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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 ).SalinasdeGortari’sDevelopment 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 wide–range 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 existed in Southeast Asia, where the essence was the reduction of the cost of labor, compared with developed countries, and that were affected by the wage increases pressure performed by unions.5Modern maquiladoras perform product assembly operations, that once processed are re-exported totheUnited States.All this facilitated by the significant reduction in tariffs for both the import of raw materials and components from the United States, and for subsequent export tothesame country.The origin of this concept dates back to the thirties of last century, when to driving engine was the development of the northern region while simultaneously reducing fears of conflicts like the ones that happened in the past in Texas, including war betweenthetwo countries in mid XIX century.In some cities free perimeters were created as free trade zone . This initiative was followedbythe National Border Program (PRONAF), in 1961, designed to promote economic and social development of border regions.In the vision of Jaime Serra Puche, Secretary of Industry

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and Trade of the Salinas’ Administration and one of the main responsible for the negotiation and subsequent signing of the Treaty by the Mexican government, the origin of the commercial opening of Mexico, was constructed by joining the GATT in 1986, the signing of the Economic Solidarity Pact in 1987, and NAFTA in effect from 1 January 1994. Serra Puche imagined Free Trade Agreements with the European Union and Japan, like other clear demonstrations oftheopening process formally began in 1986.Incorporating to the GATT was formally a clear signal of change Mexico's trade policy, giving prioritytoexports over imports, and thus initiating the shift policy import substitution industrialization.The consolidation of this change is more noticeable with one of the measures promoted by the Economic Solidarity Pact, and this is what establishes the maximum tariff of 20% in all sectors.Some highlights in the contributions done by Serra Puche, refers to what were the primary guidelines that led to the Salinas’ administration in seeking to achieve the exchange treaty with the main economic powerinthe world.They were conceived as a way to get to Mexico out of the continuing economic crisis in the last decades of the last century, and find ways to ensure the growth and distribution of wealth, thus tryingto reduce the high participation of segments of the populationlivingin poverty and extreme poverty.These guidelines sought, first drove the growth of non-oil exports, to reduce the risk of high dependence on the latter industry and thus boost production sectors using

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labor intensive activities.The second aspect that was pursued wastoensure the inflow of foreign direct investment tothecountry, which added to future domestic savings that couldbegenerated, would ensure macroeconomic and social goals.3. Macroeconomic Effects.One of the effects that mentioned Serra Puche, is the elimination of the distortion between the relative price between exportable and importable goods, with events such as the extension of consumer options in Mexico and the significant increase of daily exports, which multiplied ten times in the period 1993/2013, reaching 1000 million in 2013.As Castaneda (2014) points out, NAFTA had a very positive effect on the increase in Mexican exports, which somehow as mentioned, had begun a growth trend with trade liberalization implemented by the administration of President de la Madrid.US exports grew from 60 billion in 1994 to nearly US$400 billion in 20137.One of the goals that were mentioned during the construction of the Treaty by Mexico, wastosecure a significant inflow of foreign direct investment in the country.Serra Puche mentions that the average foreign investment in the five years before the Treaty was about 2,000 million dollars.In the last five years that average increased to 20.000 million.Castañeda in the Foreign Affairs article "NAFTA's Mixed Records" notes that the Treaty did nothavethe expected impact on generating an income level of foreign direct

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investment needed to supply the required target of 5% annual GDP growth.The result of foreign direct investment, in the duration of NAFTA, was less than 2% of GDP.A different perspective to see the effects of NAFTA, is that developed by Caliendo, Lorenzo in the compilation by Boskin, Michael (2014)8.One of the point refers to the disparity of members of the Treaty in its economic development and the main macroeconomic variables.An example of this is the GDP per capita of Mexico that was to begin the Treaty corresponding one-fifth of the United States.Something to note is something that happened before the Treaty but was strengthened in it, is the great exchange of intermediate goods, and in the case of Mexico 80% of its imports fromtheUnited States and Canada are such goods.In contrast Mexico mainly exports final goods to partners in the Treaty.Analyzing the effects of NAFTA, Caliendo emphasizes the analytical difficulty in extracting the true meaning of the Treaty, considering that important events occurred that somehow hadanimpact on the region in the period under analysis, the first twenty years of the same.Important events were the Tequila crisis in 1995, the bubble of the ".com" in America and eventually China's entry to the World Trade Organization. Inaddition Mexicohassigned more than 10 trade treaties since 2006, which undoubtedly had its effect on macroeconomic variables of the country. His conclusion is the generation of "trade creation" in Mexico, that helped to positive changes in the real wage in a greater extent than what happened in Canada and

