The North American Free Trade Agreement (NAFTA) seeks to create a trading bloc consisting of Canada, the United States, and Mexico. The bulk of the treaty was negotiated by the Bush administration, but it falls to the Clinton administration to coordinate its ratification by Congress. The agreement is the subject of much controversy over whether American jobs would be lost or gained, and what the eventual affect of the agreement will be on the American economy. This research seeks to understand the effect of NAFTA on a smaller scale; namely, the effect of the agreement on those states which border Mexico.
To understand NAFTA's effect, it is necessary to understand the environment into which NAFTA will be implemented. Mexico effectively restructured its economy during the late 1980s. Prior to that time, the country was highly protectionist and socialist, unable to complete on an international basis, and heavily reliant on its oil reserves. In addition, Mexico had a high level of debt (much of it to American financial institutions).
Under President Carlos Salinas de Gortari, the number of publicly held companies fell from more than 1100 in 1982 to just over 200 in 1992. During the same period, the public debt was halved, and inflation fell from 150 percent in 1987 to 12 percent in 1992. While still considered high by American standards during a recession, the relatively low rate of inflation has brought about new credit options and new opportunities in the international market. The privatization effort continues, although the government retains control of the lucrative national petroleum conglomerate. Other industries, including textiles, steel, cement, mining, airlines and banking, continue toward privatization.
The government has also shifted away from protectionist tactics with regard to its international commerce strategy. The following chart illustrates key areas where improvements have been made in reducing pro...