MEXICO NAFTA still isn't a sure success

Instead of integrating into a modern economy, people came to the United States.
CHICAGO TRIBUNE
FRANCISCO VILLA, Mexico -- When the North American Free Trade Agreement went into effect Jan. 1, 1994, it was a sign to harvest elsewhere for Domingo Tena and the rest of Mexico's small-time corn farmers.
Although Mexico introduced corn to the world and village life revolved around it for generations, NAFTA meant that inefficient producers on tiny plots could no longer hope for government help to survive in a new world of open competition with the U.S. They would have to find other jobs, but in a new Mexico that would produce many opportunities as the country leapfrogged into the 21st century.
In fact, Tena did find a new job. In Chicago.
"By 1996 or 1998, almost everyone was up here," said Tena, 28, who left home in 1995, sneaked over the border and works as a landscaper in Cicero. "The only ones who stayed behind were children."
Ten years into NAFTA, the accord is still intensely debated, with opposing statistics and political agendas making its results difficult to measure. But while the pact has delivered many benefits to Mexico, it is agreed that a broad swath of Mexicans was either directly hurt, left out or suffered because Mexico was unable to take the additional steps to help its population adjust and benefit from the new realities.
Transition was difficult
The success stories include booming exports of electronics, avocados and flowers to the U.S. But few of Mexico's 25 million rural residents could make a transition to doing other things because Mexico fell short in providing bridges of opportunity as it enthusiastically opened its borders to taxpayer-subsidized U.S. farm products even faster than NAFTA required, including millions of bushels of corn from Illinois each year.
On a broader level, the government has not followed NAFTA with necessary reforms in education, energy, taxes, labor laws and other areas. That has kept the country from generating and keeping jobs, preparing its work force and remaining competitive--tasks that President Vicente Fox's government is struggling with now.
Among the new landscapers and other Francisco Villa natives in Chicago's western suburbs are young men--such as Tena and a neighbor--who tried to succeed in construction and other fields back home but decided that going to the U.S. was their only realistic option.
Poverty rate
Mexico's poverty is about 45 percent nationwide and about 73 percent in rural areas. Wages have gone down, not up as the free-trade theorists envisioned. Nor has free trade helped stanch the outflow of illegal immigrants, despite former President Carlos Salinas de Gortari's oft-stated promise that under NAFTA, Mexico was going to export products, not people.
Analysts say NAFTA benefited border areas, the coasts and areas on the main highway between Mexico City and Laredo, Texas, while leaving no traces across much of the rest of the country.
And the most obvious benefits of NAFTA are wearing off. The accord lured an estimated 750,000 jobs from the U.S. to the maquiladora exporting factories along the border. But at least 250,000 of those jobs have been lost in recent years as operations moved to China and Southeast Asia, where labor is even cheaper.
NAFTA's legacy is having a wider influence, as the Mexican experience is being examined closely by Brazil and other developing nations pondering a Bush administration push for a broader Free Trade Area of the Americas. The sight of Mexican farmers protesting in February, including storming into Congress on horseback, has led to second thoughts and demands for "better" treaties.
NAFTA "created the perception that things would get better, but the truth is we have two economies, one exporting and the other one left behind," said Luis Rubio, a pro-free trade analyst with Mexico's Center of Research for Development.
"Canada saw NAFTA as an instrument for their own transformation, whereas Mexico saw NAFTA as an end in itself, so they didn't see a reason to pursue (additional reforms)," he said.
"The theory was that the children would integrate themselves into the modern economy, and you'll only lose one generation, not two or three. But now mostly they've gone to the States."
Attracted investment
NAFTA's backers say the accord has been a resounding success in achieving its main objective of creating a more stable and regulated business environment that has attracted more than $130 billion in foreign investment to Mexico.
Since 1994, the volume of overall U.S.-Mexico trade has tripled, with Mexico now enjoying a trade surplus, although many of the factories' exports are merely the re-export of products assembled with parts imported from the U.S.
Agricultural exports to the U.S. have doubled, although agricultural imports have grown faster.
And supporters say NAFTA has helped lower inflation, increased productivity, offered consumers more choices and cheaper prices and helped Mexico recover faster from the 1994-95 peso crisis, which had hobbled NAFTA's initial implementation.
"You can't say that this country hasn't taken advantage of NAFTA. We still have problems, but the instrument to increase investment and manufacturing growth has worked, no doubt about it," said Jaime Serra, Mexico's former trade minister and chief NAFTA negotiator who now runs a NAFTA-oriented investment firm.