Understanding the Mexican Economy

A Social, Cultural, and Political Overview

Roy Boyd, Maria Eugenia Ibarrarán, Roberto Vélez-Grajales

• Publisher: Emerald Publishing Limited
• Year: 2018
• ISBN:
  9781787690677
• Topic: Business
• Subtopic: Business General
• Index: Business

The Mexican economy is a contemporary political flashpoint, and not just in Mexico, but in the United States, as well. Yet few people understand it in its full complexity, and fewer still understand the social, cultural, and historical factors that have helped to make it what it is today and that will continue to affect its future.
In Understanding the Mexican Economy, Roy Boyd, Maria Eugenia Ibarrarán, and Roberto Vélez-Grajales offer a comprehensive overview of these factors. They provide a full, historical, economic, and political context through which to understand the actions of the people and government of Mexico, and they give insights into how those actions impinge -- and might continue to impinge -- on the United States. They conduct a wide-ranging examination of the Mexican economy and investigate the causes of persistent problems such as economic stagnation, high poverty levels, and emigration abroad. Stressing the critical role played by economic incentives as well as Mexico's geography and political institutions, they employ a number of modeling techniques, including a specially designed computer model, to discuss a variety of topics including international trade, regional inequality, the informal economy, natural resource extraction, Mexico's "war on drugs, " and the economic impact of US trade and immigration policy on both Mexico and the US.
For its comprehensive overview and the new insights it provides into these crucial and yet often tragically misunderstood issues, Understanding the Mexican Economy is essential reading not only for economists, but also for practitioners with a policy interest in Mexico, for students of Latin American studies, Development Studies, geography, and sociology, and for anyone with an interest in recent events and controversies around US-Mexican relations.

Chapter 1

A Brief History and Geographical Overview of Mexico

1.1. History: Pre-Columbian Mexico

When the Spanish arrived in Mexico in 1511, they encountered a rich civilization whose roots dated back to the Paleolithic times. Today’s most reliable DNA evidence strongly supports the theory that the first humans to populate Mexico originally crossed over to the Americas from eastern Asia. For most of the twentieth century, it was believed that these early inhabitants entered North America via a land bridge near the present day Bering Strait some 19,000 years ago. Recent findings have cast some doubt on these earlier conclusions, however, and suggest that people could have entered the Americas much sooner and crossed over as early as 40,000 years ago (Dillehay, 1998, 2000, 2003; Dillehay et al., 2015; Lucas, 2017). It is now theorized that these early settlers could have utilized boats and ventured south on a route closely hugging the Pacific coast off present day Alaska and Canada (Fladmark, 1979; Mann, 2005). Regardless of the date of their original crossing and the course they followed, solid archeological evidence indicates that humans had established a presence in what is now central Mexico at least 11,000 years ago (González et al., 2003).

The original inhabitants of Mexico were most likely nomadic in nature and relied on fishing, hunting game, and gathering wild fruits and vegetables to carve out their existence. Thousands of years would pass before any notable change came about, but eventually these early Mexicans began to build larger towns and villages. As in the Old World, these larger permanent settlements were facilitated by the development of agriculture and seasonal crops. The crops that they developed, however, were quite unique to the Americas. Whereas the “Old World” civilizations in ancient Mesopotamia and East Asia had relied largely on wheat and rice, the main staple consumed in Mexico was maize (corn). Interestingly, the development of corn as a staple required extensive crossbreeding and was quite probably the first instance of extensive “genetic engineering” practiced by human beings (Mann, 2005). The cultivation of corn in pre-Columbian Mexico was supplemented by that of tomatoes, beans, chili peppers, squash, and various other crops that first made their appearance in the Americas before being exported to Europe by early explorers.

One of the oldest civilizations to emerge in Mexico was that of the Olmecs. The Olmecs inhabited a region in eastern Mexico near the present day city of Veracruz, and their settlements of San Lorenzo and La Venta date back to 1800 BCE. In the centuries that followed, other sophisticated civilizations took root in various regions throughout Mexico. In what is now the State of Oaxaca (in southwestern Mexico), the Zapotecs constructed the great temples and monuments of Monte Albán. To their north and west were the (often warring) city-states of the Nadzahal (or Mixtec) people, and to their east on the Yucatán peninsula lay the sprawling kingdoms of the Maya.

The central valley of Mexico has been the site of a host of civilizations stretching back to antiquity. The first great city to be constructed was Teotihuacan. Teotihuacan flourished between the first and eighth centuries AD. At its height it was home to more than 120,000 people, and its great pyramids (25 miles to the northeast of Mexico City) are still a major attraction (Millon, 1967). After the fall of Teotihuacan, central Mexico came under the control of the Toltecs whose rule stretched from 800 CE (AD) to 1200 CE (AD) until they too fell into a state of decline. In the power vacuum that ensued, a number of groups vied to set up a power base in central Mexico. The situation remained fluid for quite some time, but finally, in the early 1400s, a people known as the Mexica together with two other indigenous groups formed a “triple alliance” and established the Aztec empire. The Aztecs built an impressive capital at Tenochtitlan in the middle of an ancient lake where modern day Mexico City now stands. Tenochtitlan and its surrounding areas held between 200,000 and 300,000 inhabitants and provided a central base from which the Aztecs ruled a vast area of central Mexico (Restall, 2018). Collecting tribute from their vassal states, the Aztecs became wealthy and held power for almost a century until the arrival of the Spanish.

