About 23 years ago NAFTA was first implemented, which
allowed Mexico to enter into a new trading agreement with the US and Canada. At
that time, the deal was a promising step that would increase Mexico’s economical
growth and its internal development. The article contrasts Mexico’s production
economy with the surrounding countries since the signing of NAFTA, comparing
the Mexican economic and social indexes with its past economic performance. The
results show: 

Mexico position 15th of 20 Latin American countries in
growth of actual GDP per capita from 1994 to 2016, the most basic economic
evaluation of living standards 

Mexico underwent a collapse of economic developing after
1980, with Latin American per capita GDP growing by just 9 percent, and Mexico
by 13 percent, from 1980 to 2000. 

Mexico’s per capita GDP growth of just 1 percent yearly
over the past 23 years is largely less than the rate of growth of 1.4 percent
accomplished by other Latin America’s countries. 

If NAFTA had been effective in bringing back Mexico’s
pre-1980 growth rate Mexico today would been of the top income countries , with
income per capita notably exceeding Portugal or Greece. It does not make sense that an
immigration reform would have caused a large political issue in the United
States, since relatively few Mexicans would seek to cross the border. 

As you can notice, the poverty rate in Mexico in 2014 was
55.1% which is significantly higher than what the poverty rate was in 1994,
according to Mexican national statistics. Therefore, there is about 20.5
million more Mexicans living below the poverty line as of 2014 compared to Mexico
in1994.

The rest of Latin America experienced  a decline in poverty for more than five times
as much as Mexico: 21 percentage points (from 46 to 25 percent) for the rest of
Latin America, versus 3.9 percentage points (from 45.1 to 41.2 percent) for
Mexico. 

Wages for Mexican were almost the same in 2014 as in 1994,
with a slight decrease in 4.1 percent over 20 years, and barely above their level
of 1980. 

Unemployment in Mexico is 3.8 percent today, as compared to
an average of 3.1 percent for1990–94 and a low of 2.2 percent in 2000; these
numbers seriously understate the true lack of jobs, but they do not show an
improvement in the labor market during the NAFTA years. 

NAFTA also had an adverse impact on agricultural
employment, as US supports corn financially and other products wiped out small
farmers in Mexico. From 1991 to 2007, 4.9 million Mexican family farmers were
repositioned; while seasonal labor in agro-export industries increased by about
3 million. This meant a net loss of 1.9 million jobs. 

The poor productivity coming from the Mexican economy has
unsurprisingly led to a rise in Mexicans emigrating to the United States for a
better life.. The number of Mexican-born residents living in the United States
has doubled from 4.5 million in 1990 to 9.4 million in 2000, and peaked at 12.6
million in 2009. Basically from 1994 to 2000, the annual number of Mexicans
emigrating to the US increased by a staggering 79 percent.

 

 

 

 

 

 

Analysis :

            On
January 15th ,1994, the North American Free Trade Agreement was launched and it
took Mexico to a new level of commercial agreement with the US and Canada.
Liberalization and freeing of trade in textiles, agriculture and farming, and
automobile manufacturing was their main point of their attention. NAFTA’s terms, which were put into effect gradually through
January 2008, asked for the complete removal of most fees and tariffs on
products and services traded between these three neighboring countries. The
treaty also was crafted to protect different intellectual assets, initiate a
system of dispute-resolution, and through accordance, implement human labor and
environmental protection.

            NAFTA appreciated bipartisan support—it
was arbitrated by President George H.W. Bush which passed through Congress and
was alter carried out under Democratic President Bill Clinton in the beginning
of his presidency. NAFTA has essentially reformed the North American economic
relationship by influencing a unique integration between Canada and the United
States’ advanced economies and Mexico’s growing country. The agreement uplifted
and encouraged the tripling of regional merchandising. The cross-border
investment between the three countries also developed considerably. Yet NAFTA
has remained a lasting target in the broader argument over open trade.
President Donald J. Trump says the agreement has reversed U.S. manufacturing
production, and jobs, to Mexico, and in August 2017 his administration relaunched
negotiations with Canada and Mexico with the goal of reforming it.

              It is
doubtful to say that Mexico would have done better in the presence of NAFTA. In
fact, we can demonstrate the productivity rate of Mexico with other regional
countries since 1994 using available economic and social indexes.

According to the center of economic and policy research in
Washington DC, the growth of GDP per capita in Mexico from 1994 until 2016 has
increased by only 28.7 percent, cumulatively, with annual rate of just 1.2
percent. Therefore, it turned to be less in contrast with other regional
countries in Latin America like Panama, Peru, Chile with (4.0, 3.2, 3.0)
percent annual growth respectively, in the same period.

