Describe how Mexico’s development strategy changed from the 1950s to today and how that changed the production location decisions of firms.
What will be an ideal response?
From the 1950s throughout the 1970s Mexico’s development policy emphasized the domestic market and firms found that it was less profitable to export. Domestic production was protected from competition and goods sold abroad were not. This caused firms to locate near Mexico City or of the few other major urban areas. This caused Mexico City to become one of the largest cities in the world and resulted in a very high proportion of the population becoming concentrated in urban centers. By removing many of the tariffs and other protections that had kept domestic firms from facing foreign competition, the policy makers shifted to a more neutral stance with respect toward production for foreign or domestic markets, creating a more level playing field for export production. Under the new rules, the largest profitable market is the U.S. rather than Mexico City. Given internal economies of scale and transportation costs, location as close as possible to the U.S. was logical and the northern border cities began to grow rapidly, years before NAFTA.
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