Mexico city street food Robin Cerutti/Getty Images

The Mexican Paradox

After a series of macroeconomic crises in the mid-1990s, Mexico undertook bold reforms, from liberalizing its economic policies to investing in education. But, while these efforts brought some benefits, they failed to spur significant productivity and economic growth.

CAMBRIDGE – Few economies pose as big a paradox as Mexico’s. Emerging from a series of macroeconomic crises in the mid-1990s, Mexico undertook bold reforms that should have put it on track for rapid economic growth. It embraced macroeconomic prudence, liberalized its economic policies, signed the North American Free Trade Agreement (NAFTA), invested in education, and implemented innovative policies to combat poverty.

In many respects, these reforms paid off. Macroeconomic stability was achieved, domestic investment rose by two percentage points of GDP, and average educational attainment increased by nearly three years. Perhaps the most visible gains were on the external front. Exports jumped from 5% to 30% of GDP, and the GDP share of inward foreign direct investment tripled.

But where it counts – in overall productivity and economic growth – the story is one of substantial disappointment. Since 1996, per capita economic growth has averaged well below 1.5%, and total factor productivity has stagnated or declined.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

http://prosyn.org/BlhbYy2;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.