2 - The making of modern Mexico

Summary

Mexico witnessed a profound transformation from the 1930s onwards that changed its social and economic structure. It became a more urban, increasingly educated society and with longer life expectancy. The economy grew more sophisticated and eventually became a major trading partner in the North American region. This chapter will chart the stages through this long process beginning with the period of rapid growth stimulated by domestic demand and import substitution. The shortcomings of this development model began to falter in the 1960s and created a series of contradictions that were not possible to overcome immediately and not without major structural change. Until that eventually happened, Mexico relied on foreign debt and oil revenues to maintain its rapid rate of growth, but that only made the contradictions more profound so when the debt crisis exploded in the early 1980s, the fall was even deeper. The structural reforms of the 1980s and 1990s that followed a decade of stagnation, further changed Mexico’s economy and society. Some sectors and regions developed much more than others, the successful ones linked to foreign trade and the US economy, while others more isolated remained less developed and lagged behind. There were no effective policies to ensure a more balanced growth. Those changes were accompanied by an incipient and slow democratization process, that is still on its way today.

THE GOLDEN AGE OF IMPORT-SUBSTITUTION INDUSTRIALIZATION

For many countries the Second World War was the starting point of a long-lasting policy of import-substitution industrialization. The isolation of those economies forced them to look inwards and promote domestic industry with protection and sometimes subsidies. That was not the case of Mexico. Owing to its geographic location, Mexico continued to trade with the United States throughout the war and was able to grow at a rapid pace. As the world conflict ended, the Latin American economies, despite further isolation succeeded in growing fairly rapidly during the postwar period (Bulmer-Thomas 2014: ch. 8). Mexico implemented a policy of import substitution industrialization late in the 1940s, which fuelled its continued growth.