Far from being primitive and intellectually backward, the civilizations of pre-Columbian Mexico were quite adept and excelled in a number of areas. In addition to developing a number of important agricultural products, many of these groups were highly literate and scientifically advanced. Astronomy, mathematics, philosophy, art, architecture, and poetry all flourished throughout the regions. The economies of these societies were also quite sophisticated. Mining, commerce, and trade thrived throughout Mexico, and, centuries before NAFTA, the people of Chaco Canyon and Mesa Verde in the US were actively trading tools and agricultural products with their counterparts in Mexico. Indeed, the “New World,” in which the Spanish explorers now found themselves, was in many respects as highly advanced as the “Old World” from which they had come.

1.1.1. The Arrival of the Spanish and Colonial Mexico

Although the first Spanish explorers reached what is now Mexico in 1511, the actual Spanish Conquest of the Aztec Empire dates back to April 22, 1519 when an expeditionary force headed by Hernán Cortés came ashore near present day Veracruz. In setting out to conquer territory in the New World, the Spanish were driven by several distinct motives. In addition to the urge to explore new areas, many of the Spanish who arrived were driven by religious fervor and a wish to expand the empire of Spain’s Catholic Monarchy. However, other motives were also involved, including a desire for political power, personal fame, and the wealth that these new lands had to offer. Although badly outnumbered by their Aztec adversaries, the Spaniards enjoyed a number of advantages. From a purely military standpoint, they had steel armaments, gunpowder, and domesticated horses to ride in to battle. Perhaps more importantly, however, discontent with the Aztec’s heavy-handed rule afforded the Spanish a host of ready allies, and the susceptibility of the indigenous peoples to Old World diseases would eventually lead to heavy losses among the Aztec troops¹.

A few months after their arrival, the Spanish began their march inland, and in September 1519, they engaged the armies of the Tlaxcala alliance in battle. The Tlaxcaltecas were rivals of the Aztecs, and soon they put aside their differences with the Spanish and the two groups formed an alliance. On October 25, 1519, their combined forces marched on the Aztec capital of Tenochtitlan. There, Hernán Cortés met the Aztec leader Moctezuma, and, at least initially, the two groups avoided outright warfare. The Spanish remained in Tenochtitlan for the next seven months in the midst of an increasingly tense situation. On July 1, 1520, following the killing of Moctezuma, hostilities broke out and the Spanish were driven out of the city by Aztec forces in what is now referred to as the “Noche Triste.”²

After suffering heavy losses, the Spanish and their allies regrouped and returned to Mexico’s central valley in early 1521. In the ensuing months, a number of battles took place between the Spanish/allied armies and the Aztec troops under the command of the Aztec’s new leader, Cuauhtémoc. At the same time, an outbreak of smallpox occurred, ravaging the country and decimating the indigenous population of Tenochtitlan. The climactic battle occurred in the Summer of 1521. Tremendous casualties were suffered on both sides as pitched battles were fought throughout the city. Finally, on August 13, 1521, the city’s central plaza fell, the Aztec leaders were captured, and central Mexico came under the rule of the Spanish.³

Once central Mexico was secured, the Spanish conquerors (or Conquistadores) quickly moved to expand their territory and influence. Politically, the Spanish sought total dominance, effectively abrogating the terms of the treaties with their one-time allies while maintaining the strict hierarchical structure constructed by the Aztecs, only now with the landed Spanish aristocracy in control. To finance their expanding empire and fill Spain’s coffers, a system of tributes, similar to that of the Aztecs was initiated, and forced labor was often employed by Spanish authorities in industries such as the mining of precious metals (see Chapter 2). A strict social order soon emerged where virtually all political and economic power was concentrated in the hands of the wealthy Spanish elite, while poverty was fairly common among the remainder of the population. At the same time, many religious practices of the indigenous groups were banned,⁴ and friars from various orders were recruited from Spain to learn the indigenous languages and convert the local inhabitants to Christianity (Ricard, 1974). Intermarriage between Spanish and indigenous people became quite common and their descendants (known as Mestizos) now make up the majority of Mexico’s population.

The pace of Spain’s military conquest varied by region, and different areas of Mexico came under Spanish dominance much more rapidly than others. Most areas of northern Mexico were subdued fairly quickly, and even large portions of today’s southwest US became part of “New Spain” by the early 1600s. Areas of southern Mexico and Yucatán were, by contrast, not fully controlled by the Spanish until about 1700. Indeed, the resistance to Spanish authority by the locals in southern Mexico combined with the lack of precious metals were key initial factors in the slow economic progress that this region and its Mayan descendants have historically experienced compared to other parts of the country (see Chapter 3).

