page_title: Economic history of Mexico
section_title: World War II and the Mexican miracle, 1940–1970
hierarchical_section_title: Economic history of Mexico / World War II and the Mexican miracle, 1940–1970
caption_attribution_description: This is a map of the Papaloapan River drainage basin. It is based on USGS and Digital Chart of the World data with Rand McNally and Prentice Hall Atlases used as reference.
context_page_description: Mexico's economic history has been characterized since the colonial era by resource extraction, agriculture, and a relatively underdeveloped industrial sector. Economic elites in the colonial period were predominantly Spanish born, active as transatlantic merchants and silver mine owners and diversifying their investments with the landed estates. The largest sector of the population was indigenous subsistence farmers, who lived mainly in the center and south.
  New Spain was envisioned by the Spanish crown as a supplier of wealth to Iberia, which huge silver mines accomplished. A colonial economy to supply foodstuffs and products from ranching as well as a domestic textile industry meant that the economy supplied much of its own needs. Crown economic policy rattled American-born elites’ loyalty to Spain when in 1804 it instituted a policy to make mortgage holders pay immediately the principal on their loans, threatening the economic position of cash-strapped land owners. Independence in Mexico in 1821 was economically difficult for the country, with the loss of its supply of mercury from Spain in silver mines.
context_section_description: Mexico's inward-looking development strategy produced sustained economic growth of 3 to 4 percent and modest 3 percent inflation annually from the 1940s until the 1970s. This growth was sustained by the government's increasing commitment to primary education for the general population from the late 1920s through the 1940s. The enrollment rates of the country's youth increased threefold during this period; consequently when this generation was employed by the 1940s their economic output was more productive. Additionally, the government fostered the development of consumer goods industries directed toward domestic markets by imposing high protective tariffs and other barriers to imports. The share of imports subject to licensing requirements rose from 28 percent in 1956 to an average of more than 60 percent during the 1960s and about 70 percent in the 1970s. Industry accounted for 22 percent of total output in 1950, 24 percent in 1960, and 29 percent in 1970. The share of total output arising from agriculture and other primary activities declined during the same period, while services stayed constant. The government promoted industrial expansion through public investment in agricultural, energy, and transportation infrastructure. Cities grew rapidly during these years, reflecting the shift of employment from agriculture to industry and services. The urban population increased at a high rate after 1940 (see Urban Society, ch. 2).
  Although growth of the urban labor force exceeded even the growth rate of industrial employment, with surplus workers taking low-paying service jobs, many Mexican laborers migrated to the United States where wages were higher. During World War II, Mexico-United States relations had improved significantly from the previous three decades. The Bracero Program was set up with orderly migration flows were regulated by both governments. However. many Mexicans could not qualify for the program and migrated north illegally, without permission from their own government and without sanction from the U.S. authorities. In the post-war period as the U.S. economy boomed and as Mexico's entered a phase of rapid industrialization, the U.S. and Mexico cooperated closely on illegal border crossings by Mexicans. For the Mexican government, this loss of labor was "a shameful exposure of the failure of the Mexican Revolution to provide economic well-being for many of Mexico's citizens, but it also drained the country of one of its greatest natural resources, a cheap and flexible labor supply." The U.S. and Mexico cooperated closely to stop the flow, including the 1954 program called Operation Wetback.
  In the years following World War II, President Miguel Alemán Valdés's (1946–52) full-scale import-substitution program stimulated output by boosting internal demand. The government raised import controls on consumer goods but relaxed them on capital goods, which it purchased with international reserves accumulated during the war. The government spent heavily on infrastructure. By 1950 Mexico's road network had expanded to 21,000 kilometers, of which some 13,600 were paved. Large-scale dam building for hydroelectric power and flood control were initiated, most prominently the Papaloapan Project in southern Mexico. In recent years, there has been a re-evaluation of such infrastructure projects, particularly their negative impact on the environment.
  Mexico's strong economic performance continued into the 1960s, when GDP growth averaged about 7 percent overall and about 3 percent per capita. Consumer price inflation averaged only 3 percent annually. Manufacturing remained the country's dominant growth sector, expanding 7 percent annually and attracting considerable foreign investment. Mining grew at an annual rate of nearly 4 percent, trade at 6 percent, and agriculture at 3 percent. By 1970 Mexico had diversified its export base and become largely self-sufficient in food crops, steel, and most consumer goods. Although its imports remained high, most were capital goods used to expand domestic production.
caption: Map of the Papaloapan River drainage basin before construction of the Cerro de Oro Dam, showing the Miguel Alemán Lake(center)
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