              The
same study shows Mexico’s growth ranks 15th of 20 countries in the GDP index.
Those numbers are a clear indicator of the poor performance of Mexico since the
implementation of NAFTA comparing to countries that are not part of that
agreement.

Another important fact we need to mention is Mexico’s
growth rate in contrast with the rest of region since NAFTA, comparing to the
one before it. According to the center of economic and policy research in
Washington DC, Mexico increased twice its income per capita from 1960 to 1980,
which was higher than that in its Latin American counterparts as a whole.
Interestingly, if that growth had continued to increase, Mexico would be a high
income nation today.

             The
regional growth of GDP per capita has declined from 87 percent in 1960-1980 to
only 9 percent from the period from 1980 to 2000, in other words, 0.9 annually.
Mexico’s share in that decline was from 97 percent GDP growth per capita to
just 13 percent. In the period from 2000 to 2016,  the regional GDP growth per capita was 1.5
percent annually, with 0.8 percent growth rate for Mexico, according to
Feenstra, Inklaar, and Timmer (2015) and IMF (2016).

            Another
study done Laura Carlsen, the director of the Americas program at the center
for international policy, Shows the negative impact of NAFTA on Mexico’s
economy. According to her, American financial aid or what is called subsidy
aiming to supporting US corn and others main produces, has damaged the Mexican
farmer market by dumping it with subsidized corp making the pieces to drop and
farmer’s livings significantly insufficient.

       Consequently,
around million have been forced to leave their farms to survive, and prices has
increased making people’s life difficult. 20 million Mexicans live in food
poverty, and 25 percent of the population can’t afford staple food not speaking
of the 25 precent of children suffering from malnutrition.

           Another
important  negative outcome of NAFTA is
the dramatic increase in the number of 
Mexican migrants to the United States, with a rate of half a million
annually following NAFTA. According to Laura Carlsen, NAFTA jeopardized farmers
when multinational corporations controlled their lands that supported their
families for decades. Moreover, the significant increase in poverty level
created a very fertilized ground to criminals to flourish and threatens the
social and economic environment. 

           Another
study was done by National Autonomous University of Mexico (UNAM) affirms that
Mexico has not achieved their goals within NAFTA in terms of decreasing the
poverty level in the country, with 55.1 percent poverty rate in 2014 and 52.4
percent rate in 1994. It is also useful to compare the performance of Mexico in
decreasing the poverty level with the ones in the regional countries. The UN
economic Commission on Latin America (ECLAC) assures that the poverty level in
Mexico dropped a little from 45.1 percent in 1994 to 41.2 percent in 2014, yet
poverty in the region including 19 countries declined significantly from 46
percent to 25 percent at the same period of time.

           Another
important outcome of NAFTA is connecting the US economy with Mexico’s economy,
making the latter vulnerable to economic fluctuations and crisis.

With more than the two third of Mexico’s exports go to the
United states and when the US Federal Reserve’s rose the US monetary policy
rate in 1994, the peso crisis occurred 
causing a loss in the GDP of Mexico by 9.5 percent.

              Another example of the result of
integrating the economy of the US and Mexico is the recession that happened in
Mexico following by the one that took place in the US first in 2000 caused by
the stock market issues and then in 2006-07 as a consequence of the biggest
asset bubble issue in the world history. In that recession, Mexico has suffered
more than any country in Latin America due to what expert refer as the negative
influences of the US economy on it with a decline in Real GDP of 6.7 percent from
2008 to 2009.

              A
Mexican manufacturing employment rate following NAFTA  was expected to rise but it did not reach the
hoped level for a couple of reasons. Like producing products assembled from
imported parts and components, which led to adding small values and little job
creation. The biggest case happens in maquiladora plants which are owned by
American or multinational companies, where imports inputs occupy about tree
quarters of the value of their export.

           Secondly,
Mexico losses the surplus it gains from trading with US to the deficit in goods
trade with Asia (about $55 billion with China), and $25 billion deficit with
Europe. As such Mexico did not improve a lot in terms of increasing employment
rates from its trade.

Lastly, the industrial growth rate was slow and China’s
entering to the US market as a tough competitor have impacted the employment
growth of the manufacturing sector negatively.    

 Interestingly,
Mexico is a better market for the US than China, despite the deficit in trade between
Mexico and the US towards Mexico, due to the surplus in US import to Mexico
comparing with the one to China.

