Latin America in the 1990s
Edited by Rob Vos, Lance Taylor and Ricardo Paes de Barros
Chapter 9: Mexico: trade liberalization, growth, inequality and poverty
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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