The arrival of Europeans from Spain dramatically transformed every aspect of Mexican life, and the colonial period differed markedly from the period that directly preceded it. Among other things, the Spanish brought a new language, a new religion, new foods, new art and architecture, and a new way of thinking into the country. Interestingly, however, many of these things were transformed by the indigenous population in ways that made them uniquely Mexican. Mexican cuisine, art, and music acquired a character quite different from their Spanish counterparts, and even religious celebrations such as “All Souls Day” morphed into the unmistakably Mexican “Day of the Dead.” Unfortunately, the Spanish arrival also entailed immense suffering and hardship for Mexico’s original inhabitants. As in other parts of the Americas, the “Old World” diseases carried by Europeans were deadly to Mexico’s indigenous population.⁵ It has been estimated that, through a combination of war and disease, Mexico’s population dropped from 25 to 5 million people in just the 50 years since the Spanish first arrived, a devastating loss by any measure (Malvido, 1973). In addition to this human loss, there was also a significant cultural loss as well. The language, art, and religion of Mexico’s original inhabitants were either looked upon with disfavor or banned outright. Additionally, many of the codices containing a written account of these groups’ culture and history were destroyed by their Spanish conquerors and lost forever.

1.1.2. Mexican Independence and Northern Wars

The Spanish colonial system proved to be remarkably resilient, but by the early 1800s, events both in the Americas and Europe conspired to change the situation in a fundamental way. In Mexico itself, the level of resentment to Spain’s autocratic rule (through the Viceroy of “New Spain”) had grown over time, and Mexico’s rigid system based on inherited privilege and its highly skewed distribution of wealth and income created deep animosity among the lower classes. Mexicans could also observe the success of other revolutions in their own hemisphere, including the War of Independence fought in the United States. Finally, in Europe, the Napoleonic wars were wreaking havoc in Spain. French troops occupied Madrid and the Spanish monarchy maintained only a tenuous grip on its overseas possessions.

On the night of September 15, 1810, from a small village just to the north of Mexico City, Father Miguel Hidalgo y Costilla issued a call to action known as “El Grito de Dolores.” His followers were successful in their initial confrontation with Spanish loyalists. They were, however, plagued by poor organization and lacked a solid military strategy, and eventually, they were defeated by Spanish forces. Hidalgo was later captured and then executed in 1811. The cause of independence was quickly taken by others though, most notably another priest, José María Morelos. He, like Hidalgo, called for independence from Spain, abolition of slavery, equality for non-Spaniards, and aid to the poor. Unlike Hidalgo, Morelos was an excellent military tactician and engineered a series of victories over Spanish opposition before he also was captured and then executed in December 1815. Following the death of Morelos, the independence movement was taken over by Vincente Guerrero, and, due to a critical lack of resources, large scale battles were generally avoided in favor of guerrilla tactics. By 1820, the cause of Mexican independence seemed to be on the brink of collapse. Liberal reforms in Spain, however, precipitated an agreement (known as the “Plan of Iguala”) between Guerrero’s army and the royalist forces led by Augustin de Iturbide. This, in turn, led to the resignation of the Spanish Viceroy and the acceptance by Spain of an independent Mexico under the Treaty of Córdoba signed on August 24, 1821.

The first decade of Mexico’s existence as an independent State was fraught with turbulence, both internally and externally. Iturbide, who had assumed power after Spain’s exit, soon became the target of fierce opposition from various quarters, and he abdicated his position as the emperor of Mexico in 1823. After briefly fleeing to Europe, he returned to Mexico and was executed the following year. Wars were conducted by Mexico in both Central America and the Caribbean, and Mexico’s treasury was depleted as Spain (unsuccessfully) attempted to re-conquer Mexico in a series of engagements throughout the 1820s. During this period, the country was headed by a series of presidents, but no single leader managed to consolidate power until Antonio López de Santa Anna assumed the presidency in 1832. A complex individual, Santa Anna served as both a politician and military leader and was the dominant force in Mexican politics until the mid-1850s.

Upon taking power, Santa Anna quickly moved to establish tight federal control over all of Mexico’s far-flung regions. Such actions were not universally popular, and were strongly opposed in both the Yucatán (in the south) and in Tejas (in the north). The northern state of Tejas (later Texas) had been opened in the 1820s to largely English-speaking settlers from the US. The area was sparsely inhabited then and Mexico had initially allowed settlement there to populate the region and make it less vulnerable to raids from Native American groups such as the Comanche. The newly arrived “Texans” had been granted entry on the condition that they convert to Catholicism, assume Mexican citizenship, and not bring in African–American slaves. The settlers had largely ignored these requirements and they bristled at Santa Anna’s plans for a more centrally governed Mexico. The situation deteriorated rapidly and an armed struggle ensued.

Beginning with the battle in Gonzales, in October 1835, the local population engaged in a series of increasingly violent and bloody confrontations with Mexican authorities. In an attempt to quell the uprising, Santa Anna sent a 6,000-man army into Texas and personally assumed its command in February 1836. Initially, the Mexican forces were fairly successful in their efforts. They annihilated the Texan defenders of the Alamo in March, 1836, and defeated the Texan forces in a series of battles in what became known as the “Goliad Campaign.” I...