Mexican Economy I. Historical, Population, Culture, Political, and Economic Information History Mexico was the site of some of the earliest and most advanced civilizations in the western hemisphere. The Mayan culture, according to archaeological research, attained its greatest development about the 6th century AD. Another group, the Toltec, established an empire in the Valley of Mexico and developed a great civilization still evidenced by the ruins of magnificent buildings and monuments. The leading tribe, the Aztec, built great cities and developed an intricate social, political, and religious organization.
Their civilization was highly developed, both intellectually and artistically. The first European explorer to visit Mexican territory was Francisco Fernndez de Crdoba, who in 1517 discovered traces of the Maya in Yucatn. In 1535, some years after the fall of the Aztec capital, the basic form of colonial government in Mexico was instituted with the appointment of the first Spanish viceroy, Antonio de Mendoza. A distinguishing characteristic of colonial Mexico was the exploitation of the Native Americans. Although thousands of them were killed during the Spanish conquest, they continued to be the great majority of inhabitants of what was referred to as New Spain, speaking their own languages and retaining much of their native culture. Inevitably they became the laboring class. Their plight was the result of the ‘encomienda’ system, by which Spanish nobles, priests, and soldiers were granted not only large tracts of land but also jurisdiction over all Native American residents.
A second characteristic of colonial Mexico was the position and power of the Roman Catholic church. Franciscan, Augustinian, Dominican, and Jesuit missionaries entered the country with the conquistadores. The Mexican church became enormously wealthy through gifts and bequests that could be held in perpetuity. Before 1859, when church holdings were nationalized, the church owned one-third of all property and land. A third characteristic was the existence of rigid social classes: the Native Americans, the mestizos, mixed Spanish and Native American (an increasingly large group during the colonial era), black slaves which were brought from Africa and the Caribbean, freed blacks and white Mexicans. The white Mexicans were themselves divided.
Highest of all classes was that of the peninsulares, those born in Spain, as opposed to the criollos, or Creolespeople of pure European descent who had been born and raised in New Spain. The peninsulares were sent from Spain to hold the highest colonial offices in both the civil and church administrations. The peninsulars held themselves higher than the criollos, who were almost never given high office. The resentment of the criollos became an influential force in the later movement for independence. In 1808 the viceroy, under pressure from influential criollos, permitted them to participate in the administration.
Other peninsular officials objected and expelled the viceroy. In the midst of these factional struggles a political rebellion was begun by the Mexican people. Mexico has been rocked by political rebellion during most of its entire history in one way or another. Under the various dictatorships that Mexico found itself under at times in history, it made tremendous advances in economic and commercial development. Many of the new undertakings were financed and managed by foreigners (mostly American and European). This was and continues to be a major factor in the discontent of most Mexicans. Moreover, the government favored the rich owners of large estates, increasing their properties by assigning them communal lands that belonged to the Native Americans.
When the Native Americans revolted, they were sold into peonage. Discontent, anger and a spirit of revolt continued to grow throughout Mexico. Madero was elected president in 1911, but was not forceful enough to end the political strife. Other rebel leaders, particularly Emiliano Zapata and Francisco (Pancho) Villa, completely refused to submit to presidential authority. Victoriano Huerta, head of the Madero army, conspired with the rebel leaders and in 1913 seized control of Mexico City.
New armed revolts under Zapata, Villa, and Venustiano Carranza began, and Huerta resigned in 1914. Carranza took power in the same year, and Villa at once declared war on him. In addition to the ambitions of rival military leaders, intervention by foreign governments seeking to protect the interests of their nationals added to the confusion. In August 1915, a commission representing eight Latin American countries and the United States recognized Carranza as the lawful authority in Mexico. The rebel leaders, except for Villa, laid down their arms. The bandit leader incited his forces to commit crimes against Americans to show his resentment against the United States and in 1916 led a raid on Columbus, New Mexico.
