Economy of Mexico in 1970s From the early 1970s through the early 1980

From the early 1970s through the early 1980s, Mexico was awash on a sea of optimism regarding its future oil prospects. Since the days of expropriation in the 1930s, oil had enjoyed a special symbolic standing as the culmination, in a sense, of the Mexican revolution. With expropriation, Mexico had at long last asserted control over its patrimony. Mexico's natural wealth was now owned by Mexico, not by foreign interests.

The oil boom of the 1970s underlined and reinforced this symbolic significance of Mexican oil. In 1974, after a brief period in which Mexico became a net importer as demand outstripped domestic production, Mexico regained exporter status at virtually the same moment as the world price increased fourfold. Soon it was proclaimed, and widely believed, that oil would solve Mexico's longstanding problems of development. Mexico would become the Saudi Arabia of the western hemisphere, using the flow of oil wealth to modernize its industries and achieve at long last the good life its people had been so often promised, and had never (outside of the small elite) achieved.

Then, in the 1980s, the dream evaporated. World oil prices sagged, then collapsed. Mexico was left only with a mountain of debt a substantial portion of it incurred precisely due to the frantic effort to expand oil production during the heady 1970s. The demoralization could only be increased by the discovery, which became public early in the de la Madrid sexenio,

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The negative effects of the oil boom upon Mexico were made worse by its shortlived nature. In the 1970s, the emphasis was on expanding oil production at a pace that can be called frantic. Thus, instead of using oil income to fund oil expansion, and development of Mexican industrial and technological capabilities, the necessary technology was largely purchased abroad, and with debt. The oil industry along contributed in substantial measure to the explosion of Mexico's foreign debt in the 1970s and early 1980s. A further feature of the oil industry, little touched on in the literature, contributed to the selflimiting character of oilbased development. Oil development calls for a large capital input and a rather small labor input. This was in precise imbalance to the situation of Mexico, which had a shortage of capital, but a large reserve of underemployed labor. Development of agriculture, for example, could well have been undertaken upon laborintensive lines, providing a large number of jobs which would be very lowpaying and lowproductivity by developedworld standards, but would still be better and more plentiful work than was available to many millions of Mexicans. In contrast, oil development drain

Category: Foreign - E