Luis Rubio

Something evidently failed. The idea was that the country would adopt a set of strategies and economic reforms and that, within a reasonable time, the country’s economy would be transformed and, with that, it would move decisively towards development. Although today the reforms of the last decades are criticized a lot, it is essential to understand what happened and why the results ended up being inferior to what was desired and promised.

The first thing is to place oneself in the context of the old political system, in the era of the hard PRI in which the president was all-powerful and his capacity to impose his will enormous. The reforms began in the eighties when the country was virtually bankrupt (truly bankrupt, with total inability to meet its financial obligations) and everything tried until then had failed. The presidents of the seventies had changed course, raising public debt to unsustainable levels, without achieving anything relevant: although the economy grew, productivity stagnated and, when oil prices fell, government finances collapsed like the house of cards it had been.

The reforms were conceived as a means to force economic agents to raise their productivity levels, be more competitive, reduce prices and generate an environment of growth that, little by little, would bring the whole of the population into the process. The scheme made sense and was similar to the one that had been pursued by a host of successful countries. However, the errors and exceptions that accompanied it ended up being pernicious for the achievement of high growth rates.

An obvious mistake from the beginning was that the liberalization that took place (of investment, imports, regulations and exports) was limited for political reasons: the governments that hoisted the reforms refused to affect politically relevant interests in the political, trade union and political world. In this way, services, energy and a good part of the manufacturing industry were left protected, thus limiting their development. Also, the gas pipeline network was prevented from growing because a political group owned the trucks that distributed the gas. In a word, the reforms were well structured in general, but they were never conceived as a transformative project; rather, in practice, as a partial remedy, a patch.

A part of the economy and of the society experienced enormous benefits, but another one lagged behind. The contrasting performance of various states is more than illustrative. On the other hand, the implementation of the reforms coincided in time with the growing attrition, and eventual collapse, of much of the government and security structure that existed. The old system centralized everything and, for a time, maintained peace; however, it wore out over the years and never prepared itself to deal with the need to build the governance capacity that the future would require. At the beginning of this century, the entire structure collapsed, giving a death blow to countless families which, in the process, lost children, parents and brothers on the altar of organized crime and drug trafficking.

The economic problem is not the same as that of diminished capacity of government: they have different origins and distinct dynamics, but inevitably feed on each other. But two things are unobjectionable: first, although Mexico has an increasingly robust economy, economic performance has been insufficient to incorporate the population as a whole. Second, the political problem and its manifestation in the form of crime and violence has not even begun to be addressed.

Santiago Levy* has just published an excellent book that explains a lot of what went wrong: it is not that the reforms were bad, but that everything that was necessary was not reformed. Specifically, there was a lack of a strategy for social inclusion that would allow both to bring the whole of the population into the reforming economy and to raise productivity for the entire economy. As things went, productivity rose dramatically in the modern sector, but most of the population was stuck in an economy that was informal, unproductive, uncertain and without a future. Levy’s proposal is to create mechanisms that encourage formalization and increase productivity through a social policy strategy that does not make the costs of formalization fall on the micro-enterprises. The proposal is ambitious and complex but, coming from one of the original authors of the reforms, invaluable.

For his part, Jesús Villaseñor,** for decades a developer and manager of some of the main development banks of the country, argues that development banking is a potentially central element of economic progress but that sexennial changes, occurrences and errors end up undermining their potential and decreasing their impact. A book with extraordinary anecdotes, shows not only the importance of an institutionalized development bank, protected from political ebbs and flows, but also the indispensability of a technical body capable of leading these efforts.

León Felipe, the poet, understood what is important and necessary: “I go with tense reins, restraining the flight, because what matters is not to arrive alone or soon, but to arrive with everyone and on time.”

* Under-Rewarded Efforts: The Elusive Quest for Prosperity in Mexico

**El fin de la banca de desarrollo: institucionalizarse o morir