Mexico Economic Development

Add: 23-11-2017, 12:58   /   Views: 161

International Business

Economic Development is the development of economic wealth of countries for the well-being of their population.

Economic development is an effort to improve the economic well-being and the quality of life of the nation by creating or retaining incomes.

The countries pass through various stages of economic development.

Economic Development stages of Mexico

On the basis of purchasing power parity and the GDP, Mexico is the 12th largest economy in the world.

The history of economic development in Mexico ways back from the early 1917, when the government, for the overall development of the country and its population, provided in its constitution the principles of national ownership of subsoil rights, expropriation of property needed for national purposes and the breaking up of large estates.

It also expropriated the property of the foreign oil companies in 1938 (Buscaglia, 1994).

Even the production, refining and distribution were brought under the government control.

The banking, railways and the power plants were taken by the government under its control.

Till the year 1984, majority of the sectors required to have the Mexican ownership.

After that, the legislations for foreign investment were relaxed.

The government also undertook many developmental projects in the fields of modernization of railroads, increasing the agriculture productivity and expansion of the fishing fleet (Buscaglia, 1994).

When Mexico joined GATT in 1986, it eliminated trade barriers and tariffs were also reduced.

Privatization was adopted by 1989 and generated large onetime revenues for the government.

During 1993 to 1999 more than 3.1 million firms export contributed less than 5% and more than 300 exporting firms and 3,500 maquiladoras have produced 95% contribution in GDP of Mexico.

Joining The North American Free Trade Agreement (NAFTA) in the year 1994, there has been tremendous growth in the Mexico.

It had opened up foreign investment possibilities in mostly all Mexican sectors like services sectors, banking, investment, intellectual property rights, labor & environmental, etc.

In 1994-95, Mexico faced financial crisis.

In the form of emergency funds, Mexico, received help from U.S government, World Bank, IMF and the Inter-American Development Bank.

The Mexican economy began to recover in 1996.

In 2001-02, the Mexican economy had weakened due to weak domestic demand.

The government aimed at a reduction of the fiscal deficit and public debt by 2006.

Impact of NAFTA on Mexican the development of Mexican Economy

NAFTA is considered as the extension of the earlier Free Trade Agreement between Canada and the U.S.

in 1988.

Under international law, it forms the part of a treaty where as in the United States law, it is considered as an agreement of congressional-executive (Bergstrand 1989).

The North American Free Trade Agreement (NAFTA) was launched by Canada, the United States and Mexico in January 1994.

It forms the world's main free trade area.

In all three countries, this Agreement has successfully brought rising standards and economic growth for the people.

In addition to this, NAFTA is recognized as a well-built foundation for the future growth (Arndt & Alex 2001).

This agreement removed most barriers to trade and investment among the United States, Canada, and Mexico.

For global business corporations, such mutual co-orporation proves to be very lucrative (North American Free Trade Agreement, 2004).

To be globally successful, the corporation must try to gain the partnership of powerful nations.

For example; among U.S, Canada and Mexico, the U.S is the powerful country, which has abundant natural resources, high productivity and a well-developed infrastructure.

Mexico is gaining from the riches of the US.

By joining with NAFTA, all non-tariff barriers to agricultural trade between the United States and Mexico were eradicated.

After joining NAFTA, in 1994, the FDI from the United States to Mexico had increased significantly from 4.7 billion and in 1997 it had become more than 5.8 billion.

In the case of trade growth, due to the NAFTA, there was an increasing integration between the United States and Mexico.

There was more than 72% and 78% import and export had been accounted in Mexico from Canada and the United States.

In 2000, this share had become 92% and 75%.

Due to this trade growth, Mexico has achieved a considerable trade surplus with the United States.

With the introduction of privatization and linearization in these countries, the other developing countries also resorted to implement these policies in their respective policies.

To take the benefit of these developed economies, businesses from all over the world would try to establish their operation particularly in Mexico (Cherunilam, 2006).

Its economic infrastructure trade policies and government regulations attract most of the global business organizations.

The prevalence of more employment rate also increases the growth prospects of the multinational companies.

The world is emerging as a global or transactional economy.

This removes the national borders, which are hindering the growth of global businesses.

It is characterized by free flow of trade and factors of production across national borders.

The supportive government policies in these countries provide better ground for carrying out global business operation.

It may take the form of policy and procedural reforms, development of facilities like research and development support and financial market reforms (Cherunilam, 2006).

Advertising is a tool of marketing and the paid form of non personal presentation and promotion of goods and services by an identified sponsor.

It is a cost- effective way to educate people and to build brand image of the product.

It improves knowledge and creates awareness regarding the new features of existing products.

It is used to convince current purchasers so that they make the right choice (Kotler, 2002).

In the present competitive era, strong consumer base is the key of success for any business organization.

Behind the advertising of any product the main purpose of the organization is to attract the consumers.

From times immemorial, the human beings have been considered to be the most intelligent creature existing on this earth.

The basic reason leading to such a belief is that the humans have the maximum capacity to apply their brains to any kind of situation.

Currently, sociology, psychology and anthropology are the main features through which an organization can analyze the behavior of a human being.

In order to make the concept of effective advertising, it is essential for any organization to research and study the field of behavioral sciences (sociology, psychology and anthropology).

It is the integration of relevant knowledge of these areas that has given us a new field of study.

Sociology means behavior of a human being in the group or in the society (Prasad, 2008).

With the help of sociology the management could analyze the behavior of consumers and their preferences in the society.

Psychology consist intra individual dynamics of human behavior.

It focuses directly on understanding and predicting individual behavior.

Various aspects such as motivation, personality, attitude, learning, attracting, etc.

are based on the concept of psychology (Mathew, 2003).

With the help of this concept the management could understand that every person in the society is differ from one another according to their values, attitudes, personalities and roles, so the management should plan the advertising process and select the marketing tool according to its target market and consumer's psychology (Prasad, 2003).

Anthropology could be defined as the study of both human and environment.

Anthropology improves the understanding between the relationship of human being and its culture.

It influences the people to behave according to the environmental circumstances and nurture in which he develops (Mathew, 2003).

This concept helps to the marketing department of an organization to analyze the action and reaction of consumers for the environment.

With the help of this they could understand the liking and disliking of its target market.

In the present time, the world has become a global village.

At the international level, there are various types of consumers, which belong from different cultures and societies.

Every one has different preferences and options according to their values, ethics, religion etc.

From an international business perspective, if an organization wants to develop a strong customer base from different types of culture and society and want to be success at the international level, it is essential for the company to analyze the preference and choice of the target market with the help of sociology, psychology and anthropology.

Due to this, it would be possible of the organization to make an advertising concept according to their behavior and it would be able to attract the consumer to use the services and products of the company (Sharan, 2005).


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North American Trade After NAFTA: Part I, Part II, and Part III.

Claremont Policy Briefs, Issue No.

01-01, 01-02, and 02-01.

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Bergstrand, JH 1989.

The Generalized Gravity Equation, Monopolistic Competition, and the Factor Proportions Theory of International Trade.

Review of Economics and Statistics 71:143-53.

Buscaglia, E.


Legal and Economic Development in Mexico: The Steps Ahead. School of International Studies: University of Miami.

Cherunilam, F.

(2006) International Business: Text and Cases.

New Delhi: Prentice Hall of India Pvt.


Kotler, P.


Marketing Management (11th Edition).

New Delhi: Prentice Hall of India Private Ltd.

Mathew, M.J.


Fundamentals of Organizational Theory and Behavior (1st Edition).

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Sharan, V.


International Business: Concept, Environment and Strategy (3rd Revised Edition).

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