Economic History of Mexico - Independence

Independence

Faced with political disruptions, civil wars, unstable currency, and the constant threat of banditry in the countryside, most wealthy Mexicans invested their assets the only stable productive enterprises that remained viable: large agricultural estates. Later generations accused these entrepreneurs of preferring the symbolic wealth of tangible, secure, and unproductive property to the riskier and more difficult but innovative and potentially more profitable work of investing in industry, but the fact is that agriculture was the only marginally safe investment in times of such uncertainty.

The seeds of economic modernization were laid under the restored Republic (1867–76). President Benito Juárez (1857–72) sought to attract foreign capital to finance Mexico's economic modernization. His government revised the tax and tariff structure to revitalize the mining industry, and it improved the transportation and communications infrastructure to allow fuller exploitation of the country's natural resources. The government let contracts for construction of a new rail line northward to the United States, and in 1873 it finally completed the commercially vital Mexico City-Veracruz railroad, begun in 1837 but disrupted by civil war and the French invasion from 1850 to 1868. Protected by high tariffs, Mexico's textile industry doubled its production of processed items between 1854 and 1877. Overall, manufacturing grew, though only modestly.

During the Porfiriato (1876–1911), Mexico underwent rapid but highly unequal growth. The economic advisors of President Porfirio Diaz reversed the country's decades-long opposition to foreign investment, and by playing off British, French, and U.S. investors and governments against one another, was able to maintain a modicum of national independence. Taking "order and progress" as its watchwords, the Porfirian dictatorship established political stability and at least an image of social peace and the rule of law. The apparent stability of the Porfiriato brought increased capital investment to finance national development and modernization. Rural banditry was suppressed, at least relative to earlier decades; local customs duties that had hindered domestic trade were abolished; foreign investment in mining boomed; and communications and transportation facilities were modernized as the Mexican railroad system, now owned almost exclusively by foreign investors, expanded from 1,000 kilometers to 19,000 kilometers of track between 1876 and 1910.

The economic growth of the Porfirian era was heavily concentrated in the north of the country—the region with the greatest concentration of mineral resources and, coincidentally, the region closest to the recently acquired Southwestern states of the United States. U.S. entrepreneurs invested heavily in mining, mineral refining operations, and the railroad system that connected northern Mexico with the U.S. As the railroad system improved, and as the population grew in the western U.S., long-distance commercial agriculture became viable, and both U.S. and Mexican entrepreneurs began investing heavily in modernized large-scale agricultural estates along the railroad lines of the north.

The technocratic economic advisors of the Porfirio Diaz dictatorship, as well as the foreign investors they invited into the country, were quite satisfied with the advances that the Mexican economy made between 1876 and 1910. Under the surface, however, popular discontent was reaching the boiling point. The economic-political elite scarcely noticed the country's widespread dissatisfaction with the political stagnation of the Porfiriato, the increased demands for worker productivity during a time of stagnating or decreasing wages and deteriorating work conditions, the cruel repression of worker's unions by the police and army, and the highly unequal distribution of wealth. When a political opposition to the Porfirian dictatorship developed in 1910, it quickly gave way to a popular insurrection against the economic foundations of the country's entrenched inequality.