Development models (III)

In last week’s article I pointed out that given the total exhaustion of the import substitution model, the balance of payments crisis of 1982 and the lack of access to the international capital market due to the suspension in the service of the foreign debt in August of that year, in a notoriously adverse scenario, the government of the president of Madrid opted for a paradigm shift in the economic development model, one aimed at increasing the economic freedom of private economic agents, with a regulatory State and not The first step was Mexico’s accession to the GATT in 1986 (followed by a significant reduction in import tariffs in January 1988) and a first phase in the privatization of government companies.

This process of institutional modernization continued in the following governments. During that of President Salinas, the privatization of government companies was deepened (not to mention that due to a poor design of the process there were two failed privatizations, banks and highways), thereby expanding the scope of private participation in the economy and, consequently, step, one of the main sources of fiscal imbalance was eliminated, the structural deficit of government companies derived from their notorious inefficiency.

Likewise, in the area of ​​strengthening the government’s regulatory intervention, the Economic Competition Commission (COFECO) was created in 1992 and in 1996, already during the government of President Zedillo, the Federal Telecommunications Commission was created. With the constitutional reforms in 2013, these two commissions were replaced, already with the rank of autonomous constitutional bodies, by the Federal Economic Competition Commission (COFECE) and the Federal Telecommunications Institution (IFT). The impact of these two organizations, in both stages, has been to increase competition in the markets with a clear benefit for consumers. Its weakening or even worse its disappearance would have a clear negative impact on the well-being of Mexicans.

Special mention deserves one of the most important institutional changes that the Mexican economy has undergone in line with the commercial opening that began in 1986 and deepened in 1988. The North American Free Trade Agreement (NAFTA), marked a watershed, not only because The opening of the economy to international trade and competition from international producers was consolidated with a clear benefit for consumers, but even more, because it changed the rules of the game, which gave certainty to national producers and foreign investors that the opening it would be permanent. Its entry into force in 1994 and its subsequent consolidation modified the relative incentives for the sectoral and regional allocation of productive resources, which gave a boost to exports, both manufacturing and agricultural, and led to Mexico receiving greater flows of foreign investment. direct value, added value chains will be created between the three North American countries and economic growth was given to the regions integrated to international trade and recipients of national and foreign investment, basically the Bajío and the north of the country. Violating the rules established in the treaty that replaced it, the T-MEC, would be one of the biggest mistakes in economic policy.

Another institutional change that is important to note was the granting of autonomy in 1993 (although it came into force until April 1994) to the Bank of Mexico for the independent conduct of monetary policy and as guardian of the economy’s payment system. The political autonomy that the central bank has due to the way in which the members of the Governing Board are appointed, the economic autonomy provided by a flexible exchange rate regime and the constitutional prohibition that it cannot be forced to grant financing the government has allowed the government to achieve a stable macroeconomic environment (the recent spike in inflation warrants another article). Violating this autonomy would have serious consequences.

This story will continue.

Twitter: @econoclasta

Isaac Katz

Economist and professor

Point of view

Knight of the National Order of Merit of the French Republic. Professional Merit Medal, Ex-ITAM.

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