Mexico: from national-developmentalism to a neoliberal turn (from Cardenas to Miguel de la Madrid)

Starting in the 1930s, in the government of Lazaro Cardenas (1934-1940), Mexico begins a process of modernization of its economy and society. Cardenas, who in 1913 adhered to the Mexican Revolution, in 1928 became governor in the state of Michoacan, in 1931 moved on to be the president of the National Revolutionary Party (“PRN” in the Spanish language acronym), that positioned itself as the heir to the 1910 Revolution.

                One of the demands met by Cardenas was an ample land reform, which distributed lands to the peasants (in a communal way, with intents to strengthen their bonds). The worker movement in this period saw the government encourage the creation of unions and, from that point on, the Confederation of Mexican Workers (“CTM” in Spanish) came to be. Worker and social rights were guaranteed to the workers. Cardenas, with the argument that British and North-American companies imposed working conditions and wages that are very bad to the Mexican worker, nationalized the underground wealth in the country, handing to the State the control of exploration and production of oil through Petroleos Mexicanos (PEMEX). In spite of the opposition of the USA and the UK, the context of World War II and the need to supply energy to the allied troops reduced questioning over this Mexican nationalist policy. The scenario was favorable to Mexico, and it knew how to make the most of it.

                The Mexican president acted to centralize power and ascribe to the State the management of the national capitalist development. Perhaps it might have been the first experience, in actual terms, of a national-developmentalist government in Latin America. Between the decades of 1970 and 1980, redemocratization and neoliberalism started to lead the way in politics and the economy in the subcontinent. The PRN was transformed into the Mexican Revolutionary Party (“PRM” in Spanish), with aims to bring the masses closer to the party, what would be the embryo for the future single party. Even though Cardenas believed in the existence of class struggle and took the side of the workers, the centralization of the State and the management of social interests done by it put Cardenas’ actions close to the corporativist model developed initially by the fascist European governments.

                As in other developmentalist experiences in Latin America, among which the best success story is Brazil, the period that goes from 1929 to 1979 was of huge economic growth for the economy in Mexico. This period came to be between the stock market crash in New York in 1929, which represented the end of the expansion cycle founded upon enormous financial speculation. The following fifty years watched the consolidation and dominance of the Keynesian paradigm and, in the Latin American case, starting in the 50’s, of the structuralism based on ideas developed at the UN’s agency, CEPAL (“United Nations Economic Comission for Latin America and the Caribbean” translated to the Spanish and Portuguese acronym). Besides the proposals of governmental intervention advocated by Keynes, the structuralism of authors as Raul Prebisch and Celso Furtado highlighted the “center-periphery” dynamics, in which the center represents advanced capitalist countries (the USA, Western Europe and Japan) and the periphery the biggest (in territory and population) and most late part of the world. The center holds the capitals, the entrepreneurial and public organization, and the technology the periphery does not have. The State, therefore, should be the main actor in overcoming the economic gap.

                The economist Wilson Cano, professor in the Economics Institute of the Brazilian university called State University of Campinas (UNICAMP) has done a very relevant analysis of the Mexican economy history of evolution in the book “Sovereignty and Political Economy in Latin America” (“Soberania e Política Econômica na América Latina” in Portuguese), as well as analyses of other cases, just like the title points out, of other Latin-American nations. We will make use of Professor Cano’s work to support the synthesis of this article. According to him, the period of 1929- 1979 can be split in three: “1) the one going from the 1929 crisis to “Cardenismo”; 2) the one that covers 1939-1970, that is, from the intense period of imports substitutions; 3) the period of 1970-1979, in which the course of the political economy suffers a decisive turn”. In regards to the first period, still according to the same author “The great depression, for Mexico, had already started in 1927, given the slowing down of the North-American economy. In the period the highest point reached in GDP was in 1926 and the lowest in 1931: between both points the accumulated fall in GDP was of 36%, maybe the steepest in the region, and that’s because 75% of Mexican exports were mineral ores, dramatically affected by the crisis and, in particular, by the doubled protectionism of the USA during the depression” (CANO, p. 400.) With the election of Cardenas, Mexico lives the beginning of a new period. Cano says that “the results for the period of 1933-1939 were exceptional: the mean rate of GDP growth was of 5,4% and in the manufacturing industry of 8,7%, increasing its participation in GDP to 16%” (CANO, p. 403).

                Cano also explains that, after Cardenas’ period (that ended in 1940) “Mexican politics moved off of the revolutionary and more radical positions, returning to more conservative positions. If it could well maintain a great deal of continuity in the steering of the economic policies, and certain efficiency, it made society pay the price of authoritarianism, with the rise in the State’s discretionary power, party officialism and increasing corruption. A difference, at least when it comes to the more heightened use of national sovereignty, is seen in the 1964-1976 period, in the governments of Diaz Ordaz and Echeverria, in which Mexico restates stronger stances in foreign policy (for instance, not breaking relations with Cuba in 1964) and in economic policy with a policy of mexicanization of the economy starting in the late 1960’s. At the same time, however, internal repression rose” (CANO, p. 403-404).

