence of foreign investors. England and the USA in particular poured a lot of money into the country, which had a major impact on the improvement of the infrastructure. In addition, the country slowly integrated itself into the world market through its agricultural exports and was able to build up its own financial sector through foreign capital. This created the conditions for an economic upswing. As a result of the transport savings due to the “railway boom” and the expansion of the road network, a single market gradually emerged in the country . In some areas, for example, foreign imports were replaced by domestic deliveries. However, the upturn continued to be based on raw material exports. During the Porfiriat , Mexican exports abroad increased six-fold. Even when the country's economic upswing, discontent among the population continued to rise and ultimately led to a revolution in 1910.

The increasing poverty of the small farmers, the landless and the craftsmen displaced by industrialization was the main cause of the revolutionary war, which was waged with great severity at times . The armed uprising began on November 20 under Francisco Madero and Pancho Villa in northern Mexico. Production in mining, industry and agriculture decreased significantly due to the armed conflicts during the revolution. However, the unrest in their own country was not solely responsible for the falling growth rates. Due to the global economic crisis (from 1929/30) and the depression in the USA, the foreign demand for metals, food and some finished goods fell noticeably. This circumstance and the restrictive attitude of the revolutionary groups towards foreign capital had a negative effect on exports and thus on overall economic growth.

By the end of the revolution in 1929, Mexico's population had shrunk from 15.2 to 14.8 million and many parts of the country were completely devastated.

Import-substituting industrialization

The consequences of the global economic crisis were severe in Mexico, but the state recovered from its effects faster than most industrial cities. After the economic low point had been overcome in 1932, most industries were able to record an economic upturn again after a few years. Because of the unchanged high demand for the silver and the oil of Mexico, the trade could be stimulated and the price level restored. The action-oriented state economic policy provided further reasons for the rapid rehabilitation after the crisis: The abandonment of the gold standard , the devaluation of the peso and some infrastructure measures created considerable advantages for industry. The processing industry in particular experienced a comparatively enormous upswing at this time and accounted for 40% of the overall economic growth. Despite the renewed strengthening of the export sector, the industry gradually became the “driving force” of Mexican development. This sudden advance in industrialization was caused by three reasons:

  1. The rising profit prospects in the industrial sector
  2. The increasing internal demand for industrial products
  3. The massive transfer of resources from the agricultural sector

The country began increasingly to produce its own products and in many areas was no longer dependent on the import of foreign manufactured goods. The increase in tariffs ensured that local products were cheaper and, despite their lower quality, more in demand. The capital could be increased rapidly due to the particularly favorable profit opportunities of the industrial branch and thus offered an ideal prerequisite for a consequent industrialization program. However, such a reform program was only implemented during the reign of Lázaro Cárdenas (1934–1940). Infrastructural improvements, an intact banking system, growing purchasing power and advantages for the industrial workers (e.g. cheap food) boosted industrial production considerably. In the period that followed, profits continued to grow and investment increased. Due to the economic policy of Cárdenas, many small and medium-sized enterprises developed that manufactured consumer goods with simple technologies. Overall, the 1930s was an extremely successful decade for Mexico, preparing for accelerated economic and industrial growth from 1940 onwards.

The "Mexican miracle" from 1940

The ideal conditions, which were created in the 1930s, were the cornerstone for the "Mexican miracle". This term is used to describe the economically extremely successful period from 1940 to 1980. In these 40 years the gross domestic product (GDP) grew by an annual average of more than 6%. The share of the industrial sector in the growing GDP continued to grow and at times reached 34%. These impressive growth rates are initially mainly due to the completely changed import-export situation during the Second World War. Manuel Ávila Camacho , who was elected president of the country in 1940, took a position against the Axis powers during this world war and supplied the USA with workers and raw materials from Mexico. In return for the support of the Allies, Mexico received modern machines and new technologies.

After the Second World War, the Mexican government continued to rely on import-substituting industrialization and thus on the expansion of the domestic market. So far, attempts have only been made in Mexico to replace the simple imported consumer goods with their own, but from the end of the 1950s an attempt was made to produce durable consumer goods and capital goods themselves. However, the success of this experiment was very limited. The substitution plan only worked in the manufacture of electronic products, metal goods and automobiles. This fact and the slowdown in economic growth indicated that the traditional weaknesses of the industry were not yet finally overcome. When the Organization of the Petroleum Exporting Countries (OPEC) reduced oil production in 1973, the oil price rose by around 70% worldwide. Since Mexico has huge oil reserves and was already one of the most important oil exporters in the world at that time, this “oil boom” had an extremely positive effect on the country's economy. The production and export figures rose continuously and made it possible to build an oil processing industry in the country. PEMEX, a state monopoly company for the extraction and processing of Mexican oil, achieved 75 percent of the total foreign exchange income of the Mexican state with oil exports. The increased oil exports due to the petrolization of the economy were not solely responsible for economic growth. High government spending and a rapidly increasing foreign debt boosted growth for a short time, but it was foreseeable that this dependence on foreign debtors could not be successful in the long term. The first economic difficulties became apparent as early as the mid-1970s, but in 1976 the “milagro mexicano” ended for good.