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theUnited States.Serra Puche commented on a compilation done by Boskin, that NAFTA did not produce "Trade Diversion" or the derivation of trade to a less efficient member, which in this case couldbeconsidered to Mexico, given the degree of development of the other two partners Treaty andisnot therefore appropriate management of tariffs, but essentially by the existence of rules of origin.With the same argument defended free trade agreements such as NAFTA, considering them as building blocksofinternational trade, but thatwouldrequire some adjustment in establishing the World Trade Organization, to include specifically requirement of maximum components in the rule of origin of the treaties of this kind.Another effect resulting from NAFTA is what Parrilla, Joseph and Berube, Alan (2013) describe in what they call the new map of trade in North America9.US Business transactions through NAFTA with Mexico and Canada went beyond what it does with Japan, Korea, and BRICS countries combined.This trade is done through the location of different parts of the production process among member countries of NAFTA.Approximately 58% of trade conducted betweentheUS, Canada and Mexico, occurs in a network of 432 metropolitan areas.If it deemed to automotive, pharmaceutical, electronics, machinery and precision instruments, aerospace trade percentage is 69%.The research highlights that exchange have been detected in 15 pairs of Metro areas between the United States, highlighting the couple Los Angeles - Mexico City, on the rest.

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The performance of the Mexican macroeconomy in the first 20 years of NAFTA, despite the significant increase in trade through theexports as was mentioned, he did not show significant results in the performance of GDP, which experienced two contractions (1995 and 2009), two years of zero growth (2001 and 2013) and four years of high performance (1997, 2000, 2006 and 2010), and an average of only 2.6% growth, enough with the high goals intended to be produced by the (Castañeda 2013) Treaty.The per capita GDP in the 1994/2012 period grew only 1.2% annually on average, below the results observed in Brazil, Chile, Colombia, Peru and Uruguay, in the same period.Castañeda establishes an interesting reflection on labor mobility and energy.His analysis considered what it would have been NAFTA, with a style similar tothatmade by the European Union, in the sense of resource transfers from developed countriestothe Treaty (United States and Canada in this case) to infrastructure sectors such as energy in Mexico , as the EU did in Italy, Spain, Portugal, in different industries.The investment in this sector would have been significant and thus could have generated a more open attitude of Washington to negotiate issues in other areas, such as immigration.Openness to foreign investment in energy in Mexico was recently approved in the Peña Nieto administration, but it is valid Castañeda’s reflection on what would have helped if it existed at the beginning of the Treaty.Among the macroeconomic effects of NAFTA, which are common to the three countries, Serra Puche mentioned the convergence of macroeconomic variables.It highlights the evolution of two rates: inflation and

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short term interest, both with convergence trend following the path of an asymptote.

In this sense tested for cointegration, linking linear combinations of time series of the three countries, soasto detect whether thereisany long-term relationship.Since 1999,a downward trend in inflation and low volatility is observed.The same effect is proved since 1996 with regard to interest rates short term.

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Serra Puche also highlights the synchronization of business cycles, especially in Mexico withtheUnited States since 1998 when as the effects of the Tequila crisis had been diluted.4. Social Effects.Among the indirect effects of social aspects, is valid the reflection of Castaneda in "Mixed Records" about the influence of the Treaty on indirectly prevent governments repeat the mistakes of the past, as the debt overhang, moving away from the mistakes of protectionism, nationalizations, high interest rates, inflation and exchangerateinstability.In contrast macroeconomic stability policies under the Treaty and the close relationship with the United States, allowed governments to offer credit to population, housing construction and stability even in times of international crisis.The political opening was reinforced by the consequences of stability derived from NAFTA, paving the way for a

