Looking back on NAFTAs promises and realities from a local perspective. The state of Coahuila, Mexico

The effectuation of the North American Free Trade Agreement (NAFTA) in 1994 between Mexico, the United States, and Canada, can be considered one of the most radical trade experiments in history, representing a new phase in global trade policy. Perhaps the most significant aspect of NAFTA was the fact that it was the first agreement of its kind between economies with fundamentally different levels of development. As a test case for other developing economies, developments in Mexico under NAFTA have been closely followed and evaluated by the international financial community. Almost celebrating its fifteenth anniversary, policymakers insist that Mexico has made progress in many areas. Indeed, Mexico’s growth, in terms of exports and foreign investments, has been remarkable during the past one-and-a-half decade. Today, many other governments of developing countries consider export-oriented industrialisation, driven by foreign investments, to be the most viable recipe for capturing the potential benefits of globalisation and a ‘fast-track’ out of poverty. Nevertheless, the ‘realities’ of free trade policies are often far more complex than their ‘promises’ suggest. Not all regions, economic sectors, and social groups manage to become successfully integrated into the world economy. In order to understand why some regions perform better than others, detailed case studies are necessary. The success or failure of any development strategy generally involves a great number of variables such as local industrial traditions, local governance structures and the roles of the local private sector. The state of Coahuila, situated directly on the US border, makes an interesting case study with respect to the socio-economic impact of NAFTA. During the past decade, a large number of domestic and foreign companies, in particular in the automotive and garment sectors, have made substantial investments in Coahuila, strongly contributing to its Gross Domestic Product (GDP) and growth of exports. However, when looking beyond these impressive macro-economic figures, it becomes clear that the gains have not been evenly divided across the different sub-regions of Coahuila. Questions must also be raised about their ability to contribute to sustained, longterm growth. Only few foreign direct investments are firmly embedded within the local economy, which as a result has become extremely vulnerable to external shocks.

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