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Blaming Nafta: a convenient scapegoat, trade deal unfairly criticized by the indolent.

I've been reading a lot of rubbish about whether or not Nafta is a good thing, usually based on criteria the writer selects. The current depressed state of the Mexican economy has led many to believe it has been a failure. They cite lost jobs here and in the United States as evidence, along with statistics showing real wages have not risen in Mexico while unemployment has. Why is all this Nafta's fault?

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Mexico's problems have little to do with free trade with the United States. Most of them have to do with a lack of competitiveness. Nafta has fooled us into thinking the Mexican economy is more advanced than it is by giving us Wal-Mart, Citibank and Starbucks. Being able to buy a Milky Way in the stores is not a sign of a developed economy.

The lack of infrastructure, the poor education system, corruption, a mind-numbing bureaucracy and monopolies in key industries are some of the real reasons Mexico is stuck in the Third World. However, it has become fashionable to criticize globalization for the world's ills, and leaders of less-developed countries are jumping on this bandwagon. It's always easier to blame the U.S. military-industrial complex than admit your own faults.

Part of the problem is also the way the treaty was sold in 1994 as a cure for all economic ills. Then President Carlos Salinas de Gortari promised Mexicans they were on the verge of entering the First World, an illusion that lasted until the peso crisis just weeks after he left office.

WHO GOT THE SHORT END?

It is impossible to measure how good Nafta has been, because there is no alternative for comparison. But let's look at a few winners and losers. The biggest winners are the U.S. multinationals that set up shop here to take advantage of cheap labor. Many complain taking advantage was all that foreign companies did, but if Mexican workers had been better trained in the first place, multinationals would have also brought in higher-paying technology jobs that instead are going to India, Ireland and China.

Instead, the Mexican worker demanded higher wages without getting any faster at assembling televisions and now complains companies are moving away. Companies exist to make profits, not perform social services. That's the government's job.

Also in the winner's circle are Mexican consumers. People rage against the Wal-Marting of the country, but the other option involves more expensive food and less choice in consumer electronics. People who complain should insist on paying three times as much for everything in a bid to protect Third World jobs and the overpaid, unprofessional managers who still run the family-owned companies. Wal-Mart cut a swathe through Mexican retail but failed utterly in Brazil where it came up against far more sophisticated competitors.

If one were to be sarcastic, Carlos Slim and the other Mexican moguls also benefited as Nafta has left them and their monopolies--in everything from bread to cement to beer--untouched.

The losers are the poor who are in the same hopeless state now that they were 10 years ago because the economy has barely progressed outside certain limited sectors. It is no easier to get a loan or set up a small business, and the legal jungle is as impenetrable as ever.

In other words, Mexico opened up the economy but didn't take any of the measures needed to ensure a progression to the First World. So is it any surprise many of the politicians, whose fault this is, are blaming Nafta?

John Moody is a former reporter for Bloomberg News who has covered political and financial news in Mexico for nearly a decade. He can be reached at jonjo66@mac.com.

Commentary by John Moody
COPYRIGHT 2004 American Chamber of Commerce of Mexico A.C.
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Title Annotation:Free Trade Agreement, 1992, United States-Canada-Mexico
Author:Moody, John
Publication:Business Mexico
Geographic Code:1USA
Date:Feb 1, 2004
Words:622
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