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democratic transition after 69 years of permanence of a single party in the government of Mexico.Another aspect highlighted by Castaneda is not only the economic opening of Mexico due to NAFTA, which helped to steadily modernized the country, accelerating the exchange of goods and relationships through the long border that separates it from the United States, but also helped diluting the ghosts of the emerging victimization of territorial disputes and war from the nineteenth century.However this modernization process was not complete enough to achieve local manufacturing development in the sense of reducing the percentage of imported inputs in exports below 73% in 1994. In 2013 the percentage had risen slightly to 75% not showing substantial changes and therefore wages.Something similar was seen in the participation of the number of American travelers to Mexico, which remained stable in relation to total US performing tourism abroad during the period, the activity that generates more jobs in Mexico.Another angle to be considered on the effects of NAFTA and aspects that may be pending since its implementation, is what raised Luis Rubio (2014)10with two different visions of Mexico and the impact of NAFTA.The most visible Mexico has an outstanding performance, which is achieved by the effects of the Treaty that brought features of modernity, agility and as mentioned helped to show a more competitive and growing economy, including the transformation of state enterprises into private, free trade, with macroeconomic variables under control, and increased productivity.It was also mentioned in this research, that this level of

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growth was insufficient to achieve the goals of GDP per capita and reduced poverty levels.Rubio elaborates on the other Mexico, which constitute an immense amount of small businesses, which operate with decreasing levels of productivity, low innovation and inefficiency.This task despite recent reforms implemented by the Peña Nieto administration, have been insufficient, and needs are concentrated in stimulating small businesses, with the existence of credit accessible and regulations in line with the need of building this other Mexico, such as what it was achieved by large industries directly linked to the benefits of the Treaty.The implementation of NAFTA, ledtothe creation of some programs dedicated to offset negative effects on some sectors.Blecker (2009)11, interprets the shortcomings of the Treaty in achieving established goals, are due to missing additional policies in member countries, with emphasis on Mexico, they reached areas such as education and industrial issues, with adequate investment by the government infrastructure issues.Some of the most prominent programs were insufficient to offset effects of the Treaty as:1) Procampo, which refers to direct support tothefield, launched in 1993, as compensation for Mexican producers to the competitive disadvantage caused by subsidies in member countries of the Treaty;2) Opportunities / Progresa: a government program established to fight poverty in both rural and urban communities through money transfer.Launched in 1997 as Progresa Opportunities and renamed since 2002.

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A similar perspective on the social effects of NAFTA, were expressed by Pastor, Robert (2014)12saying that the disparity of income per capita in Mexico had a significant deterioration, mainly duetothe disparity of opportunities that had the northern regions close the exchange zone with respect to regions that had no direct relationship actvidades under the Treaty.5. Demographic effects.The issue of immigration, by Mexican citizens in the United States, is still a pending debate betweenthetwo nations.It is a story with different stages, as mentionedthe Bracero program, created at the time of the First and Second World War, wasanexception to immigration laws, and a labor option in some seasons to cover agricultural activities and the rail industry.Asaresultofpressure from Unions and groups fighting for civil rights, the program was canceled.The cancelation of these programs intensified illegal immigration that was avid for opportunities.Only in the nineties the number of Mexican citizens who emigrated to the United States, represented 40% of the total received during the past century.The profile of immigrants starting from the seasonal programs of the US government, reflected people with relatively low educational level and only experience in agricultural activities.In recent decades only 5% of the immigrants were people dedicated to agricultural activities and of that percentage nearly two - thirds have done so illegally 13.Until 1990 most Mexican immigrants where founded in