                A relevant issue was the role of control and arbitration of social interests played by the Revolutionary Institutional Party: “until then PRI was the instrument of negotiation and representation of interests for the many social classes, source for the recruitment of professional politics personnel, manager of social demands – through a client-like mediation –, and a device for the electoral legitimation of the government. Its national political network would blend in with the public services one, at federal, state and municpal levels, and the increasing action of the State in the economy allowed – besides the visible advance of industrialization – the economic and social reproduction of its elites, mainly the industrial and financial ones. Industrialization and urbanization produced growth in the cities, growth of a new middle class and of a mass of informal employment. On the other hand, the modernization of public services and its continued decentralization shrank the role of the client-like mediation. Both phenomena harmed part of PRI’s control in the service of social demands, and most importantly in the control of elections. Consequently, if in the federal elections of 1968 PRI got 86% of the vote, in 1979 it rolled in 70%, losing the election in many urban disctricts” (CANO, p. 407-408).

                President Echeverria (1970-1976) gave continuity to the economic nationalism and sought after trade agreements with other agents outside the orbit of the USA. It was the last period in which industrialization was the steering axis for economic policy, even if petroleum had already started to have a bigger economic importance. An important change was that the driving powers in the economy ceased to be political, but rather young economists, generally post-graduated in the USA and followers of economic conservatism. This became the technocracy of the Central Bank (“Banco do Mexico”) and of the Office for the Treasury. In the Office for Heritage and in the Nacional Financiera (the development bank) the bulk was of Keynesian-CEPALian personnel, developmentalists (CANO, p. 408).

                The government that marks the watershed for the neoliberalism turn and divorce with PRI as a party was that of Lopez Portillo (1976-1982). His government was a transitional one between a more nationalist policy to one more tied to the USA, more conservative, with agreements with the International Monetary Fund and placing as the main axis for economic policy the option for petroleum, with a huge external debt in the endeavor. It was the end of the process of replacing imports and the beginning of a liberalizing policy (CANO, p. 408-409). One may say that it was the moment when Mexico renounced to an active industrial policy and coordination and state incentives for the constitution of a diversified industrial complex to accept the role of producer of raw materials for exportation (mainly oil) and, with the signing of NAFTA in 1994, consolidated the option for the maquiladora industry, in which the USA industry, mainly, takes advantage of the workforce differential to, basically, assemble parts coming from the USA to re-export them to the rich neighbor in the north. The maquiladora industry started in 1966 from the USA tax concessions to Central America and to Mexico,and modifications in the Mexican legislation (CANO, p. 413-414).

                The 1980s, just as it was for the rest of Latin America, was a period of economic crisis with GDP suffering an expressive downfall and only returning to the levels of 1981 in 1988; high inflation, currency devaluation and problems with the debt ran up by the country (that, like the other Latin American countries, goes through a big surge in face of the North-American interest rate shock promoted by the Federal Reserve chairman at the time, Paul Volcker). The government of Miguel de la Madrid, which took office in November 1982, reinforced the turn to the right in the PRI. That has important political effects, making of PRI a party representative only of the economic elites in the country. Once again, in the words of Cano, “The prolonged economic crisis deteriorated even more the political situation in the country, and the persistence of PRI’s political stance promoted a strong internal divide and the launching, in 1987, of its democratic current, led by Cuahtemoc Cardenas (son of former president Cardenas). The PRI moved farther and farther of its peasant and worker origins, dedicating itself to the elite, representatives of companies and the financial system. Therefore, economic policy, after some heterodox rehearsals, would take directions of orthodoxy and neoliberalism. Still, political difficulties forced the execution of a political reform in 1986, which would crack a small opening for the political life of the remaining parties” (CANO, p. 415-416).

                Mexico, since the 19th century, has had its economy strongly linked to the economy in the USA, country against which Mexico waged war and to whom it lost part of its territory. The “westward expansion” by the United States imposed that loss, but also integrated the territory of both countries by means of railroads. The growth in foreign investments in mining also benefitted the Mexican economy of this period. The transition discussed in this article, between the 1930’s and 1980’s, took Mexico to, in the almost thirty years gone by after this period, to strictly apply the neoliberal prescriptions. The PRD, which substituted the PRI in the years of 2000, did not change economic policy. The result has been low rates of economic growth and mounting violence, especially the one perpetrated by drug cartels. The victory, this year, of the leftist Andres Manuel Lopez Obrador (AMLO) brings hope to the Mexican people, hope for a reorientation of policies after decades of neoliberalism. The relation with the USA, where millions of Mexicans live and where three fourths of exports are sent to is very sensistive. AMLO, before taking office, was have to deal with the renegotiation of NAFTA defended by Donald Trump. The assymetry of power with the neighbor to the north is a strategic problem to Mexico and certainly limits its options, but still, the full adhesion of its elites to economic conservatism and the abandonment of any idea of national project (as it has happened and has been described in the present article, between the decades of 1930 and the second half of the decade of 1970) with the fostering of an effectively local industry (and not only assembler of parts produced abroad) and socially inclusive policies took the country to the difficult social and economic situation in which it stands. Lopez Obrador, in a very different scenario than that of Cardenas, will have to propose and execute new policies for the development of Mexico.

Reference: CANO, Wilson. Soberania e Política Econômica na América Latina. São Paulo: Editora Unesp, 1999

All translations of citations in Portuguese into English were done by this Blog.