> On Nov 19, 2006, at 4:41 PM, Julio Huato wrote:
>
>> The economic disaster that devastated my state worsened in the 1980s
>> and 1990s. Its seeds were sown in the 1960s and 1970s, with the
>> crisis of rural Mexico.
>
> What happened to cause the initial crisis? How much did NAFTA
> contribute?
The crisis of rural Mexico predated NAFTA by decades.
Its causes were -- IMO -- (1) the incompleteness of the 1930s-1960s land reform, which left a fragmented, conflict-ridden, capital-starved rural economy, (2) the international cycle of commodity prices that ruins Third World agriculture every so many years, (3) the continued squeezing of Mexico's countryside by the policies of import-substitution industrialization, and (4) the incompetent ways in which the former were implemented in what relates to Mexico's rural sector.
The prolongued crisis of rural Mexico underlies the ruin of a bunch of formerly prosperous small and middle cities (whose economies depended on farming), the explosive growth of a few mega-cities in the 1960s and 1970s, the large rates of urban unemployment and underemployment, the sudden growth of the informal sector in the same period, and -- in general -- the deficit in urban housing and public services.
That was the situation when a short oil boom happened (1977-1982). Obviously, the government was tempted to leverage the oil revenues in the international capital markets when money was cheap. The rest is history. That's what I mean by "... worsened in the 1980s and 1990s."
Paul Volcker happened in the late 1970s and early 1980s. And just as the interest rate shot up, commodity prices fell.
I believe Joseph Stiglitz that, even if the public sector had been financially sound in Mexico (and Latin America) in the late 1970s and early 1980s (and it wasn't), Paul Volcker's policies would have led to a disaster similar to the one that actually took place:
http://www.cepal.org/publicaciones/xml/2/20222/lcg2204iStiglitz.pdf