          The
forecasts of rising US jobs within NAFTA, from increasing export to Mexico, was
overestimated and turned out to be proven wrong.  NAFTA proponents,  claimed that opening Mexico to free trade and
unregulated foreign investment would increase job growth and raise incomes
needed to create a stay-at-home middle class.

           There was
an effort in the early 1980s by a group of U.S.-educated economists and businesspeople
who took over the ruling Partido Revolucionario Institutional (PRI) to build a
privatized, deregulated and globalized Mexican economy. Among their objectives
was tearing up the old corporatist social contract in which the benefits of
growth were shared with workers, farmers and small-business people through an
elaborate set of institutions connected to the PRI.

          NAFTA
however provided no social contract. It offered neither aid for Mexico nor
labor, health or environmental standards. The agreement only protected
corporate investors and everyone else was on his own. NAFTA’s critics knew it
would stimulate more trade; that was, after all, its function. Instead, what
happened was that all of the benefits that came with new trade went largely to
the rich while the middle class and the poor would pay the costs, and the
promised growth did not materialize.

          Although
NAFTA is not the cause of all Mexico’s economic troubles, it has clearly made
them worse. Since NAFTA’s inception in 1994 the Mexican middle class has shrunk
and the number of poor has expanded. Economic growth was below the old
corporatist economy’s performance and substantially less than what is needed to
generate jobs for Mexico’s growing labor force.

             The
North American Free Trade Agreement was meant to integrate the economies of the
United States, Canada and Mexico by breaking down trade barriers among them,
creating jobs and closing the wage gap between the U.S. and Mexico. What
happened under NAFTA was that heavily subsidized U.S. corn flooded the Mexican
market, putting millions of farmers out of work. Multinational corporations
opened up factories creating low-wage jobs at the expense of organized labor
and the environment. This, in turn, drove waves of migration north.

Mexico has benefited less than its neighbors to the north.
During NAFTA, Mexico has had the slowest rate of economic growth than with
any other previous economic strategy since the 1930s. From 1994 to 2013, Mexico’s
gross domestic product per capita has grown at a paltry rate of 0.89 percent
per year.

        Additionally,
During NAFTA, Mexico’s economy grew much slower than almost every Latin
American country. NAFTA has boosted trade and investment, but has not
translated it into meaningful growth that generates jobs. One of the problems
it has generated is basically an exporting economy for transnational
corporations, and not for the Mexican industry. The initiation of NAFTA in 1994
pushed under a guise of a free trade partnership with Mexico that was supposed
to bolster the economy and curb immigration did just the opposite. Heavily
subsidized US crops flooding in drove production down and consumer prices up.
New corporations dominating the market collapsed small businesses across the
country, sweatshop labor surged, 20 thousand of small Mexican businesses were
destroyed in NAFTA’s first four years.

         The price of
corn, Mexico’s main staple, fell by 66% therefore ejecting at least two million
small from their land ,because of the lack of profit, and forced to migrate
north in the search of life-sustaining work. NAFTA’s model of neoliberal
development exploits Mexico’s food independence. In post NAFTA Mexico 42% of
the food consumed  comes in from abroad.
Following this terrible policy  about 22
million Mexicans in a country of about 122 million live in food poverty, the
number of undocumented immigrants coming to America increased a dramatic 185
percent.NAFTA gave a major boost to Mexican farm exports to the United States,
which have tripled since NAFTA’s implementation. Hundreds of thousands of auto
manufacturing jobs have also been created in the country, and most studies have
found that the pact had a positive impact on Mexican productivity and consumer
prices.

There is no doubts that NAFTA has created a great
opportunity for both American and Mexican nations by increasing the level of
trading and economic integration. Mexico however, has learnt a very profound
lesson that NAFTA by itself can not boost the economy and make miracles, but a
deep and comprehensive reformation in the economic system would be able to put
Mexico among the top countries with strong and productive economy.  

 

Conclusion:

  The NAFTA
agreement, signed 20 years ago, was believed by many that it would improve the
Mexican economy, create more jobs and decrease the amount of Mexicans
immigrating to the US. However, NAFTA had a horrible consequence on Mexico,
instead, it ruined the economy, has shrunk the Mexican middle class and
expanded numbers of poor. It had put millions of farmers out of work and the
real wages in Mexico have fallen significantly below pre-NAFTA levels as price
increases for basic consumer goods the exceeded wage increased.