Economic problems and the 1982 crisis

When Mexico had a share of 26.5% of the total Latin American national product in 1968 and economic growth seemed unstoppable, it was all the more astonishing that one crisis after another rocked the country from the mid-1970s. In 1976, the high inflation rate made it necessary to devalue the currency significantly. The growth rates then rose again to over 9% annually, but only because of the unrestrained taking up of foreign loans. The state's external debt increased from $ 3 billion to $ 85 billion in twelve years, from 1970 to 1982. This devastating increase resulted in the state of Mexico having to announce its insolvency in 1982. The sudden drop in oil prices and the rise in international interest rates on loans were mainly to blame for the disaster. It was now clearly visible that the unrealistic economic and financial policy of the state could not be successful in the long run. The presidency of Miguel de la Madrid (1982–1988) was marked by an intensive attempt to fight debt. He implemented a structural adjustment program, which should contain the debt. The following points were implemented in this program:

  • Reduction of the budget deficit
  • Restricted fiscal policy to reduce inflation
  • Abolition of public subsidies
  • Devaluation of the peso
  • Export promotion and import reduction

The social impact of these measures on society has been dramatic. Average real annual wages for workers halved in the 1980s. In addition, the unemployment rate, and thus underemployment in the country, rose by around 50%. This led to the impoverishment of the vast majority of the population. In the late 1980s, more than half of all Mexicans had to get by on a monthly income of just $ 200. The crisis of 1982 left a disorderly economic and social chaos, which still has an impact on the present day.

The country after the crisis

President Miguel de la Madrid passed his office on to Carlos Salinas de Gortari on December 1, 1988 . His task now was to contain the negative effects of the nationwide crisis and to advance the modernization process. His neoliberal reform project took the adjustment programs of the other Latin American countries as a model. The concentration on the domestic market, which had been strictly enforced in previous years, was relaxed and the markets opened up. Another crucial step in his program was the privatization of state-owned companies. The banks, which were nationalized in 1982, were eventually reprivatised by Salinas. The new export-oriented and global market-integrated economic policy quickly delivered positive results.

In December 1992, the presidents of Mexico, the United States, and Canada signed the North American Free Trade Agreement (NAFTA). The state was henceforth a member of the largest free trade area in the world. With the entry into force of this agreement, the gradual dismantling of customs tariffs between the three member states was guaranteed. Furthermore, investments were made significantly easier and the service markets were liberalized. The NAFTA was the climax of the restructuring policy under Salinas de Gontari and the starting point for improved Mexican-American trade relations.

On May 18, 1994, shortly after the agreement was signed, Mexico became a member of the Organization for Economic Cooperation and Development . Almost all of the 30 member states of this organization are industrialized countries and Mexico was the first “non-industrialized country” to join. The community has set itself a few goals:

  • Promote sustainable economic growth
  • Higher employment
  • Support the development of other countries
  • Securing financial stability
  • Increase in the standard of living
  • Contribution to the growth of world trade

When it joins the OECD at the latest, it becomes clear that Mexico is no longer a developing country, but has made the leap to becoming an emerging country. With this event, Mexico's path from developing country to emerging country ends.

literature

  • Dieter Briesemeister, Klaus Zimmermann (ed.): Mexico today. Politics, economy, culture (= Bibliotheca Ibero-Americana; 43). Verlag K. Vervuert, Frankfurt am Main 1992, ISBN 3-89354-543-3 .
  • Dieter Böhn, Eberhard Rothfuss, Eberhard: Manual of geography teaching, Vol. 8.1: Developing countries I . Aulis-Verlag Deubner, Cologne 2007, ISBN 978-3-7614-2392-9 .
  • Large lexicon. A – Z, prompt and clear . Edition Isis, Zurich 1996.
  • Hans Werner Tobler : The Mexican Revolution. Social change and political upheaval 1876–1940 (= st; 1988). Suhrkamp Verlag, Frankfurt am Main 1992, ISBN 3-518-38488-0 .