9781422286869

MEX I CO Leading the Southern Hemisphere

Finding a Financial Balance The Economy of Mexico

A cruise ship docks in a port off the Mexican coast. Tourism is an important source of income for many people in Mexico.

MEX I CO Leading the Southern Hemisphere

Finding a Financial Balance The Economy of Mexico

Mason Crest Philadelphia

Mason Crest 450 Parkway Drive, Suite D

Broomall, PA 19008 www.masoncrest.com

©2015 by Mason Crest, an imprint of National Highlights, Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, taping, or any information storage and retrieval system, without permission from the publisher. Printed and bound in the United States of America. CPSIA Compliance Information: Batch #M2014. For further information, contact Mason Crest at 1-866-MCP-Book. First printing 1 3 5 7 9 8 6 4 2 Library of Congress Cataloging-in-Publication Data on file at the Library of Congress

ISBN: 978-1-4222-3221-7 (hc) ISBN: 978-1-4222-8686-9 (ebook)

Mexico: Leading the Southern Hemisphere series ISBN: 978-1-4222-3213-2

TAble of Contents

Timeline

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1. A Troubled History 2. Finding Solutions

11 21 29 37 43 51 58 60 61 62

3. Manufacturing and Industries 4. Agriculture Feeds a Hungry Economy 5. Mexico Banks on its Natural Resources

6. Mexico’s Beauty Pays Off

Series Glossary Further Reading Internet Resources

Index

MEX I CO Leading the Southern Hemisphere

Beautiful Diversity: The Geography of Mexico Famous People of Mexican History Spirit of a Nation: The People of Mexico Fiesta! The Festivals of Mexico Ancient Land with a Fascinating Past: The History of Mexico Vital and Creative: The Art and Architecture of Mexico Victoria! The Sports of Mexico Finding a Financial Balance: The Economy of Mexico Zesty and Colorful Cuisine: The Food of Mexico

Meeting Future Challenges: The Government of Mexico Mexico’s Gulf States Mexico’s Pacific North States Mexico’s Pacific South States Mexico’s Northern States Mexico’s Central States Mexican Facts and Figures

KEY ICONS TO LOOK FOR:

Text-dependent questions: These questions send the reader back to the text for more careful attention to the evidence presented there.

Words to understand: ;OLZL ^VYKZ ^P[O [OLPY LHZ` [V \UKLYZ[HUK KLÄUP[PVUZ ^PSS increase the reader's understanding of the text, while building vocabulary skills.

Series glossary of key terms: This back-of-the book glossary contains terminology used throughout this series. Words found here increase the reader's HIPSP[` [V YLHK HUK JVTWYLOLUK OPNOLY SL]LS IVVRZ HUK HY[PJSLZ PU [OPZ ÄLSK Research projects: Readers are pointed toward areas of further inquiry connected to each chapter. Suggestions are provided for projects that encourage deeper research and analysis. Sidebars: This boxed material within the main text allows readers to build knowledge, gain insights, explore possibilities, and broaden their perspectives by weaving together additional information to provide realistic and holistic perspectives.

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Finding a Financial Balance: The Economy of Mexico

Timeline 1519 Hernán Cortés arrives from Spain. 1810 Mexico begins fight for independence from Spain. 1821 Mexico gains independence from Spain. 1869 Mexico’s first oil well is drilled. 1877 Porfirio Díaz becomes president, beginning the “Porfiriato” period. 1938 Oil industry of Mexico is nationalized. 1946 Miguel Alemán becomes president and begins fueling the economy with more highways, railroads and airports. 1963 The Department of Tourism and the National Tourism Promotion Fund are created. 1970 The Federal Labor Act takes effect; this law deals with wages and employment issues. 1982 President Portillo nationalizes Mexico’s banks. 1985 Mexico City earthquake hits. 1986 Mexico enters into GATT (General Agreement on Tariffs and Trade). 1987 Mexico begins Economic Solidarity Pact, whose goal is to reduce inflation. 1988 Hurricane Gilbert strikes Mexico. 1989 The Brady Plan helps restructure Mexico’s debt. 1991 Mexico signs a bilateral free-trade agreement with Chile to reduce tariffs. 1992 Mexican, Canadian, and U.S. leaders negotiate the North American Free Trade Agreement (NAFTA), and it is signed the next year. 1994 NAFTA officially goes into effect on January 1.

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Timeline

1995 Inflation shoots to 52 percent in Mexico. 1997 Thanks to economic reforms, Mexico is able to pay back $13.5 billion in loans to the United States. 1999 Mexican government passes the Mining Law Regulation to update mining procedures. 2000 Vicente Fox is elected president, and implements pro-business policies. 2003 President Fox appeals to the United States in efforts to form an immigration accord, with the goal of granting legal status to many Mexican immigrants in America. 2006 The economy becomes a major issue during the presidential election; voters elect Felipe Calderón, who favored free trade and business expansion more than his opponent. 2007 A group of anti-government rebels, called the Popular Revolution Army, repeatedly bombs gas and oil pipelines to attack the Mexican economy. 2008 Calderón releases a joint statement with U.S. President George W. Bush and Canadian Prime Minister Stephen Harper, emphasizing the need for the countries to continue freely trading. 2012 Enrique Peña Nieto is elected president of Mexico, receiving 38 percent of the vote. His election returns the PRI to power after 12 years of PAN rule. He is sworn in as president on December 1. 2014 The Peña Nieto administration passes a package of economic reforms.