As a result, an American force under General John J. Pershing was sent to Mexico. A new constitution, enacted in 1917, provided for a labor code, prohibited a president from serving consecutive terms, expropriated all property of religious orders, and restored communal lands to the Native Americans. Many provisions dealing with labor and social welfare were advanced. Some of the most drastic were intended to curb foreign ownership of mineral properties and land.
In 1936 an expropriation law was passed enabling the government to seize private property whenever necessary for public or social welfare. The national railways of Mexico were nationalized in 1937, as were the soil rights of the oil companies. A government agency called Petrleos Mexicanos, or Pemex, was created to administer the nationalized industry. The expropriations seriously affected the Mexican oil industry, for it became difficult for Mexico to sell oil in U.S., Dutch, and British territories. Mexico was forced to arrange barter deals with Italy, Germany, and Japan.
The oil trade with these nations was interrupted by World War II. In 1940, the so-called Good Neighbor Policy of the United States became dominant in Mexican politics. This policy involved close cooperation with the United States in commercial and military matters. Mexico agreed to allow the United States Air Force to use Mexican airfields and also agreed to export critical and strategic materials (mostly minerals) only to countries in the western hemisphere. Consistent with its policy of cooperation with the United States, Mexico severed diplomatic relations with Japan, Italy and Germany in December 1941. In May 1942, after the sinking of two Mexican ships by submarines, the Mexican Congress declared war on Germany, Italy, and Japan.
Later that same year a trade agreement, establishing mutual tariff concessions, was negotiated by Mexico and the United States. In 1944, Mexico agreed to pay U.S. oil companies $24 million plus interest, for oil properties expropriated in 1938. In June 1945, Mexico became an original member of the United Nations. The government stabilized the peso in with the aid of loans from the Treasury of the United States and the International Monetary Fund. In 1950, the problem of Mexican laborers who entered the United States to seek seasonal farm employment became a matter of grave concern to the two governments. Official agreements between Mexico and the United States provided for the legal entry of a specified number of such workers annually.
Approximately 1 million, however, crossed the border illegally every year. The problem was further complicated by the demand of the Mexican government for guarantees against the exploitation of its citizens by U.S. employers and by the hostility of U.S. farm labor organizations toward the competition of Mexican migratory laborers willing to work for substandard wages. In March 1952, the Congress of the United States passed a bill providing for the punishment by fines and imprisonment of those recruiting and employing aliens who entered the country illegally.
The Mexican economy grew at a healthy annual pace during the period from 1970 to 1974, but beginning in 1975 growth decreased markedly and inflation rose substantially. In an attempt to reduce the nation’s foreign-trade deficit, the government in 1976 devalued the peso by more than 50 percent by changing from a fixed to a freely floating exchange rate. A potentially beneficial economic development was the discovery in 1974 and 1975 of huge crude-petroleum deposits in Campeche, Chiapas, Tabasco, and Veracruz states. Oil production more than doubled during the latter half of the 1970s. By the mid-1980s a rapid increase in foreign debt, coupled with falling oil prices, had plunged the country into severe financial straits.
In 1989, the Salinas government sped up the privatization of state-controlled corporations and modified restrictive trade and investment regulations to encourage foreign investment by permitting full control of corporations by foreign investors. The current president, Ernesto Zedillo, is a strong advocate of reform. He has taken the lead in performing budget cuts, price and tax adjustments, tight monetary policy and further deregulation and privatization. Population The Mexican population is composed of three main groups: the people of Spanish descent, the Native Americans, and the people of mixed Spanish and Native American ancestry, or mestizos. Of these groups, the mestizos are by far the largest, constituting about 55 percent of the population.
The Native Americans total about 30 percent. The population of Mexico is 90,419,606. The population density in 1990 was 119 people per square mile with about 73 percent of Mexicans living in urban areas. (Encarta, “Mexico”) Political Divisions Mexico consists of 32 administrative divisions31 states and the Distrito Federal (federal district), which is the seat of the federal administration. The national executive power is vested in a president, who must be Mexican-born and the child of a native Mexican. The president is popularly elected for a six-year term and may never be reelected.
