ABSTRACT
A structural critique of the era of market liberalization in Mexico helped to clarify what had gone wrong with orthodox theory and practice. In Mexico, ‘maquila,’ assembly-type production developed around ‘imported’ industries producing simple electronics, textiles and garments, and automobiles. The particularistic form taken by maquila mode manufacturing resulted in part from institutional changes that eased requirements governing the sourcing of components. The policy of nominal exchange rate stability, the preferred ‘anchor’ against inflation, underwrote real peso appreciation and contributed at times to the ‘commitment’ problem of foreign capital. The ‘hot money’ injections induced a sharp, real appreciation of the Mexican peso and produced unsustainable deficits on the Trade Account. Orthodox theory predicted that freer trade should raise the prices of traded goods and, in derivative fashion, the ‘price’ of the abundant and intensively used factor. Theory also suggested that globalized capital markets would allocate FDI in ways that would complement the receiving countries’ abundant, less-skilled labor.
