Understanding the Mexican Economy After NAFTA

Mexico has experienced many changes since NAFTA was initiated on January 1, 1994 ("The North American Free Trade Agreement", n.d.). There is much argument as to whether or not NAFTA actually helped or hindered Mexico's economy. When NAFTA began in 1994 the Mexican government was "single-party dominated, and in 2003 to present time it has been a "multiparty democracy" (Smith & Lindblad, 2003). Between the years 1993 and 2003, the GDP for Mexico has risen from $403 billion to $594 billion (Smith & Lindblad, 2003). Mexican immigrants living in the United States has risen between the years 1990 and 2000 from 2.04 million to 4.81 million (Smith & Lindblad, 2003). The number of Mexican students that finish high school had risen 8% between the years 1993 and 2003 (Smith & Lindblad, 2003).

Part of the reason for Mexico's high illegal immigration rate to the United States is due to the weak economic growth since NAFTA (Bussey, 2003). Bussey states "Government statistics show that while extreme poverty has fallen sharply, the number of people classified as poor or extremely poor has risen from 62 million to 68 million, out of a population of more than 100 million" (2003). Wages have not improved since NAFTA either. The wages in Mexico are actually much lower now then when the agreement was first put into effect (Bussey, 2003).

"NAFTA has had no discernable effect on Mexican export performance" (Pacheco-Lopez, 2005). Although there has been no abundant amount of growth in exports there has been in imports (Pacheco-Lopez, 2005). "These results support our argument that one of the effects of trade liberalization in Mexico has been increasing dependence on imported inputs" (Pacheco-Lopez, 2005). Pacheco-Lopez says that NAFTA "shows no significant effect on exports, which is, perhaps, not surprising, given the extent of trade liberation that had already taken place" (2005). In other words trade liberation, such as NAFTA was not the answer for swift economic growth as it was promised when it began.

NAFTA also mandated that Mexico raises its environmental protection standards to be the same as the United States standards ("Mexico: Environmental Issues", 2004). This brought two new bodies to assist with this matter: North American Commission for Environmental Cooperation and North American Development Bank ("Mexico: Environmental Issues", 2004). These bodies were designed to assist in the provision of funding for Mexico to develop the necessary equipment and procedures to eliminate the environmental issues along the border with the United States ("Mexico: Environmental Issues", 2004). The environmental issues that Mexico faces are "an absence of sewage systems, running water, and electricity" ("Mexico: Environmental Issues", 2004). Thanks to Mexico's concern for the environment, there has been an improvement in air quality, which is visible in Mexico City ("Mexico: Environmental Issues", 2004).

There have been many problems arise since NAFTA in Mexico with concern for worker's rights. Workers were not protected properly by NAFTA in the first three years (Zirnite, 1996). One example of this problem was when MDM workers tried to form an independent union and break away from the CTM (Zirnite, 1996). Zirnite says that the workers never had a chance, and that when an election was finally held, it was rigged "in an effort to assure continued dominance of the government-backed union" (Zirnite, 1996). After the election many of the independent union activists were fired, and "took their grievances to the dispute panel established under the labor side agreement" (Zirnite, 1996). To the disgruntled employees' dismay, the panel could only offer ministerial consultations due to a lack of enforcement powers (Zirnite, 1996).

As you can see there are many hardships and also good outcomes from the North American Free Trade Agreement. If you ask many people from Mexico, you will find differing opinions about NAFTA. It is important that we understand the background of Mexico with NAFTA, so we can adequately communicate while working with the country.

References

Bussey, J. (2003, November 10). NAFTA revisited. Retrieved January 16, 2007, from CFO Web site: http://www.cfomaquiladoras.org/naftarevisited.en.html

Mexico: environmental issues. (2004, January). Retrieved January 16, 2007, from EIA Web site: http://www.eia.doe.gov/emeu/cabs/mexenv.html

Pacheco-Lopez, P. (2005, Summer). The effect of trade liberalization on exports, imports, the balance of trade, and growth: the case of mexico. Journal of Post Keynesian Economics, 27(4), 595-619. Retrieved January 16, 2007, from Business Source Elite.

Smith, G. & Lindblad, C. (2003, December 22). Mexico was nafta worth it?. Business Week, (3863), 66-72. Retrieved January 16, 2007, from Business Source Elite.

The north american free trade agreement. (n.d.) Retrieved January 16, 2007, from Public Broadcasting Service Web site: http://www.pbs.org/kpbs/theborder/history/ timeline/24.html

Zirnite, P. (1996, December 3). NAFTA flaw leaves workers without rights. Retrieved January 16, 2007, from Albion Monitor Web site: http://www.monitor.net/monitor/9612a/ss-naftafail.html