Economis History

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Economics History

During the 1980s Mexico experienced what Latin American social scientists call a change in its "development model " Gone is the import-substitution industrialization model that characterized Mexico since the 1930s . Instead , Mexico has become an open economy in which the state 's intervention is limited by a new legal and institutional framework . Under the new model , the tendency is for the market to replace regulation , private ownership to replace public ownership

, and competition , including that from foreign goods and investors , to replace protection . Nothing illustrates the change in strategy more vividly than the pursuit of a free trade agreement with the United States , first mentioned by Salinas in June 1990 , and the constitutional reform of land distribution and the ejido system adopted at the end of 1991 (Watling 1992

What prompted this change in development strategy ? Mexico had taken a risk in the 1970s by borrowing heavily in world capital markets and indulging in over-expansive policies , and then paid dearly when oil prices fell and world interest rates rose . Adjustment to the new circumstances required a policy that would increase net exports generating foreign exchange to service the external debt . Because the government , not the private sector , owed most of the external debt fiscal policy also had to change in to increase revenues and cut noninterest expenditures . The restoration of growth required changes that would build confidence and encourage private capital...