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the states of California and Texas. From that date on the new immigrants settle in remote towns from the border: Atlanta, Denver, Greensboro, New York, Portland, Raleigh-Durham, Salt Lake City, Seattle, Washington DC, etc.The expected effect of NAFTA on Mexican immigration reductiondidnothappened, and among the initial factors that can be cited, the severe Tequila crisis had strong impact on the reduction of jobs in Mexico, motivating immigration trends.One of the best times to be jointly developed an appropriate immigration policy occurred during the Fox (2000-2006) Administration in February 2001, when a comprehensive proposal was presented to the Bush administration.It considered four key areas: 1) legal status for illegal immigrants, 2) a new program for seasonal workers, 3) joint measures to curb violence in the border, and 4) changes in the immigration law providing more opportunities to Mexican workers.The occurrence of the terrorist attacks in September 2001, gave priority on the US agenda to internal security matters, therefore these negotiations that were started never had continuity through the years.In the years after this initiative, various proposals have been debated within the US Congress, but the issue has not had new definitions despite the importance. The United Nations at the beginning of the new century, estimated that the percentage of people living in a different country of birth was 3% of total world residents. In the case of Mexico at that time the percentage was 9%.In the article mentioned in Social Effects from Pastor,

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there is an elaboration on internal migration effect naturally generated to regions offering more job opportunities. From the contributions of NAFTA to Mexico in terms of multiplying free trade and foreign direct investment, they also increased the disparity, since 90% of the investments have been directed towards four states, three of them northerners. The economies of the northern border states have shown agrowth 10 times greater than those in the south, driving a strong migration to the former.One of the goals established former President Salinas de Gortari (1988-1994), launching NAFTA meant a radical change that would result in the issue of Mexican immigration in the United States. The objective expressed by Salinas de Gortari was to export goods and not people. Growth in commodity exchange was achieved, but something similar occurred with the entry of Mexican immigrants. In 1994 the immigrant population born in Mexico was of 6.2 million people. At the end of 2013, that number doubled despite the deportation of a million Mexicans by the Obama administration between 2009 and 2013. (Castañeda, 2014).6. NAFTA and security issues.The United States Mexico common border, with an area of 3,152 km, 50 official border crossings, with the existence of four main twin cities: Tijuana-San Diego, Nogales (Sonora) -Nogales (Arizona), Ciudad Juarez-El Paso, and Laredo - Nuevo Laredo, make transport routes intense trade driven by NAFTA. It is the busiest border in the world, recorded in 1996, for example the crossing of 75 million cars, 3.5 million trucks and 254 million people 14.

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Inspection for smuggling this important traffic is not all goods circulating cites the Washington Post (02/11/1997) but 5% of them, approximately.The consumer market of American illicit drugs is the largest in the world, and the intensification of trade along the long border with Mexico since NAFTA, has contributed to maintaining the flow of drugs towards the United States, as well shipment of military weapons used by different organizations of Mexican organized crime.The implementation of the security doctrine Bush, did not grant priority to the issue of drug trafficking and focus almost exclusively on the issue of internal security linked to the terrorist threat, as happened in 2005 when the leaders of the three countries of North America, signed the SSP (Security and Prosperity Partnership), who share the values of freedom, economic opportunity and the existence of strong democratic institutions.The issue of drug trafficking was concentrated in the action of the security forces of the US and Mexico with greater collaboration in the Calderon administration (2006-2012) and a reduction of importance in the agenda of Peña Nieto after taking office in 2012, though the overall strategy is not very different. These concepts are clearly expressed in the weekly geopolitical report Stratfor of 7 January 2014 on the future of NAFTA where it is mentioned that organized crime is a visible obstacle that may slow foreign investment despite that Peña Nieto’s administration has lowered the tone in its communication strategy of internal security subjects. 15 .7. Future of NAFTA.Elapsed twenty years after the implementation of

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NAFTA, world trade has undergone important changes, among which may be mentioned that 50% of it is done by the 250 treaties that exist in different regions of the planet.NAFTA according to a study done by the consulting firm KPMG "Competitive Alternatives - KPMG's Guide to International Business Location Costs (2011), analyzing the performance of private companies by country highlighted Mexico’s performance, which ranked third on the list as one of the best locations for business, from the point of view of profitability before taxes.Something similar but obviously linked occurs with a study done by the Boston Consulting Group, "Competitive Alternatives - KPMG's Guide to International Business Location Costs (2011)", which analyzes the manufacturing costs of the top 25 exporting economies in the world, and Mexico also mentioned in a very favorable position, ranking third.These outstanding positions achieved by Mexico undoubtedly reflect the economic integration achieved through the Treaty.Mexico confirms its competitive position in the outsource of manufacturing, with the advantage that additionally has the transportation costs, given its proximity to the US compared to other countries, especially China, which must also cover a tariff Most Favored Nation, that increases their costs .With regard to energy, in addition to global US leadership as a producer of natural gas achieved in recent years, the Energy Reform undertaken by Mexico in the Peña Nieto’s administration, predicts that gas production in this country in 2040 would be four times larger than currently,

