Peso Debacle Was Predictable
I read with my usual consternation the free-trade apologia (“Optimism Is Fading,†Jan. 8). As a development economist with many years working in Mexico, mostly at the border, I find it incredulous that at this point a serious person, an intellectually honest person, could write such an article. If NAFTA didn’t cause the Mexican currency debacle of the last month, pray tell, what on Earth did?
The story tells us of the costs of modernization of a garment factory in Mexico City and of the effects of overnight inundation of First World import commodities on the Mexican consumer. What it doesn’t tell us is that these two stories are back sides of the same shock therapy free trade coin.
Let’s forget for a moment that all that highly liquid foreign (and domestic) capital moving into Mexico was moving there to exploit Mexican workers at incredibly low wages, leaving American workers in the lurch and undermining a century of labor organization here in the same move.
Let’s also forget that that money hadn’t even the slightest interest in the modernization of Mexico or the creation of a Mexican working middle-class with disposable income. Let’s just examine whether the logic of the NAFTA ever made sense, even if you accepted all of its many untenable assumptions, the first of which was a long-term commitment on the part of international investors to a Mexican development based on a working middle class.
If you expose an incredibly inefficient economy like the Mexican to First World competition overnight, you lose on both sides of the coin. Your businesses can’t compete with foreign businesses that have had better access to technology and affordable finance for decades. And your consumers, realizing a good deal when they see one, immediately switch to imports because they are both higher quality and, if not always cheaper, usually within 5% or 10% of the shoddy Mexican substitute (when there is one). The trade deficit that emerged wasn’t an accident. It was inevitable--and for years.
NAFTA and all the elitist notions it represents are the problem, and, moreover, the Mexican people now know it.
CURTIS M. DOWDS
San Diego
