2015 NAFTA 1994 2014, effects on Mexico

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    2015. NAFTA 1994/2014, Effects on Mexico 1. Introduction.The purpose of this research istoanalyze the effects produced in Mexico by the North American Free Trade Agreement, in macroeconomic, social, demographic, political terms and in security and migration aspects, in its first twenty years of implementation.The analysis will include the foundational aspects that led to its development, the approval process in general terms, the evolution of indicators and evaluation of different aspects mentioned.2. Background.Major global macroeconomic events and their consequences in Mexico were preparing the way for the creation of the Treaty of free trade in North America (NAFTA).As described Marquez, Graciela (2014)1, the period 1945-1982 was building an enviable model of economic expansion in the region, based on industrialization model that basically considered the needs and internal demands. It is what she considered the rise and the decline of the industrialization model.The focus on the domestic manufacturing sector was the source of positive results but simultaneously was the reason that ended hurting public finances and growth prospects in the long term.No doubt the structural shortcomings of the closed system are compounded by handling errors and excesses of the different administrations that were leading to the default crisis occurred in 1982.In 1966, Raymond Vernon had warned that the support of

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    the "Mexican miracle" led to the choice of one of two ways,since the model of import substitution industrialization (ISI) was running out.One of those ways wastoabandon the protection of domestic industries and opening the economy to competition and foreign investment, with options to access the international capital for development.Politically unsustainable2option at the time.The other way wastosupport the continuation of growth through public spending, with the restriction that this option was unsustainable over time. This was the path chosen by the different administrations until the start of the opening that took place with De la Madrid.Populist policies developed by the different administrations of the Institutional Revolutionary Party (PRI), more specifically from the government of Adolfo Lopez Mateos (1958-1964), put emphasis on food distribution, building schools and public housing, the launch of the distribution of a percentage of corporate profits to unionized employees, and nationalization of energy companies.Most of these activities demanded increasing amounts of funds and fed a significant deficit in the accounts of the nation.The deepening of these public policies becomes even more evident during the administration of Luis Echeverria (1970-1976).Thecontinued nationalization processes including mining, land distribution in some northern states, and the establishment of limits on foreign investment.In this period had its heyday the policy of import substitution industrialization, which somehow was a

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    response to the global crisis, but had some features that could lay the groundwork for future difficulties in the sense of making a certain block of activities related to conducting exchanges with the outside, and became in many cases generator of subsidies to local industries, and given therelatively high level of corruption, could promote relations with certain economic groups. ISI policy undoubtedly was a response that generated the bases of many local industries, with the consequent effect on employment generation and social improvement.During the Echeverria government subsidies had an even greater boost, withafocus on housing construction, social coverage to a larger portion of society plans, and education.Despite the increase in oil prices and growing discoveries of reserves in land and maritime platform, Mexico needed funds to cover government policies mentioned, and that led to significant levels of debt with multilateral institutions, andtheconsequent growth national external debt.During the Lopez Portillo (1976-1982), the trend of generation of high deficits of the national current account continued in full swing, with the consequent level of debt becoming unmanageable.One element that could have helped reduce the debt crisis, was the area of public revenue through taxes.During the different administrations of the PRI and even today, it remains low.Already in 1917 an American consultant, Henry Chandler, had expressed the need to increase the contribution through income tax.Years later, in the early sixties, the British economist Nicholas Kaldor, attherequest of the Secretary of Finance

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    and Public Credit, Antonio Ortiz Mena, had suggested progressive rates of this tax to higher revenues and expansion of the tax base.These recommendations continuetobe politically of unviable implementation (Marquez, Graciela. 2014).One of the major macroeconomic crisisinthe country and the region, occurred in the second half of 1982 (1/2/3graphic) when Mexico was forced to declare the country in default unilaterally andtorequest extension of the payment dates set along with new forms of financing.Among the measures related to face this crisis, was the nationalization of the Mexican banking system.The shift toward opening the economy, and perhaps the first indication of the possibility that in later years to gestate NAFTA, occurred in the administration of Miguel de la Madrid (1982-1988).It was gradually favoring the inflow of foreign investment, and significant privatization of state enterprises, a remarkable difference to what happened during the first 53 years of the PRI'seconomic policies.The need for growth and openness able to satisfy young and growing population of Mexico, leading to the Madrid guide the economy toward an opening, a profound change in relation to the protectionist orientation of previous decades.The first formal indicator in this sense, was the adherence totheGATT in 1986, asaformal manifestation of a policy change and focus on generating foreign exchange in an intensification of exports.Attheend of the mandate the president De la Madrid, launched the Economic Solidarity Pact, whose main

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    pillars triedtoput a brake on inflation through lower wage increases and thus containing overall demand.The other pillars were: the change in exchangeratepolicy, abandoning the fixed one;reducing barriers to international trade through tariff reductions / elimination export taxes, and the elimination of subsidies with emphasis on privatization of state enterprises.The adoption of an economic policy, by Carlos Salinas de Gortari (1988-1994), framed in the neoliberal trend of those times, conducted to complete privatization process, as happened with the banking system and Telefonos de Mexico (TELMEX ).SalinasdeGortarisDevelopment Plan, aimed at improving living conditions through the recovery of the Mexican economy, bringing a substantial reduction of inflation to single digit levels forthefirst time in many years.He continued the process of integration of Mexico into the international system, and it became one of the first countries in the region to join in 1994 the OECD (Organization for Economic Co-Operation and Development).Salinas administration took the initiative to propose a widerange trade agreement withtheUnited States, as an alternative to generating genuine export earnings, job creation and greater transparency of the economy.United States during the administration of George Bush, undertook an initiative that soughttohelp countries involved in the problems of debt, initiated by the insolvency of Mexico to meet its commitments in 1982. This initiative called the Brady Plan whose main tool would be known as bonds with the name of Nicholas Brady Treasury Secretary.Essentially a program of debt

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    reduction, whichwouldbe materialized through the so-called Brady Bonds, whichwouldtransform bad debts on these certificates zero coupon backed by the US Treasury, and offered guarantees in raw material available in countries originally.Itisnoteworthy that the first attempts of the Salinas administration in this regard were directed to establish such agreement with Japan and the European Union, but perceiving that the answer was not decidedly positive, efforts were concentrated on achieving agreements with the United States in mid 1990. In the process of primary negotiations on the treaty, Canada, which had already signed similar agreement withtheUnited States in 1987, CUSFTA (Canada US Free Trade agreement) was added to give an even broader spectrum of coverage and so to complete an exchange that entirely cover the territory of North America.The negotiation process that began Salinas de Gortari with President George Bush (1993-2001) was confirmed by his successor Bill Clinton, who initially had reservations about the treaty.Clinton's proposal to confirm the Treaty with the Legislature, included the creation of parallel agreement on Environment and Labor Affairs.When NAFTA was initiated included two developed economies and one in process of development, whose GDP combined in dollar terms corresponded to a trillion dollars and considered a population of 360 million people.Twenty years later in 2014, the joint GDP of the member countries of the Treaty, formed an economy of 20 trillion dollars with a total population of 480 millions 4.NAFTA relative to world GDP in 2014, 77.9 trillion current dollars,itmeant 26.3% of the same and its

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    population represents 6.6% of the world. The Industrialization Program of the Northern Border started in 1965 in Mexico, as an alternative that could soften the impact of the US Bracero Plan, given pressures form unions in that country, and that gave opportunities for legal temporary work to Mexican citizens. The Industrialization Program of the Northern Border, had similarities with ZPEs, processing zone exports, which exis