Mexico's financial crisis placed in jeopardy one of the major fundamentals of the North American Free Trade Agreement (NAFTA): the liberalization of financial markets. In the United States, the Mexican crisis threatens to destroy the legitimacy of a so-called Washington consensus, whereby economic liberalization, privatization, and free trade became a panacea to Latin American economies, especially those like Mexico's. In spite of this major crisis, a new consensus seems to be emerging between Washington and the Mexican government, namely, that the Mexican crisis has no connection with NAFTA and that NAFTA is operating according to the major purpose for which it was created: the opening of markets. This article reviews the weakness of this new NAFTA consensus that seems to be shared by Mexico and Washington, and comments on the major institutional challenges that NAFTA has provoked in Mexican society.
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References
1.
1. Address to the U.S. Chamber of Commerce, Oct. 1995.
2.
2. We adhere to Douglass North's definition of transaction costs, in the sense that “the Costliness of information is the key to the costs of transacting, which consist of the costs of measuring the valuable attributes of what is being exchanged and the costs of protecting rights and policing and enforcing agreements.”Douglass C. North, Institutions, Institutional Change and Economic Performance (New York: Cambridge University Press, 1993), p. 27.
3.
Sidney Weintraub , “Modeling the Industrial Effects of NAFTA,” in North American Free Trade: Assessing the Impact, ed. Nora Lustiget al. (Washington, DC: Brookings Institution, 1992).
4.
4. Gary Clyde Hufbauer and Jeffrey J. Schott, NAFTA: An Assessment, rev. ed. (Washington, DC: Institute for International Economics, 1993), p. 15.
5.
5. El financiero, 18 Sept. 1995, p. 28.
6.
6. “National treatment” is understood here to mean that investments and investors coming from North America will receive the same treatment as that enjoyed by national investors in similar conditions, or at least not less favorable treatment.
7.
7. Scott Burlingame, Lars Jorgensen, and Michael Lund, North American Integration and the Lessons from Europe (Copenhagen: DJOF, 1994), p. 108.
8.
8. Isidro Morales, “NAFTA and U.S. Foreign Trade Policy: Regionalism as an Option to Foster U.S. Leverage in World Trade Matters,” in Growth, Trade and Integration in Latin America, ed. Weine Karlsson and Akhil Malaki (Stockholm: Stockholm University, Institute of Latin American Studies, 1996).
9.
9. As Alan Rugman has pointed out, “NAFTA can be viewed as an institutional device resulting from political exchange. It is designed primarily to reduce both the production costs and transaction costs associated with economic exchange among the three partner countries.... It also limits the possibilities of using discretionary regulatory processes against foreign firms. However, each of the partner nations has retained a substantial number of exemptions... that are related to both the value of benefits and control of assets by foreign [multinational enterprises]. Nevertheless, from a transaction cost perspective, these exemptions may have facilitated the political exchange process leading to NAFTA.”Alan Rugman and Alaine Verbeke, “Foreign Direct Investment and NAFTA: A Conceptual Framework,” in Foreign Investment and NAFTA, ed. Alan Rugman (Columbia: University of South Carolina Press, 1994), pp. 88, 99.
10.
10. Paul Krugman, “Emerging Market Blues,”Foreign Affairs, pp. 28-44 (July-Aug. 1995).
11.
11. It was, rather, public savings that the Salinas government aimed to increase, by the reduction of the fiscal deficit and the privatization of public enterprises. But this was also a major condition imposed by the International Monetary Fund, in order that the country could continue to serve its foreign debt.
12.
12. According to a recent study elaborated by the International Monetary Fund, it was Mexican investors and not foreign investors that started the speculative attack against the peso during the three weeks before the peso devaluation of 19 Dec. 1994. Economist, 26 Aug. 1995, p. 65.
13.
13. See Morales, “NAFTA and U.S. Foreign Trade Policy.”
14.
14. Fred Lazar, “Investing in the NAFTA: Just Cause for Walking Away,”Journal of World Trade, 27(5):23 (Oct. 1993).
15.
15. Lourdes P. González, “Más de 170 denuncia antidumping en seis años; resueltas 109,”El financiero, 7 Nov. 1994, p. 29.
16.
16. The embargo on Mexican tuna and the establishment of antidumping measures against Mexican cement were considered unfair by panels undertaken under GATT, but in both cases the U.S. government did not revoke those punitive measures, even after the passing of NAFTA.
17.
17. This was, in fact, a major issue on the Mexican agenda even before the NAFTA negotiations. See Miguel Angel Olea Sisniega, “México en el sistema de comercio internacional: Análisis de las negociaciones comerciales internacionales durante el decenio de los ochenta,” in La politíca internacional de México en el decenio de los ochenta, ed. Bernardo Sepúlveda (Mexico: FCE, 1994).
18.
18. José Luis Gaona, “Zona libre,”El financiero, 31 Aug. 1995, p. 20.
19.
Kevin G. Hall , “Dumping Disputes Fail to Quash Mexico's Hopes for US Trade,”Journal of Commerce, 8 Nov. 1994.
20.
20. Hall, “Dumping Disputes.”
21.
21. José Luis Gaona, “Imposible detener las importaciones acereras con cuotas compensatorias,”El financiero, 24 Apr. 1995, p. 24.
22.
22. Enrique R. Vilatela, “Oportunidades para exportar” (Proceedings, Banco Nacional de Comercio Exterior, Mexico, Sept. 1995).
23.
23. Ibid.
24.
24. James M. Cypher, “Renascent Rivalry: Global Low-Wage Manufacturing, U.S. Decline, and Emergent Regionalism,” in Perspectives and Issues in International Political Economy, ed. Chronis Polychroniou (Westport, CT: Praeger, 1992).
25.
25. United Nations Center on Transnational Corporations, Foreign Direct Investment and Industrial Restructuring in Mexico, ST/CTC/SER.A/18 (New York: UNCTC, 1992), p. 48.
26.
26. Ibid.
27.
27. Ibid., p. 46.
28.
28. John H. Dunning, The Globalization of Business (London: Routledge, 1993), pp. 315-329.
29.
29. Cypher, “Renascent Rivalry”; Peter Morici, “Free Trade in the Americas: A U.S. Perspective,” in The Premise and the Promise: Free Trade in the Americas, ed. Silvia Saborio (New Brunswick, NJ: Transaction, 1992).
30.
30. Horacio Sobarzo, “A General Equilibrium Analysis of the Gains from Trade for the Mexican Economy of a North American Free Trade Agreement” (Working Paper no. II-91, El Colegio de México, 1991), p. 38.
