Trade and financial liberalization revisited. Mexico’s experience

In the middle of two crises, the first one in 1982 and a second one in 1986, Mexico initiated a new economic strategy, inaugurated with two important reforms: trade liberalization, and financial liberalization and deregulation. With the first reform the economic wanted to reposition Mexico in the international division of labor. With the second one they aimed at attracting capital inflows and modernize the banking sector. Resolute commitment to drastic trade and to financial liberalization brought praise from a large part of the press and from international organizations, especially during the years going from the mid 1980s to the mid1990s when these two reforms were implemented in full strength. The objective of this work is to study this period, and to show that the results of those reforms do not deserve such an enthusiastic praise. I believe that Mexico’s experience is important in itself, and also because we can learn a lot from its positive results as well as its shortcomings. This is why an analytical reflection on the reasons for their failure to achieve the expected benefits is still important today. Trade liberalization: booming exports without growth The story of trade liberalization is rather simple to tell. Between 1984 and 1987 Mexico’s average import tariffs fell from 41 to 14% and the percentage of