Mexico’s future dies with Nafta
If Trump kills the free trade agreement, he’ll destroy the Mexicans’ dream of a modern, economically prosperous country
he shakiest tremor United States President Donald Trump may have triggered in Mexico is not his insults or attacks. Instead, it’s a renewed debate about Mexico’s development. For the second time in four decades, the way Mexico’s economy, indeed the country, is run has become a subject of debate. This time, however, the criticism has not come from within: It’s come from the US.
The North Atlantic Free Trade Agreement (Nafta) was the culmination of changes that began with a debate in Mexico’s government in the second half of the 1960s. The country had to decide whether to open the economy or keep it protected, move closer to the US or keep its distance, give precedence to consumers over producers, and whether to have more or less government intervention in personal and business decisions. It was, broadly, a debate on what Mexicans should do to advance the country’s development. In the 1970s, Mexico expanded government, increased spending and protected the economy, decisions that produced financial crises in 1976 and 1982. It stretched the chord as much as it could, until reality snapped it.
In a setting of hyperinflation in the mid-1980s, authorities stabilised the economy and started a sinuous process of economic liberalisation. Hundreds of firms were privatised, public spending was rationalized, foreign debt was renegotiated and the country opened up to imports. The hope was that a change of strategy would generate enough investment to boost growth, and increase jobs and revenue. Although the changes were radical, they failed to bring about enough of the promised investment.
It was Nafta that boosted the economy. It sparked a revolution in industry and exports. Despite the many, and in some cases absolutely legitimate, criticisms of the free trade deal, the country became an exporting powerhouse that no longer faced a balance of payment problem that had prompted crises in earlier decades. But Nafta was much more than a trade and investment agreement — it was a window of hope and opportunity.
For the ordinary Mexican, it meant the possibility of building a modern country, a society based on the rule of law, and, above all, a ticket to development. This may explain the mix of attitudes in Mexico towards Trump today: Personal contempt for him on the one hand without vulgar anti-American feelings spreading through the population; and on the other, terrible anxiety at this dream of development being shot down. The Mexican economy, which could not attain high growth rates or a significant rise in per capita gross domestic product in all these years, exacerbated these feelings. Nafta was a way to limit Mexico’s rulers’ powers of abuse by restricting changes to the governing laws and giving Mexico’s development model credibility. It paved the way for political liberalisation.
For now, we don’t know for sure what will happen to Nafta. It has already taken a hard knock. Trump has not only exposed Mexico’s characteristic political weaknesses, but also destroyed the certainty that came with Mexico’s “ticket to modernity”.
Don’t be surprised to hear Mexicans start speaking of closing themselves off, retaliating against Americans and restoring an “efficient” state, for want of a better word. The people saying this do not understand that Nafta was much more than an economic instrument — it was Mexico’s chance for a brighter future.
Luis Rubio is chairman of CIDAC (Centre of Research for Development), an independent research institution devoted to the study of economic and political policy issues.
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