Mexican miracle
Encyclopedia
The Mexican miracle refers to the country's inward-looking development strategy that produced sustained economic growth
of 3 to 4 percent and modest 3 percent inflation
annually from the 1940s until the 1970s.
s by imposing high protective tariffs and other barriers to imports
. The share of imports subject to licensing requirements rose from 28 percent in 1956 to an average of more than 60 percent during the 1960s and about 70 percent in the 1970s. Industry accounted for 22 percent of total output in 1950, 24 percent in 1960, and 29 percent in 1970. The share of total output arising from agriculture and other primary activities declined during the same period, while services stayed constant. The government promoted industrial expansion through public investment
in agricultural, energy, and transportation infrastructure. Cities grew rapidly during these years, reflecting the shift of employment from agriculture to industry and services. The urban population increased at a high rate after 1940 (see Urban Society, ch. 2). Growth of the urban labor force exceeded even the growth rate of industrial employment, with surplus workers taking low-paying service jobs.
, President
Miguel Alemán Valdés
's (1946–52) full-scale import-substitution program stimulated output by boosting internal demand. The government raised import controls on consumer goods but relaxed them on capital goods, which it purchased with international reserves accumulated during the war. The government spent it heavily on infrastructure. By 1950 Mexico's road network had expanded to 21,000 kilometers, of which some 13,600 were paved.
growth averaged about 7 percent overall and about 3 percent per capita. Consumer price inflation averaged only 3 percent annually. Manufacturing
remained the country's dominant growth sector, expanding 7 percent annually and attracting considerable foreign investment
. Mining
grew at an annual rate of nearly 4 percent, trade at 6 percent, and agriculture
at 3 percent. By 1970 Mexico had diversified its export base
and become largely self-sufficient in food
crop
s, steel
, and most consumer goods. Although its imports remained high, most were capital good
s used to expand domestic production.
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
of 3 to 4 percent and modest 3 percent inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
annually from the 1940s until the 1970s.
Background
This growth was sustained by the government's increasing commitment to primary education for the general population from the late 1920s through the 1940s. The enrollment rates of the country's youth increased threefold during this period ; consequently when this generation was employed by the 1940s their economic output was more productive. Additionally, the government fostered the development of consumer goods industries directed toward domestic marketDomestic market
A domestic market is a financial market. Its trades are aimed toward a single market. A domestic market is also referred to as domestic trading...
s by imposing high protective tariffs and other barriers to imports
International trade
International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...
. The share of imports subject to licensing requirements rose from 28 percent in 1956 to an average of more than 60 percent during the 1960s and about 70 percent in the 1970s. Industry accounted for 22 percent of total output in 1950, 24 percent in 1960, and 29 percent in 1970. The share of total output arising from agriculture and other primary activities declined during the same period, while services stayed constant. The government promoted industrial expansion through public investment
Government bond
A government bond is a bond issued by a national government denominated in the country's own currency. Bonds are debt investments whereby an investor loans a certain amount of money, for a certain amount of time, with a certain interest rate, to a company or country...
in agricultural, energy, and transportation infrastructure. Cities grew rapidly during these years, reflecting the shift of employment from agriculture to industry and services. The urban population increased at a high rate after 1940 (see Urban Society, ch. 2). Growth of the urban labor force exceeded even the growth rate of industrial employment, with surplus workers taking low-paying service jobs.
Import-substitution program
In the years following World War IIWorld War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
, President
President of Mexico
The President of the United Mexican States is the head of state and government of Mexico. Under the Constitution, the president is also the Supreme Commander of the Mexican armed forces...
Miguel Alemán Valdés
Miguel Alemán Valdés
Miguel Alemán Valdés served as the President of Mexico from 1946 to 1952.-Life:Alemán was born in Sayula in the state of Veracruz as the son of General Miguel Alemán González and Tomasa Valdés Ledezma...
's (1946–52) full-scale import-substitution program stimulated output by boosting internal demand. The government raised import controls on consumer goods but relaxed them on capital goods, which it purchased with international reserves accumulated during the war. The government spent it heavily on infrastructure. By 1950 Mexico's road network had expanded to 21,000 kilometers, of which some 13,600 were paved.
Economic performance
Mexico's strong economic performance continued into the 1960s, when GDPGross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
growth averaged about 7 percent overall and about 3 percent per capita. Consumer price inflation averaged only 3 percent annually. Manufacturing
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...
remained the country's dominant growth sector, expanding 7 percent annually and attracting considerable foreign investment
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...
. Mining
Mining
Mining is the extraction of valuable minerals or other geological materials from the earth, from an ore body, vein or seam. The term also includes the removal of soil. Materials recovered by mining include base metals, precious metals, iron, uranium, coal, diamonds, limestone, oil shale, rock...
grew at an annual rate of nearly 4 percent, trade at 6 percent, and agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
at 3 percent. By 1970 Mexico had diversified its export base
Export
The term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer"...
and become largely self-sufficient in food
Food
Food is any substance consumed to provide nutritional support for the body. It is usually of plant or animal origin, and contains essential nutrients, such as carbohydrates, fats, proteins, vitamins, or minerals...
crop
Crop
Crop may refer to:* Crop, a plant grown and harvested for agricultural use* Crop , part of the alimentary tract of some animals* Crop , a modified whip used in horseback riding or disciplining humans...
s, steel
Steel
Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most common alloying material for iron, but various other alloying elements are used, such as manganese, chromium, vanadium, and tungsten...
, and most consumer goods. Although its imports remained high, most were capital good
Capital good
A capital good, or simply capital in economics, is a manufactured means of production. Capital goods are acquired by a society by saving wealth which can be invested in the means of production....
s used to expand domestic production.