Job Discussion Forums

[geaaronson]

Another matter of serious disagreement with the same person (the one refusing an FM3) was over whether NAFTA has benefitted Mexico in its trade relations. My reading in various journals, whether it be National Review, Atlanta Constitution, NYTimes, Mother Jones, etc. etc. is that the consensus is that Mexico as a whole, has benefited greatly, whereas it is doubtful whether the U.S. has. The best rejoinder my political adversary had on the matter was, �Well, most of the economists are wealthy graduates of Harvard and Yale, why shouldn`t they be in favor of NAFTA, whether they are Mexican bureaucrats or American economists�.
Aside from some sectors of the economy such as agriculture, and disrerding talk on the street, what is the consensus among Mexican economists about the validity of NAFTA as a boost to their national economy? The same question directed to those north of the border?

[Guy Courchesne]

I'm in the middle of reading The Lexus and the Olive Tree by Thomas Friedman. The book discusses the idea of globalization broadly (from a 1999 point of view) and uses Mexico as an example.

Generally speaking, globalization - including such things as NAFTA - are said to have brought about greater fiscal responsibility to Mexico, through a strengthening of banking laws, for example, as well as a democratization of capital in the US. If one goes back in time, you find large-scale currency devaluations and economic crises happening here, every 6 years or so as one corrupt and inept administration after the next ran the kleptocracy that was (and to a large degree, still is) Mexico. Used to be the central Mexican bank could appeal to only a handful of major stakeholders in Mexican debt in order to finance more debt, until it all came crashing down, throwing millions out of work and erasing personal savings (except for the rich).

Now, when Mexico wants to borrow money, as all countries do, they issue regulated bonds, which are bought and sold by millions of small shareholders and mutual funds. If Mexico overborrows or badly manages its finances, there's no simply calling up the US president or a cadre of Wall St bankers asking for more. The market as a whole decides on Mexico's credit worthiness. This makes the government more responsible (arguably).

I'm getting through the book, MO, and still looking forward to discussing it with you.

Globalization and free trade are wrenching, no doubt. I want to say that on the whole, Mexico has benefited, mostly through the example above when talking about governance. Many industries have benefited, while many others - most notably agriculture - have suffered. I think the consumer has benefited with more competitive prices, especially in financial services.

[MO39]

Thanks for that fair-minded summary of what you've read so far of the Friedman book. I'm also looking forward to a good discussion of the book (and the subject) with you, perhaps over a good cup of Mexican coffee!

[geaaronson]

MO39's rejoinder could be mine as well, but I prefer a discussion with the Canuck over distilled hops. I just got finished discussing the subject with a student at the anti-trust division of the Mexican Commerce department and she backed me up 100%. She insisted that it is only a small minority of think tankers and economists here in Mexico that trash NAFTA and that the majority of those briefed on the subject welcome the pact.
I, also, (yes MO39, I put my commas in where they belong, feel free to pick apart any other grammatical errors), would love to get my hands on the book as well. I will get in line after MO39.

[Guy Courchesne]

She's read it...borrowed it from me actually, before I had a chance to read it . I'll be done with it in about a week or so, then it's yours Inspector.

[MO39]

[mapache]

New import quotas of American corn under NAFTA this year has driven the price of corn down so low that farmers can no longer compete by growing it in Chiapas. Guess where they are going for work? Cheney's Jesuslandia.

[Guy Courchesne]

Actually Mapache, corn prices are at an all-time high.

http://ap.google.com/article/ALeqM5iDFuqqSH3VkkbxJml19Q8ajK3zaAD8VONHSG0

The mechanics of why they are so high have a lot to do with where corn is going...over to biofuels right now since that's where the money is. If Chiapas is part of the global market, one has to look at things from a much wider point of view, for better or for worse.

[MO39]

[sarliz]

I only have a hazy understanding of this, but from what I gather, there was a part of NAFTA that only went into effect recently (or is going to happen soon - like I said, hazy) that is opening the Mexican farming industry to the international market. I believe it's why there were a bunch of angry farmers on tractors protesting in Mexico City about a month ago. From their point of view, the small family farmers have no way to compete with the prices of the subsidized factory farms up north, and fear being run out of the market. Maybe that's what's going on with the corn farmers in Chiapas, too? My boyfriend's father has tomato farm in Jalisco, and the small farms around here were getting nervous. So I guess that would also be a "no" vote against NAFTA on the little guy farming front, probably on both sides of the border.

[mapache]

Thanks for the clarifications. Maybe my limited command of Spanish caused me to believe this already happened rather than the future fears here.