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Edited by Susan McGrath-Champ, Andrew Herod and Al Rainnie
Chapter 18: The New Economic Model and Spatial Changes in Labour Relations in Post-NAFTA Mexico
Enrique de la Garza Toledo From 1940 until 1982 the Mexican economy was dominated by a policy of importsubstitution industrialisation (ISI) characterised by significant state intervention and regulation of the economy, with the state playing two principal roles: direct producer of goods and services, and driver of aggregate demand via public spending. At the same time, economic policies protected national industry through various tax and credit programmes and favourable treatment on prices of raw materials. In spatial terms, three major manufacturing poles were developed – Mexico City, Monterrey and Guadalajara – which were focused mainly on producing for the domestic market. During this period the economy experienced high growth rates. However, in response to the state’s fiscal crisis in the early 1980s – a fiscal crisis which took the form of a default on the country’s ballooning foreign debt and a subsequent currency devaluation – a new, neoliberal economic model was established. This new model involved the state’s withdrawal from production-orientated investment and its giving priority to controlling inflation rather than directly stimulating economic growth through Keynsian macroeconomic policies. In addition, it involved seeking to attract greater levels of foreign direct investment (FDI). Although movements towards establishing this neoliberal policy began soon after Mexico’s 1982 default on its foreign debt, the economy really began opening up to foreign capital in 1986, when Mexico joined GATT, and was given a fundamental boost when the North American Free Trade Agreement (NAFTA) went into effect in 1994. Since 1994, the economy has experienced years marked by profound...
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