Economía

Lopez Cordova, J. Ernesto.
NAFTA and Manufacturing Productivity in Mexico
Economía - Volume 4, Number 1, Fall 2003, pp. 55-98

Brookings Institution Press

NAFTA and Manufacturing Productivity in Mexico M exico’s negotiation and implementation of the North American Free Trade Agreement (NAFTA) represent a watershed in the country’s economic history. The agreement will eventually open up most sectors of the Mexican economy to its largest trading partner, the United States, thereby buttressing the liberalization reforms implemented since the mid-1980s. The implications for the country’s welfare are hard to understate. Until very recently, however, there has been little hard evidence on how the agreement has affected the Mexican economy. This paper contributes to a better understanding of NAFTA’s economic implications for Mexico by studying the degree to which the agreement has affected total factor productivity in the manufacturing sector. Economists view productivity as the main engine for economic growth. As in most of Latin America, Mexico’s overall total factor productivity performance from the early 1980s through the mid-1990s was rather disappointing, with average annual growth between –1 and –2 percent.1 An understanding of the factors that hamper productivity in Mexico is crucial for the design of appropriate economic policies conducive to higher living standards. The experience under NAFTA is interesting in itself. First, the Mexican case is particularly relevant for countries participating in the ongoing 55 E R N E S T O L Ó P E Z - C Ó R D O V A López-Córdova is with the Inter-American Development...