Nafta and Mexico

In: Business and Management

Submitted By Elliez
Words 940
Pages 4
3. In previous classes, we have considered issues related to FDI (foreign direct investment) in the contexts of Botswana (the joint venture with DeBeers to exploit diamond wealth) and India (SEZs as arrangements to attract FDI). One of the stated reasons Mexico joined NAFTA (North American Free Trade Agreement) was to increase its inflow of FDI. Using your research skills as necessary, has NAFTA resulted in increased FDI inflows into Mexico? If so, has the FDI increase yielded economic benefits to Mexico, specifically in the form of long-term growth? Justify your answer.

Mexico’s joining NAFTA has resulted in increased levels of Foreign Direct Investment (FDI), with the World Bank estimating that levels of FDI in Mexico would be 40% lower had it not joined NAFTA (1.)
While the amount of FDI flowing into Mexico increased, this was not accompanied by the expected boost to long-term economic growth. NAFTA aimed to benefit Mexico with by closing the US-Mexico wage gap, boosting job growth, fighting poverty, and protecting the environment. These goals, while honorable, have not been achieved to date.
Despite NAFTA’s goal of reducing poverty in Mexico, the country experienced an increase in the percentage of people living in poverty and extreme poverty between 1994 and 1996. In contrast, both of these measures fell throughout the rest of Latin America in the same time period. While the trend of increasing poverty in Mexico was short lived, poverty measures continue to be a concern, and as of 2013, Mexico remains above the average poverty and extreme poverty measures for peer Latin American countries (2.). 20 years of NAFTA has moved the average Mexican household income in the wrong direction, dropping by roughly 15% between 1994 and 2010 in real dollars (3).
Other measures of economic success, such as annual growth in GDP per capita, further the notion that NAFTA…...

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