Traverse City Record-Eagle

Business

January 1, 2014

NAFTA didn't close wage gap

Mexican poverty rate about thesame as in 1994

MEXICO CITY (AP) — Looking around a Mexico dotted by Starbucks, Wal-Mart and Krispy Kreme outlets, it’s hard to remember the country before the North American Free Trade Agreement, which has dramatically expanded consumer choice and trade since it took effect 20 years ago on Jan. 1.

While it changed the country in some fundamental ways, the treaty never met many of its sweeping promises to close Mexico’s wage gap with the United States, boost job growth, fight poverty and protect the environment. Mexico’s weak unions and competition from Asia and Central America kept wages down; the tightening of security along the U.S. border closed off Mexico’s immigration “escape valve,” and environmental provisions in the agreement proved less powerful than those protecting investors.

Mexico took advantage of the accord with the United States and Canada in some areas. The auto, electronics and agriculture sectors grew, and foreign banks moved in, increasing access to credit, but a majority of Mexicans saw little benefit in income. While there is undoubtedly a larger middle class today, Mexico is the only major Latin American country where poverty also has grown in recent years.

According the Economic Commission for Latin America, poverty fell from 48.4 percent in 1990 to 27.9 percent in 2013 for all of Latin America. In Mexico, where it stood at 52.4 percent in 1994, the poverty rate dropped to as low as 42.7 percent in 2006; but by 2012, it had risen again to 51.3 percent.

“About 30 or 40 percent of what they promised (in the trade pact) never came through,” said Rodolfo Hurtado Corona, 65, a chauffeur waiting for his boss on a Mexico City street.

Still, motioning to the gleaming sport utility vehicle he drives for his boss, he noted that “before, there were only a couple of brands, now you can choose among many.”

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