NAFTA & Mexican Economy
Explain how NAFTA might have increased Mexico's regional disparities.
States with less developed infrastructure (transportation and communications) did not receive the benefits from NAFTA as other states. The states with more telephone service and a higher skilled labor force experienced more positive impacts. Northern and central states grew faster throughout the 1990s, modestly reducing the income differentials with those of the Mexico City area. Poorer southern states grew slower during the same time period due to low levels of education, infrastructure, and quality of local institutions, making them less prepared to gain from trade liberalization.
What were the conditions of the Mexican economy before NAFTA?
The Mexican economy had experienced many difficulties throughout most of the 1980s with a significant deepening of poverty and a currency crisis in the 90s. NAFTA was expected to improve investor confidence in Mexico, increase export diversification, create higher-skilled jobs, increase wage rates, and reduce poverty
Explain the importance of US market to Mexico's exports. Why is this of great concern?
The Mexican economy is strongly tied to economic conditions in the US, making it very sensitive to economic developments in the US. Mexico is highly reliant on exports and most of Mexico's exports go to the US. In 2008, Mexico's exports as a percent of GDP equaled 31%, up from 10% twenty years ago, and over 80% of Mexico's exports went to the US
Explain 4 factors that might explain why the Mexican economy is not converging to the US economy in terms of income.
1) Poorly implemented economic reforms 2) Lack of important reforms that are needed in other areas 3) Mexico is lacking a "domestic engine" to spur internal demand, which is increasing the country's vulnerability to economic conditions in the US 4) Gov'ts restrictions on macroeconomic policies limit the ability of Mexican policymakers to respond to external shocks in a countercyclical manner
Explain four positive effects of NAFTA on Mexico's economy.
1) The overall macroeconomic volatility, or wide variations in the GDP growth rate, has declined in Mexico 2) Positive impacts on the number and quality of jobs 3) NAFTA contributed to Mexico's economic recovery directly and indirectly after the 1995 currency crisis 4) Mexican manufacturers adopt US technological innovations more quickly
Explain 3 of Mexico's program for farmers. Do they work?
1) eliminating state enterprises related to agriculture and removing staple price supports and subsidies 2) lands that had been distributed to ejidos or community rural groups following the 1910 revolution gained the right to privatize 3) abolishment of CONASUPO, Mexico's primary agency for government intervention in agriculture
According to most studies, has NAFTA been good for Mexico?
A number of studies have found that NAFTA has brought economic and social benefits to the Mexican economy as a whole, but the benefits have not been evenly distributed throughout the country. Most studies after NAFTA have found that the effects on the Mexican economy tended to be modest at most. Though its net economic effects may have been positive, NAFTA itself has not been enough to lower income disparities within Mexico, or between Mexico and the United States or Canada.
What is the role of NAFTA in the bilateral relationship between USA and Mexico?
Effects of NAFTA have implications in trade, investment, migration, security, environmental, and health issues.
Explain the effect of NAFTA on Mexico's agricultural sector.
Many of Mexico's domestic reforms in agriculture coincided with NAFTA negotiations, beginning in 1991, and continued beyond the implementation of NAFTA in 1994. The unilateral reforms in the agricultural sector make it difficult to separate those effects from the effects of NAFTA.
What motivated Mexico to join NAFTA?
Mexico's main motivation in pursuing an FTA with the United States was to stabilize the Mexican economy and promote economic development by attracting foreign direct investment, increasing exports, and creating jobs.
Describe the changing state of poverty levels in Mexico.
Poverty is one of the more serious and pressing economic problems facing Mexico. The Mexican government has made progress in its poverty reduction efforts, but poverty continues to be a basic challenge for the country's development. The percentage of people living in extreme poverty, fell from 24% in 2000, to 17% in 2004, and 14% in 2006. In 2008, however, the extreme poverty rate went up again to 18%. Mexico's continuing problem of poverty is especially widespread in rural areas and remains at the Latin American average.
What is Oportunidades?
The program seeks to not only alleviate the immediate effects of poverty through cash and in-kind transfers, but also by improving nutrition and health standards among poor families and increasing educational attainment. This program provides cash transfers to families in poverty who demonstrate that they regularly attend medical appointments and can certify that children are attending school.
