Mexico's Economy
The Mexican Miracle
How Mexico grew rapidly from the 1940s to 1970 through import substitution, state investment and stable prices, and why the model ran out of steam.
From the 1940s to around 1970, Mexico grew rapidly, a period called the Mexican Miracle.
Growth
Mexico’s economy grew around 6 percent a year on average.
How
- Import substitution industrialisation: tariffs and permits protected domestic industry.
- State investment in infrastructure, oil (Pemex, nationalised in 1938) and electricity.
- Stabilising development (1954-70): low inflation and a fixed exchange rate.
- Urbanisation as workers moved from farms to factories.
Results
- A growing middle class.
- Expanding industry in Mexico City and Monterrey.
Limits
- Protected firms became inefficient.
- Exports remained weak.
- Inequality persisted.
- Growth relied on borrowing in the 1970s.
Comparison with India
India also used import substitution after 1947, with similar problems of inefficiency and weak exports.
The protected factory
A Mexican appliance maker thrives in the 1960s behind high tariffs, but its products are too costly and outdated to sell abroad.
Thinking Mexico was always a slow grower
It grew around 6 percent a year from the 1940s to 1970.
Key takeaways
- Mexico grew rapidly from the 1940s to 1970.
- Import substitution and state investment drove growth.
- Stable prices supported the model.
- Inefficiency and weak exports limited it.
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