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Among them is a constitutional amendment that allows foreign oil companies to operate within Mexico, ending the PEMEX monopoly.

Words to Understand

civil— having to do with citizens; a civil war is fought between citizens of the same country. ejido system— a program in Mexico where the government sets aside farmland for communities; the land is owned in common and passed down from generation to generation. exile— when a person is forced to leave his or her home. exports— goods or commodities shipped out of a country to other nations. imports— Goods or commodities shipped into a country from other nations.

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Skyline of the financial center of Mexico City. On the right is Torre Mayor, the tallest skyscraper in Latin America.

A Troubled History T oday, Mexico has the world’s 14th-largest economy, with a gross domestic product (the value of all goods and services produced in a year) valued at over $1.3 trillion in 2014. The Mexican economy is heavily dependent on exports, as Mexico is one of the world’s most receptive countries when it comes to free trade. It has signed agreements with many countries, including the United States, China, Japan, the European Union, and many countries of Central and South America. These agreements typically reduce or eliminate trade restrictions and fees on imports and exports , making it less expensive for foreign companies to buy products from Mexican companies. However, Mexico was not always an important part of the global economy. For centuries, it was an isolated land with a primitive economy based primarily on agriculture. Mexico did not become an independent nation until 1821, and for decades after gaining independence from Spain the country had many different governments. These years of political upheaval kept the Mexican economy from diversifying and growing. The foundations of Mexico’s modern economy were set after 1876, when Porfirio Díaz became president of the country. Díaz ruled Mexico until 1911, and

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Finding a Financial Balance: The Economy of Mexico

Porfirio Díaz presided over Mexico from 1876 to 1911. He influenced many aspects of Mexican life, but his focus was on the economic development of the country.

during this time the country became more industrialized. Díaz encouraged the construction of manufacturing facilities and the expansion of mining and other industries that utilized Mexico’s natural resources. He improved transportation throughout the country, as railroads, shipping ports, and other infrastructure was built. During his rule a modern

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banking system was implemented, and companies from the United States, Great Britain, France and other countries invested in Mexican factories and businesses. The period of Mexican history from 1876 to 1911—often referred to as the “Porfiriato”—brought economic stability and growth to the country. Unfortunately, Díaz’s economic policies predominantly helped the upper class of Mexican society, the criollos who were of European descent. Many of these people owned large areas of land, known as haciendas . Most Mexicans were poor

farmers who did not have their own land and had to work on the haciendas, or in other low-paying occupations like mining. They saw no opportunity to improve their lives under Díaz’s rule.

The term that a Mexican president serves is called a sexenio . This means that the president

will be in office for six years.

A Troubled History

In 1910, a young man named Francisco I. Madero decided to run against Díaz in the presidential election. He promised to break up the haciendas and distribute land to the poor farmers of Mexico. To ensure that he would win, Díaz had Madero arrested and thrown into jail. Madero escaped, and soon led a revolt against the Díaz government. In 1911 Díaz resigned the presidency and went into exile . In the following decade, Mexico was

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torn apart by revolutionary violence and civil war . Madero briefly ran the national government, but he was overthrown by a military leader, Victoriano Huerta. The Huerta government was itself defeated by forces loyal to Venustiano Carranza. In the meantime, revolutionaries like Pancho Villa and Emiliano Zapata continued fighting the various Mexican governments on behalf of the landless peasants. Carranza was killed in 1920 by soldiers loyal to Álvaro Obregón. The subsequent election that year of Obregón as president ended the worst fighting of the Mexican Revolution.

Álvaro Obregón was president of Mexico from 1920 to 1924. He helped the country transition to peace after the long Mexican Revolution.

Finding a Financial Balance: The Economy of Mexico

Obregón’s successor as president, Plutarco Elías Calles, formed a political party in 1929 that would become known as the Partido Revolucionario Institucional (PRI), or Institutional Revolutionary Party. The PRI was formed to ensure that the agreements made during the Mexican Revolution, such as land reform and political changes, were carried out. Calles focused on economic reforms. He founded the Bank of Mexico as well as the National Bank of Agricultural Credit, which was meant to loan money to poor farmers. In 1934, Lázaro Cárdenas became president. During his administration, the government implemented a major land reform program that distributed millions of acres of farmland to peasants. Under the ejido system , citizens could share ownership of farmland and pastureland. Each family in an ejido community would have a section that they could work independently. The land rights could be passed through generations of families. Cárdenas also allowed the formation of a large workers’ union, the Confederation of Mexican Workers. This union allowed workers to defend their rights and fight for higher wages. Perhaps the most significant change of the Cárdenas government was to nationalize the oil industry in Mexico. In 1938 the Mexican government took over the operations of foreign oil companies and turned them over to a new state-owned company, Petróleos Mexicanos (PEMEX). This gave the Mexican government a monopoly on the exploration, production, refining, and distribution of Mexico’s oil and natural gas resources. The growth of the oil industry, as well as natural gas production and the development of factories led to growth in the middle class of Mexico. Cárdenas also put railroads under national control. During the Second World War, Mexico helped the United States immensely. Mexicans came to the U.S. to work in factories and on farms. New laws allowed

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