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using reserves from the basins already detected.The last point highlighted by Serra Puche that can help to increase the contributions from NAFTA, together with costs and energy elements, is the right mix of factors of production, in the sense that the US and Canada are major contributors of capital and Mexico is on the labor area, supported by its competitive workforce.This new commercial board where NAFTA is, requires according to Serra Puche, a more active role from governments of the three countries in the sense of strengthening specific public policies for the better use of the Treaty, with focus in the real competitive advantages of the region: cost of transport, energy and the ideal combination of factors of production.The future performance of NAFTA also requires of appropriate negotiations with two extra-regional agreements that stand out for their global relevance.The first to be considered is the Transpacific Treaty (TTP), which opens the door to burgeoning markets of Asia Pacific and the Americas. This Treaty involves 40% of the world economy and a third of world trade. One aspect that should be considered NAFTA, is not to lose competitive advantage, with restrictions on work issues or environment from new members extended by the TTP. The suggestion is to do something similar to what was done with the additional agreements on both issues when NAFTA was launched in 1994.According to The President Office of the US Trade representative 16 , TPP builds on previous Treaties, including NAFTA, in order to raise existing standards and placing new ones that reflect current economic realities. Improvements in standards relating to the environment, to work, to ensure that state - owned

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enterprises compete on a commercial basis, the protection of the free flow of digital information, to ensure protection to 40 million Americans whose work depends on innovation and that disputes in work areas and Environment have adequate mechanisms.The second Treaty to be considered and for which negotiations are ongoing between the United States and the European Union, it is the TTIP (Transatlantic Trade and Investment Partnership). Mexico and Canada already have an agreement with the European Union, and here the challenge is to achieve convergence of the three countries as a block, once the negotiations between the US and the European Union have concluded.8. Conclusions.The launch of the NAFTA represented the most important step towards trade liberalization in the country , after the entry into GATT and the radical change in economic policy from was held for decades by teh different administrations of the PRI in Mexico.The most important contribution of NAFTA to Mexico is sustained process of improvements in its economy which helped reduce the gap with the degree of development of its partners in the Treaty.The research work done by Lerman, Daniel-Maloney, William & Servén, Luis (2005), showed the impact of NAFTA on Mexico, whose exports would have been 50% lower without the Treaty, as well as foreign direct investment that would have reached 60% of the contributions made. 16 .The macroeconomic effects of NAFTA in producing improvements in per capita income, did not have the

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expected effect. The important Tequila crisis at the time, and other worldwide events that affected their partners, given the growing linkage, collaborated in not producing the expected effects. However the biggest impact that prevented the growth of per capita income and poverty reduction was mentioned earlier in the existence of two Mexicos (Rubio, Luis. 2014). The Treaty had excellent effects on the efficiency and overall results of large industries located in Mexico, mainly from US, Mexican and European origin, as research showed KPMG. The other important part of the Mexican economy, consisting of medium and small businesses experienced losses of efficiency and deterioration, and thus affect indexes mentioned of national income and poverty. It is estimated that the degree of informality reaches 60% of the economically active population according to the Institute of Statistics and Geography (INEGI, 2012) 17 of the Mexican government and 52.3% of the total population is below the line poverty (CIA Worldfact Book).The additional imbalance generated by the NAFTA was due to the advantage of the northern and central states of Mexico, due to the proximity of the main activity area generated by the Treaty, with respect to the South, which have historically had an economic level of lower development.Without any doubt the existence and consolidation of maquiladoras already meant an advantage for states with a shared border with the United States, but the NAFTA granted additional opportunities for these assembly industries.

