High protective tariffs and other barriers to imports foster the development of consumer goods industries geared toward domestic markets. In the agricultural sector as well, the government offers tax incentives for production directed toward the home market.
Government gradually adopts full-scale import-substitution industrialization as a development policy, raising import controls on consumer goods but relaxing them on capital goods. By 1970, Mexico has a diverse export base and is largely self-sufficient in food crops, steel, and many consumer goods.
Significant oil discoveries in the '70s turn Mexico from a net importer into a significant exporter of oil and petroleum products. But as the peso becomes increasingly overvalued, non-oil exports suffer.
Mexico begins to feel the strains of its import-substitution policy in the late '70s as commodity markets collapse. Mexico becomes a net importer of foodstuffs as production of basic crops stagnates. The financial and economic crisis of the early '80s causes Mexico to reevaluate its stance on trade and liberalize its economy in a first step toward free trade.
Looking outward, Mexico enters into free-trade agreements with other Latin American countries. The neoliberal development strategy depends on the promotion of manufactured exports and thus on expanded U.S.-Mexico trade. Despite opposition from Mexican farmers who fear growing imports of cheap American grain, Mexico enters the General Agreement on Tariffs and Trade (GATT) and joins NAFTA in 1993.
Mexico is fully integrated in world trade. NAFTA contributes to the process of adjustment by enabling Mexico to reduce its current account deficit through increased exports rather than through decreased imports from the U.S. Mexico becomes the first Latin American member of the Asia-Pacific Economic Cooperation forum (APEC) as well as a founding member of the World Trade Organization (WTO).
Some farmers protest the tide of imports that NAFTA has generated. Corn farmers in Chihuahua and Chiapas demonstrate against U.S. corn shipments, and many fear they will go out of business when the corn market opens fully in 2008. The U.S. downturn hurts Mexican exports. Rising oil prices in early 2003 offer unexpected revenue.
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