The president appoints the cabinet, which is confirmed by the congress. The legislative power in Mexico consists of the senate and the chamber of deputies. The upper house is a senate, with 64 members popularly elected for six years. Two senators are elected from each state and from the federal district. The lower house is a chamber of deputies, made up of 500 members elected to 3-year terms.
Three hundred are elected from single-member districts based on population, and the remainder are elected according to a system of proportional representation. Senators and deputies may not serve two consecutive terms. The highest tribunal in Mexico is the supreme court of justice, made up of 21 full-time members appointed by the country’s president with the consent of the senate. Other important judicial bodies in Mexico include circuit courts and district courts. The chief executive of each state is a governor, popularly elected to a six-year term.
The governor of the federal district is appointed by the president of Mexico. Legislative power in the states is vested in chambers of deputies, whose members are elected to three-year terms. The Partido Revolucionario Institucional (Institutional Revolutionary Party; PRI) is the largest and most important political party in Mexico. It was formed in 1928 as the Partido Nacional Revolucionario (National Revolutionary Party) and has been continuously in power since that time, although under several different names. Opposition parties exist, but not until the 1980’s did they represent a serious challenge to the PRI. Chief among them is the Partido de Accin Nacional (National Action Party; PAN), a conservative, pro-Catholic group drawn primarily from the middle class and the Frente Democrtico Nacional (National Democratic Front, FDN), a coalition of leftist opposition groups. (Encarta, “Mexico”) Culture Mexican culture is a rich, complex blend of Native American, Spanish, and American traditions.
Rural areas are populated by Native Americans, descendants of the highly developed societies of the Maya, Aztec, and Toltecs, and by Spanish and mestizo farmers and laborers. Each of these heritages has enriched the regional culture. In the cities, both European and North American influences are evident. Most contemporary Mexican artists are striving to produce identifiably Mexican work that blends Spanish, Native American, and modern European styles. (Encarta, “Mexico”) Economy Mexico reflects a shift from a primary-production economy, based on mining and agriculture, to a semi-industrialized nation. Economic achievements are the result of a vigorous private enterprise sector and government policies that have made economic growth a predominant objective.
Traditionally, the government also emphasized Mexicanization of industry, and local control of companies engaged in mining, fishing, transportation, and exploitation of forests was required by law. More recently, however, foreign investment in new enterprises has been actively encouraged, and government controls on some sectors of the economy have been loosened. Mexico’s gross domestic product (GDP) increased by 6.5 percent annually during the period from 1965 to 1980 but only 0.5 percent yearly during 1980 to 1988. Weak oil prices, rising inflation, a foreign debt of more than $100 billion, and worsening budget deficits exacerbated the nation’s economic problems in the mid-1980s, although the economic picture brightened toward the end of the decade. In 1992 the GDP was $324.29 billion. The annual budget included $107 billion in revenue and $122 billion in expenditure. (Encarta, “Mexico”) II. NAFTA In December of 1992, Presidents Salinas and Bush and Prime Minister Brian Mulroney of Canada signed the North American Free Trade Agreement (NAFTA).
The Mexican legislature ratified NAFTA in 1993 and the treaty went into effect on January 1, 1994, creating the largest free-trade zone in the world. Creating a North American free-trade zone and privatizing state-owned industry was part of a plan by the Salinas government to revive the Mexican economy. By 1993, the Mexican government had sold 80 percent of its industries to private investors for about $21 billion and had reduced inflation from 150 percent to 10 percent. In November 1993, President Clinton predicted that if the trade agreement passes, American companies will add another 200,000 jobs by 1995. NAFTA’s promoters predicted that by the end of 1995 the U.S.
would enjoy a $9 billion trade surplus with Mexi …