He Mexican miracle Is the stage that took place in Mexico Approximately between 1940 and 1970 and characterized by rapid economic growth that led him to become an industrialized and thriving nation. This period is also known as"Stabilizing Development".
While the world was just beginning to recover from the ravages left by the Second World War , Mexico stood out for its exponential growth that made it the first industrialized country in Latin America.
Economic growth at that stage reached 7 per cent, a very high figure if one considers, for example, that the growth of the 2005-2015 decade in that country was only 2 per cent on average.
Everything seemed to be going well with the economic policies adopted by the presidents who governed Mexico during those three decades, but in reality, there were things that were not going as well as they appeared and that ended up being the breeding ground for the stagnation and crisis of The later years.
Main Features of the Mexican Miracle
The population grew rapidly, particularly in urban centers, as industrial growth did not keep pace with agricultural growth, and this caused people to move from the countryside to the cities, generating an uncontrolled urbanization process.
The industrialization and expansion of cities drove the strengthening of the services sector, which became one of the most dynamic economic activities.
Trade, tourism, transport and financial services were consolidated. Regrettably, the state bureaucracy, too, has grown out of proportion, employing more and more people. By 1970, half the population worked in the tertiary sector.
Benefits of the period
The three decades included in this stage of Stabilization Development brought many positive consequences among which can be enumerated:
- Poverty reduction.
- Emergence of an important middle class, accompanied by less inequality.
- Political stability.
- Booming industry.
- Corporatism.
- Investment in education and social welfare.
- Golden era of Mexican cinema, with actors that gained worldwide fame that exported the Mexican idiosyncrasy to the world (Cantinflas, Pedro Infante, etc.).
Weaknesses of the period
The weaknesses of this model of industrialization that brought the Mexican miracle to an end were:
- The agricultural sector was displaced by the industrial sector.
- This resulted in the failure to provide the resources needed by the country for its integral development.
- The protectionism of industry and the limitation of imports led to a lack of competition, which resulted in a deterioration in the quality of products and services.
- There was no change or technological update.
- The bureaucracy grew in a huge way.
- The increase of the bureaucracy brought with it more corruption.
- The need for investment, combined with the lack of resources and domestic savings, led the Mexican state to resort to other forms of financing.
- This resulted in increased indebtedness.
The 40's
Manuel Avila Camacho Presided the government from 1940 to 1946, crossed by the world crisis provoked by the Second War. During his term the foreign debt was negotiated product of the oil nationalization that realized his predecessor Lázaro Cárdenas.
His government made agreements with the business elite to develop the economy, ensuring that the price of the products was agreed and, in case of bankruptcy of the companies, the government would intervene to refloat them.
Ávila Camacho also assigned to the workers a good salary and social security, as well as many resources for union leaders, in order to guarantee the labor order and the acceptance by the workers before the actions of the companies and the government.
Then begins to mobilize the economic apparatus in a way, if you will, fictitious, since it was the state that handled the finances of both companies and workers, instead of doing so naturally the synergy of the economy itself.
This policy is called growth without development, ie, the number of industries increased, but not being able to compete, there was no real economic development.
In the case of the countryside, the state also guaranteed the final price of the products and granted investment loans to the big producers, while small farmers were limited in access to these benefits.
This caused many of them to migrate to cities in search of work as factory workers or shops.
In 1946 Miguel Alemán Valdés assumed the presidency of Mexico, first president of the PRI Institutional Revolutionary Party, who continued the nationalist policy and promoted the industrialization and the substitution of imports.
Mexico was largely closed to international trade to promote domestic trade: it was becoming more expensive to import goods because of the low value of the peso against the dollar. But its period was also marked by an increase in inflation, an increase in public spending and a decrease in social spending.
The 50's
In 1952 Adolfo Ruiz Cortines (also of the PRI) began his six years intensifying its nationalist policy. A sharp rise in food prices that the government could no longer compensate led to uncontrollable inflation.
This is when the Stabilization Development model is proposed and where the so-called Mexican miracle is clearly evident.
Ruiz Cortines decided to devalue the currency (which until that moment maintained a stable parity of 8.65 pesos per dollar) to 12.50 pesos to the dollar. In addition, it increased Mexican exports and further reduced the import of merchandise, which, from then on, would have to be produced in Mexico.
These measures lowered inflation and promoted economic development"inward": Mexico was to consume what Mexico produced.
This inward economic policy was to a great extent the cause of the subsequent debacle of the so-called Mexican miracle, despite having sustained growth over nearly three decades.
The protectionist state policy resulted in companies that were not competitive and unable to consolidate in foreign markets, an essential condition for a real modernization of the country, sustainable over time and that, in the long run, contributed to social development.
The 60's
In 1958 Adolfo López Mateos assumed the presidency, with the table served by falling inflation and rising economic growth, but Mexico's economy was already a time bomb.
The economic dynamics continued to be that of the subsidy; The State maintained financial support for Mexican and foreign companies. Roads and ports were built, but at the same time increased indebtedness, bureaucracy and corruption.
In 1964, when taking possession of the presidency Elementary proficiency , The situation in Mexico was complicated. The perception of the population was that of a corrupt, socially indolent government that only benefited the business and political class.
The middle class, which had emerged strongly in the 1940s, was increasingly complicated to maintain its status, and the working class, peasant and working class, suffered an unspeakable deterioration.
Agricultural production gradually declined in an inversely proportional proportion to population growth; The food shortage due to the abandonment of the field was increasingly evident and worrying.
The manufacturing and tourism sectors replaced agricultural exports as the main sources of foreign exchange for the country. At the same time, the government continually resorted to external credit to cover its budget deficit.
During the mandate of Díaz Ordaz, the Olympic Games of 68 and the World Cup of the 70 were celebrated in Mexico amid social protests that the president tried to dissolve of form - for some - authoritarian.
The repression became constant and the social outbreak was imminent. The image of Mexico as a prosperous and rich place was only maintained by its rulers and the circle around them continued to benefit.
The end of the miracle
By 1970 the situation was unsustainable. The accumulated public debt generated a strong economic crisis, the dollar soared, the guerrilla movements arose, poverty worsened and the Mexican Miracle faded.
The transition from the inflationary period of the late forties and early 1950s to the stage of"stabilizing development"was rapid and uniform.
For this stabilizing policy to succeed in the long term, in addition to the exchange rate adjustment and the increase in exports, it also required a reduction in the rate of monetary expansion and a severe austerity program of public spending. These conditions did not come to be.
References
- Clark W. Reynolds (1977). Why Mexico's"stabilizing development"was actually destabilizing. The Economic Quarter Vol. 44 No. 176, 997-1023.
- Louise E. Walker (2013). Waking from the dream: Mexico's middle classes after 1968. Stanford University Press. California, USA.
- Soledad Loaeza (2005). Gustavo Díaz Ordaz: the collapse of the Mexican miracle, in Bizberg, Ilán and Meyer, Lorenzo (coords.), A contemporary history of Mexico, Ocean, Mexico.
- G.Ortiz and L. Solis (1978) Financial structure and exchange experience: Mexico 1954-1977. Barbados. Recovered from Banxico.org.mx.