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One of the goals pursued by NAFTA, the reduction or containment of the migratory flow of Mexicans to the United States, was not achieved, and instead came to show growth as mentioned in Demographic Effects of this paper. The main reasons are concentrated on two aspects: 1) the lack of an agreement, from the original proposal of President Fox , 2) the aforementioned disparity of income, labor supply, insecurity in northern Mexico, with the growing traffic in border areas helping to promote the search for new opportunities. The ongoing debate on the issue is open and deserves due attention.Regarding security issues and NAFTA, the high degree of capillarity of the vast northern border of Mexico, with so many crossing points and the high level of movement of goods and people, turns out to be very to control, opening the door to growing business of Mexican drug trafficking organizations in its massive illicit export and import of military weapons for drugs operations.The issue has not been sufficiently highlighted as an area of alert by the countries involved in the problem, and therefore is another subject that should be part of the joint agenda of US-Mexico.The future of NAFTA, will further confirm the significant development and efficiency achieved by manufacturing industries linked to activities of the Treaty, maintaining or improving the competitive advantages in relation to other countries, as indicated by the positions of leadership in profitability and the ideal location to optimize costs.Among the goals of the next Mexican government should be implementing policies to extend the benefits of the "other Mexico", and thus improve indicators of economic health, as rising per capita income and reducing poverty

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levels a sustained manner over time.The signing of the TTP should be another mechanism that should help to achieve the above mentioned improvements, given the size and diversity of the market that make the members thereof, as well as adequate coordination with the TTIP, through adjustments in the existing treaty by Mexico.Finally, NAFTA generated since its inception stronger political ties of Mexico with the United States, and the most obvious example occurred in the first year of the Treaty, during the severe Mexican economic crisis in late 1994. Crisis generated by the conjunction many factors, but within which three had much impact. The first was the economic policy adopted that while it had reduced levels of inflation, remained a band floating exchange rate requiring permanent adjustment by the Bank of Mexico to deviations, requiring sustained inflow of foreign investment, which in situations of instability, jeopardized the level of hard currency reserves. TESOBONOS issuing by the Bank of Mexico, backed on dollars, as mentioned above, helped to overcome the severe crisis of the Tequila. The second factor was the growing political instability generated by the rebellion of the Zapatista insurgency in Chiapas (January 1994), the assassination of PRI candidate for the presidency, Luis Donaldo Colosio (March 1994), the resignation of Interior Secretary Jorge Carpizo McGregor (June 1994) and the assassination of PRI president, José Francisco Ruiz Massieu (September 1994). The third factor was the change of the economic policy of the United States, which in 1994 had started increasing the interest rate, and thus was becoming attractive for

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investment flows to that market. The response of the Clinton administration to his partner in NAFTA, was swift and successful, through his leadership in getting a package bailout, that consisted of additional support from the IMF, Brazil, Argentina, Chile, Colombia, the Bank International of loans and international private banking.In political terms the Treaty through its main macroeconomic contributions, which among them were the significant increase in commercial / industrial activity linked to exports and the inflow of foreign direct investment, helped to build the foundation for further democratization in Mexico, within a framework of overall stability greater than what was experienced in most of the last century.

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Figure 1: Source: Center for the Study of Public Finance (2009). Honorable Chamber of Deputies Congress, Mexico. Http://www.cefp.gob.mx/intr/edocumentos/pdf/cefp/2009/cefp0712009.pdf

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Figure 2: Evolution of the exchange rate and the Mexican Foreign Debt

Gráfica 3: Variaciones en las Reservas Internacionales, México Figure 3: Changes in International Reserves, MexicoSource: Mexican Debt Crisis 1982. https://economics.rabobank.com/publications/2013/september/the-mexican-1982-debt-crisis

