MEXICO EVOLUTION: PART 1

1910–1928: "Revolución" and reconstruction

In 1910 in Mexico started the “Revolution” or civil war with the power of Francisco I. Madero led an uprising against Díaz, which originated a reduction in the capital and a big fall in the population as a result of the armed conflict  and the migration to the USA.

The World War I began in 1914 and finished in 1918, Mexico was a neutral country in it, the mexican president had other priorities, as Mexico was just beginning to emerge from their own armed conflict.

During the decade of 1920, Mexico had to be reconstructed after the end of the battle. In this period, there was an increase in investment, nevertheless, the economic situation was marked by high uncertainty.

There was an increase in currency too (in inflation and in circulation). Other important data is that the principal bank presented the monopoly over the emission of currency. Before this event, private Bank took a place in money emission. In 1917 Constitution installed the national interest in their natural resources.

Growth was lower than in the previous period. Real GDP per working-age person grew up to 0.4% per year.

1928–1950: Great Depression and recovery

Great Depression had a long negative impact on economic activity all over the world. Still, Mexico didn´t fell the effects of it as directly as other States.

Between 1928 and 1932, real GDP per working-age person fell by 7% per year. Exports and imports fell. Tax revenue fell 25% and fiscal expendires were diminished.

Mexico started to grow again after the Depression by many structural reforms like the nationalization of the oil industry in 1938, the railroad nationalization in 1930, etc.

Until 1935 the Great Depression affected in a bad way the money supply and the price level.

Over the entire 1928-1950 period, real GDP pero working-age person grew at 1.3% per year due to the combianition of the fall until 1932 (7% per year) and the recovery in the following years at a rate of 3.7% per year. In general average yearly inflation was at 6.5 % per year (measured with the GDP deflator).

During this period, specifically over 1938 and 1945, the World War II took place. Although Mexico did not participate in such international conflict and stayed aside remaining neutral, this historical event is noteworthy as it affected Mexico indirectly. In contrast to what this war meant for the implicated countries, it brought Mexico positive effects.

1950–1970: Import substitution and catch-up growth

During the 50s, the government undervalued the peso to reduce the costs and spent massivly in public infrastructure: highways, health, oil, and education.

At the beginning of the 1960s the gobernment took the decision of protecting the domestic product and imposing import taxes and tarifffs; private sector begun a process of Mexicanization of the economy.

By 1970 Mexico had broaden its export and developed into a largely self-sufficient for most consumer goods. For other goods, there was a big quantity of import substitution. These products were mainly intermediates and capital goods.

The increase in GDP arised at the same time as urban growth did. Gross fixed capital formation grew at 10.3% between 1963 and 1970, increasing the investment to GDP ratio to 18.5 % in 1970.