Guest Blog: NAFTA: Necessary to Cement Mexico’s Economic Reforms but Not Sufficient for GrowthBy Luis Rubio // Tuesday, March 18, 2014
Mexico has been an independent nation for over 200 years now and we Mexicans have seen everything: periods of light and periods of darkness, eras of growth and stages of crises, times of peace and times of violence, moments of optimism and ill-fated intervals. There have also been innumerable grandiose plans, the majority of which end up supplying nearly always the poorest of results. Mistrust in the government is not recent nor is it the product of chance.
There is one exception to this rule that has ended up transforming the country – NAFTA. The agreement was conceived to give permanence to the reforms that had been carried up to then. Good or bad, and with all of their shortcomings, those reforms brought about the opportunity to effectively transform the reality but only if they were preserved in the long term. In other words, the categorical imperative of NAFTA was procuring the affording of certainty to the key factor of the reforms, the touchstone of the modernizing project of that moment: investment.
Many are the reasons for such lean results but two are prominent: lack of continuity and lack of realism. The continuity problem is summed up in the fact that every six years, when a new administration is inaugurated, the wheel is reinvented. No plan in Mexico can withstand a change in the presidential office: each government must of necessity imprint a new rationale upon its thrust, generally without there being an objective evaluation of the existing one. What there was before was always bad, inadequate or insufficient, which calls for a change, often radical.
The lack of realism derives from the willfulness that tends to characterize the plans of the government: a new crowd comes into power, full of creative and innovative ideas, with which it expects to transform, change the country at the root. Some of these plans make sense, but the overwhelming majority have been mere bright ideas, sustained on the expectation that the new government, heir-apparent of the world, will accomplish its mission because it is competent whereas the previous one was the opposite. In addition to this, our governments and legislators have been extraordinarily prone to advancing great plans without effecting the changes that would be indispensable for reaching their own objective. Thus, Mexicans end up with a Constitution saturated with good wishes (and often reformed) without the least probability of their translating into the development of the country or the well-being of the population.
The result is that there is not a system of government to which the citizen can refer or in which it can trust. Everything depends on the president in turn and his plan for his six-year term. What matters is not consolidating a system of government that treats all citizens equally and in an impersonal manner, but the great vision and the cronies. Of course none of this cultivates the loyalty of the citizenry: instead, contrariwise, there is always, lurking in the wings –the fear- of what is to come, with all of the uncertainty that this scenario entails.
The reforms of the eighties and nineties, as deep and biting as they were, were imbued with contradictions that explain a good part of the results. Some sectors remained subject to competition, others did not; the privatizations followed a logic of maximization of fiscal revenue instead of a transformation of the industrial structure; the economy, including imports, were liberalized but without deserting the darlings of the regime; regulations were eliminated but subsidies were upheld. In a word, it was another of the grandiose plans that would transform the universe.
Revealing of the nature of the political system, what is crucial about NAFTA resides in the recognition of the incapacity of the existing institutions to confer upon them the type of guarantee that the investor requires. In this regard, notwithstanding its two thousand pages, NAFTA is nothing more than a form of borrowing U.S. institutions for the benefit of Mexico. In this lie its essence and also its limitations.
NAFTA was conceived to preserve what had been achieved, but not to advance what was lacking. In this fashion, in yet another of the myriad contradictions of the reformer project, NAFTA achieved the elemental –according guarantees- but made it possible to abandon the reform process precisely when this was most important. Everything became paralyzed exactly when the whole of the Mexican economy and society needed to experience a transformation in productive structures and in education, in the nature of the government and in the mechanisms of regulation for raising productivity. NAFTA was the end of the reform process rather than the beginning of an era of transformation. What was urgent implied an integral transition to move from a closed and protected economy to an open and competitive one. In this manner, instead of this occurring, it wound up creating and preserving a dual economy in which one part is competitive and the other constitutes an encumbrance for growth.
NAFTA contributed to the transformation of countless industrial sectors, opened up opportunities for the growth of enterprises and activities, heightened the productivity of considerable portions of the economy and fulfilled its main objective with respect to investment.
Whatever the position assumed with respect to NAFTA, no one can doubt its enormous transcendence and its core function in achieving practically everything positive that takes place in the Mexican economy. What NAFTA can’t do is substitute for essential governmental functions. That is the great deficit that the Mexican society lives with and on which depends the realization of its tremendous potential.
Luis Rubio is Chairman of CIDAC (Center of Research for Development), an independent research institution devoted to the study of economic and political policy issues. Before joining CIDAC, in the 1970’s he was planning director of Citibank in Mexico and served as an adviser to Mexico’s Secretary of the Treasury. He has served on the boards of The Mexico Equity and Income Fund and of The Central European Value Fund, Inc., and is a former member of the board of directors of Banamex and Banco Obrero. Rubio serves on the board of directors of The Human Rights Commission of the Federal District, writes a weekly column for Reforma and is a frequent contributor to The Washington Post, The Wall Street Journal, and The Los Angeles Times. He is author and editor of thirty seven books, including Mexico’s Dilemma: The Political Origins of Economic Crisis; Political Reform: Necessary Component of Modernity; and Sovereignty and Free Trade. His most recent book is titled Tres Ensayos. Fobaproa, Privatización y TLC. He holds a diploma in Financial Management and his MA and PhD in political science are from Brandeis University.
Image Credit: “Mexico City, Mexico” courtesy of Flickr user Boris G
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