Mexican Free Trade Essay

In the early 1990’s, Mexican President Carlos Salinas de Gortari announced the proposition of a free trade agreement that would cure all of Mexico’s problems. For him, establishing a free trade area between the United States and Mexico was essential to revamping his country into a first world nation. With the prospect of Mexico now being able to export goods to the United States, both countries could now benefit from a boost in per capita income and labor productivity. Similarly, both these countries could also prosper from better wages and higher levels of employment in the manufacturing sector. For Mexico, higher levels of employment are important to mitigating the problem of undocumented Mexican migration. With regards to per capita income and labor

From that point on, Mexico has adopted a “neoliberal approach” that focuses on free trade and looser restrictions. By joining the General Agreement on Tariffs and Trade (1986) and NAFTA, Mexico aimed to return to the same type of growth it enjoyed during the import substitution era of the 1950’s through the 1970’s. This would be easier said than done though, since Mexico would have to endure another financial crisis in the mid 1990’s. With severe recession and devaluation of the peso in late 1994 and early 1995, per capita income and labor productivity declined to its lowest levels in the last 60 years. In the aftermath of this crisis, one would assume that after the implementation of NAFTA, purchasing power parity would show some signs of improvement. However, there has been no encouraging signs of improvement, since relative productivity and per capita income have been stagnant over the last 20 years. (Blecker 2014:6) Provided that, it is also important to assess the performance of relative wages during this time