Economic Liberalization, Distribution and Poverty

Economic Liberalization, Distribution and Poverty

Latin America in the 1990s

Edited by Rob Vos, Lance Taylor and Ricardo Paes de Barros

Since the late 1980s, almost all Latin American countries have undergone a series of far-reaching economic reforms, particularly in the areas of financial and capital account liberalization and trade. This book provides a comparative and analytical framework for assessing the impact of these reforms upon 16 countries in Latin America and the Caribbean, including: Argentina, Brazil, Chile, Colombia, Ecuador, El Salvador, Mexico, and Peru.

Chapter 9: Mexico: trade liberalization, growth, inequality and poverty

Jaime Ros and César Bouillon

Subjects: development studies, development economics, economics and finance, development economics


1 Jaime Ros and César Bouillon 9.1 INTRODUCTION Mexico provides a particularly interesting case for the analysis of the effects of the liberalization of the balance of payments. Not only were trade and financial liberalization measures in Mexico much more pervasive than in other countries, they occurred in a context of high mobility and volatility of foreign capital flows. These circumstances affected macroeconomic performance and thereby the effects of liberalization on the labour market, income distribution and poverty.2 This study analyses the effects of the liberalization of external trade and capital movements. Section 9.2 describes trade policy and financial liberalization reforms as well as the major shifts in the trends in foreign trade and capital flows. Section 9.3 analyses how capital flows and trade liberalization influenced macroeconomic behaviour through the real appreciation of the peso between 1988 and late 1994, the drop in profitability of tradable goods production and the collapse of private savings. It also examines how this macroeconomic performance affected sectoral employment and productivity. We will focus on the rapid growth of productivity and employment losses in manufacturing, which are associated with lower profitability and fast deepening of import penetration during 1988–94. Section 9.4 looks at the evolution of the wage structure since the late 1980s, linking it to the productivity and employment trends analysed in the previous section. The rise in wage inequality since the late 1980s has attracted the attention of many researchers, generating a wide range of hypotheses as to...

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