Events

How NAFTA, Migration, and Government Policy Affect Mexico's Poor

January 30, 2008 // 8:00am10:00am

On January 30, 2008 the Mexico Institute, the George Washington University, and the Inter-American Dialogue hosted a discussion of the effects of the North American Free Trade Agreement (NAFTA) on reducing poverty and economic inequality in Mexico.

Gerardo Esquivel, professor of economics at El Colegio de Mexico, presented data showing that levels of inequality and poverty have decreased in Mexico steadily after the initial jump that followed the financial crisis of 1994-95. However, looking at the data within the context of the last 50 years, it is impossible to discern whether the decrease following the implementation of NAFTA was a direct result of the trade agreement. Nevertheless, both he and Luis Felipe Lopez Calva, the United Nations Development Program's chief economist for Latin America, asserted that Mexico's poverty and inequality index would be worse without trade liberalization.

Panelists agreed that a concrete effect of NAFTA has been the widening gap between Mexico's industrialized north and the largely rural south. Empirical evidence presented by Esquivel showed that NAFTA heightened preexisting disparities. He noted that the industrialized north—given its proximity to the United States—has been able to capitalize on the benefits of the trade agreement, while the south was left ill prepared to compete due to the widespread lack of adequate infrastructure. In this sense, NAFTA has increased the north-south economic divide within Mexico.

John Scott, an economics professor at Mexico's Centro de Investigacion y Docencia Economicas (CIDE), emphasized this fact by acknowledging that while twelve percent of the population in the north lives below the poverty line, 47 percent lives below the poverty line in the south. Scott also presented evidence that suggests that NAFTA has had differing effects on income inequality, widening the divide in the south and diminishing income inequality in the north. Scott noted that social policy in Mexico, including health care and education, has become less regressive, but still overwhelmingly favors more affluent and middle class citizens over the poorest. Luis Felipe Lopez Calva closed by stating that inequality must be addressed if Mexico is committed to limiting northward migration.

 

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