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1.Internal Font: Marquez, Graciela.(2104)."Keys of the economic history of Mexico, the long-term performance (XVI-XXI centuries).Mexico, Fund of Economic Culture.2.Fuente: Vernon, Raymond.(1963)."The Dilemma of Mexico's Development: The Role of Private and Public Sectors".Cambridge.Harvard University Press.3.Hufbauer, Gary & Schott, Jeffrey.(2004)."NAFTA Revisited, Achievements and Challenges".Washington.Institute for International Economics.US Library of Congress.4.Fuente:World Bank, GDP current dollars 2014,http://data.worldbank.org/indicator/NY.GDP.MKTP.CD World Bank, Population, 2014http://data.worldbank.org/indicator/SP.POP.TOTL World Bank, World GDP , 2014 http://databank.worldbank.org/data/download/GDP.pdf World Bank, World GDP, 2014 http://databank.worldbank.org/data/download/POP.pdf 5.Fuente: Douglas, Lawrence & Hansen, Taylor. ( 2003). “ Los orígenes de la Industria Maquiladora en México”.Banco de México, Revista Comercio Exterior. http://revistas.bancomext.gob.mx/rce/magazines/59/7/RCE.pdf 6.Fuente:Serra Puche, Jaime.(2015)."The FTA and the formation of a region, a test from a Mexican Perspective".Mexico DF.Fondo de Cultura Economica.Kindle Source7. Source: Castañeda, Jorge.(2013)."NAFTA's Mixed Record, The view form Mexico".Www.foreignaffairs.com/articles/canada/2013-12-06/naftas- mixed - record 8. Source: Bosquin, Michael.(2014)."NAFTA at 20, The North American Free Trade Agreement's Achievements and Challenges".California.Hoover Institution at Stanford Junior University Leland9. Source: Parilla, Joseph & Berube, Alan.(2013)."The New North American Trade Map".Washington.Brookings Institute.http://www.brookings.edu/blogs/ the -avenue / posts / 2013/11 / 07- north - american - trade - map - grill - berube10.Fuente: Rubio, Luis (2014)."The Two Mexicos" .USA.Project Syndicate.http://www.project-syndicate.org/commentary/jaana-remes-and-luis-rubio-take-issue-with-flattering-headlines-heralding-a-new-emerging-market-success-story11. Source: Blecker, Roberto & Esquivel, Gerardo.(2009)."NAFTA, Trade and Development".Washington.Amercian University.Http://www.american.edu/cas/economics/pdf/upload/2009-24.pdf12.Source: Pastor, Robert."North America's Second Decade".USES.Foreign Affairs.Jan / Feb issue.13.Hufbauer, Gary Clyde - Moran, Theodore & Oldenski, Lindsay, assited by Martin Vieiro.(2013)."Outward Foreign Direct Investment and US Exports, R & D and Jobs: Implications for US Policy". Washington. Peterson Institute for International Economics. Versa Press Inc. Kindle Source.14. Source: International Criminal Justice Review. (2005). "The Management

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of Border Security in NAFTA: Imagery, Nationalism and the War on Drugs". http://libarts.wsu.edu/isic/research/pdf/border-security-nafta.pd15. Source: Stratfor. (2014). "NAFTA and the Future of Canada, Mexico and the United States". Washington. https://www.stratfor.com/weekly/nafta-and-future-canada-mexico-and-united-states16. Source: Lederman, Daniel-Malonet, William & Servén, Luis. (2005). "Lessons from NAFTA for Latin America and the Caribbean". Washington. The International Bank for Reconstruction & Development-The World Bank.17. Source: El Economista, Mexico. (2012). http://eleconomista.com.mx/industrias/2012/12/11/mas-29-millones-trabajan-informalidad-inegiBibliography.Michael Boskin. ( 2014). "NAFTA at 20, The North American Free Trade Agreement's Achievements and Challenges". California. Hoover Institution at Stanford Junior University Leland.Hufbauer, Gary Clyde & Schott, Jeffrey (2005). "NAFTA Revisited, Achievements and Challenges". Washington. Institute For International Economics. Library of Congress Cataloging in Publication Data.Lederman, Daniel-Malonet, William & Servén, Luis. (2005). "Lessons from NAFTA for Latin America and the Caribbean". Washington. The International Bank for Reconstruction & Development-The World Bank.Marquez, Graciela. (2104). "Keys of the economic history of Mexico, the long-term performance (XVI-XXI centuries). Mexico, Fund of Economic Culture.Pastor Robert. "North America's Second Decade".USES.Foreign Affairs. Jan / Feb issue.On the Western Hemisphere Subcommittee of the Committee on Foreign Affairs House of Representatives. (2014). "NAFTA at Twenty: Accomplishments, Challenges, and the Way Forward". Washington.US

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