MODERNIZATION,
DEPENDENCIA, AND
IMPORT SUBSTITUTION
INDUSTRIALIZATION
Mexico
Financing ISI:
Sources of State Revenue

Taxation
 Imports
and Exports
 Income (individual and corporate) and payroll
 Sales, property, etc.

Fees
 Licensing



fees and permits
State-owned industry
Monetary policy (printing)
Borrowing
Financing ISI: Borrowing
The question is who to borrow from and how.
 Ownership requirements require joint partnerships
 Local content requirements stimulate the domestic
market for intermediary goods
 Restrictions on repatriation of profits
Modernization in Mexico:
the Porfiriato Era
“Order and Progress”
 Economic Modernization





Modernization began in the rural areas
At the beginning of his Presidency imports totaled $20 million
and exports $29 million; at the end imports totaled $205 million
and exports $293 million
Focusing on the development of rail and telegraph lines to unite
the country and facilitate export activities, as well as changes in
land tenure to promote private property
Modernization was mainly paid for with foreign investment
Economic modernization favored large landholdings, pushing
increasing numbers of landless peasants into the export-led
market economy and competitive wage labor
Dependency Theory and ISI:
Revolutionary Mexico


Dependency Theory in Mexico, though popular
academically, never had much political sway.
ISI was associated with the revolutionary project as
a means of benefiting clients of the PRI, sustaining
their rule
 Small
Farmers
 Unionized urban workers
 Unionized public employees
 Business Elites
Dependency Theory and ISI:
Revolutionary Mexico
Encouraging rural support
 Agrarian reform: Article 27 of the Constitution allowed
for the formation of ejidos
In total over 170 million acres were distributed from large
estates to over 3 million peasants
 By 1940 approximately ½ of cultivated land was held by
ejidos and the number of landless rural laborers declined
by almost 25%

Encouraging urban support
 Legal protections for unions and union members
 Preferential access to social welfare programs
Dependency Theory and ISI:
Revolutionary Mexico
Encouraging domestic businesses
 Low rates of taxation
 Subsidize production inputs
 Targeted barriers to market entry
 Targeted import and export restrictions
 Manipulation of exchange rate policy
 Restrictions on FDI
Questions



What role do political motives play in the
economy? To what extent do/can domestic
political circumstances influence the national
economy?
How should we understand the legacy of ISI?
Debt and populism? Or industrialization and
infrastructure improvements?
Dependency theory raised questions about
distributive justice that remain valid. Do we have
a way to address them?
A Note on Policy Papers


Problem: slow and/or unequal economic progress
under capitalism.
Policy options:
 Modernization
 Export-oriented
growth
 Dependency
 Import
Substitution Industrialization
NOTE: you must argue in favor of a policy