The political and economic influences on the Mexican Industrialization Program

Abstract

The Mexican Industrialization Program (MIP) began as a solution to unemployment in the Mexican border region and to the loss of competitiveness of US firms vis-á-vis import competition. US and Mexican tariff exemptions facilitated the relocation of labor-intensive assembly operations from the US to the Mexican border region. Critics have argued that arrangements of this type are quickly undermined by developments in both the developed and the developing country involved. In the developed country, protectionist measures intended to defend the jobs of workers who are in competition with lower wages in developing countries might threaten the viability of coproduction. Critics also predict that social unrest stimulated by exploitative work conditions endanger this arrangement in the developing country. However, this paper concludes that in the US the impulse to protect jobs from relocation has been blunted by the desire to permit US firms to enhance their competitiveness by relocating labor-intensive stages of production in low-wage labor markets. Reinforcing the competitiveness rationale, that US opponents of the MIP lack a viable specific policy to oppose the participation of US firms has crippled their efforts. In Mexico the threat to the MIP posed by social unrest has been reduced by the low-wage level and lack of employment opportunities in the Mexican labor market. In that market maquiladoras offer the most economically vulnerable workers needed jobs and in some maquiladoras relatively attractive work conditions. Where their economic vulnerability does not ensure worker acquiescence, the desire to maximize employment has led the Mexican government to tolerate labor control tactics and on occasion to intervene to suppress labor unrest.