Announcement of Release of Report on Mexican Economy on May 11, 1953

ii • HOLD.FOR.RELEASE FOR THE PRESS PRESS RELEASE NO. 325 INTERNATIONAL BANK FOR REl1 ONSTRm 'l'I.ON AND DEVELOPMENT HOLD FOR .RELEASE. FOR RELEASE May 11, 19$3 "The Economic Development or Me.,'"(ico"·., a report prepared by a group of economists from Mexico and the International Bank for Reconstruction and Develop- ment, was published today by the Johns Hopkins Press. The report is the most complete study to be published on the economy of Mexico in recent tin1es. Much of the data - on national income, public and private investment, production am consumption - appears for the first time. The authors of the report are Raul Ortiz Mena of the Nacional Financiera, s.A., Victor L. Urquidi of the Banco de Mexico, and Albert Waterston and Jonas H. Haralz, of the International Bank. They collaborated for more than a • year in the preparation of the report and presented it jointly to the International Bank and to the Mexican Government in October 1952. The report deals with the long-term trends in the Mexican economy, with special reference to Mexico's capacity to absorb additional foreign investment. It reviews the course anq eff~cts of investment in Mexico from 1939 to 1950 an:! assesses the prospects for national income and balance of payments over the next ten years. The report opens with a survey of the magnitude and composition of invest- ments in Mexico fran 1939 to 19SO, and or the methods used to finance inve$tlnent during this pe<riod. Then follows an anaiysis of the growth of n~.tional income wit:h detailed discussion of investment a11d activity in the fields of agriculture, ,) mining, petrol~um, electric power, industr~, comm\Ulications and transportation. Asses$Tlent·s at~e made of the effect of investments in social welfare t=i.nd of the role of gove:rnm.ent revenue. and spending in economic d.evelopment. The. report conc·ludes by analyzing the outlook for the further· development of investment and p:rocl\1cticm1 am. of Mexic.o' s balance of payments.  (---' - 2 - • Orders for the published report should be addhfssed to The Johns Hopkins Press Baltimore 18, Maryland The Economic Development or Mexico ••••• 387 pages."••• $10.00 {153 tables, ·5 at1perid~ces, ··j maps and. Index) · · The report is being published in Spanish for the Mexican Government by the Fondo de Cultura Economica Mexico City 1 :P. F • • A BRIEF SUMMARY OF THE REPORT IS ATTACHED. 0 •  - 3 - • summary In the twelve years from 1939 to 19$0., Mexico experienced unprecedented economic growt~~ National income per capita more than doubled. Productive capacity was greatly ir1creased and.,, ;except in mining, major gains in output ',", were made in every sector of the economy. Imported capital goods, paid for with a growing volume of exports at favorable, prices., laid the foundations of industrialization. It is especia.lly noteworthy that this advance was not made at the expense of Mexico's agricultural production, which expanded greatly. Petroleum production and electric power and highway expansion also made exceptional advances. Even the railroads, in which investment lagged, showed an appreciable \',(.),crease in the 'i~otal volume of freight and passengers. r '·~, ' There was some improvement in the gene+al standard of living. Industrial • and commercial profits., however., increased far more than wages and salaries, and most or the higher consumption during the period was enjoyed by only a small part of the population~ The unparalleled development in 1939-1950 was made possible by forcing $aVings up, by curtailing consumption and by concentrat,ing on investment opportunities which offered quick and substantial returns. These returns were possible as long as existing railways, roa~s 1 power stations and sewerage systems could be made to carry additional burdens., and as long",d~ existing oil fields and mines continued to give rich yields. After the wa;r., however., the need for -- improved and expanded public facilities became increasingly pressing. Despite ! large investments in transportation, communications and electric power, t1he railroads ,re still inadeciuate and shortages in electric power still exist. A considerable increase in outlay~ must, therefore., take place for public facilities • and works in the next few years.  -4- • • Higher capital expenditures will also be required in the future for the development and conservation ot natural resources. Investments for the explora• tion of new oil fields are imperative to secure a continued rise in production over the next ten yearsJ the development of new mining reserves is necessary~ production of non-ferrous metals is not to follCM the downward trend already shown by precious metals. Irrtgation and hydroelectric de\"elopment will be costlier because the best sites have already been taken. There is increasing need f'or reforestation and soil conservation. In 1939-19SO domestic savings paid for most investment in Mexico. In the postwar years the rate of savings was high compared with other countries and with previous sa.vings in Mexico. In these circumstances Mexico will do well to maintain the postwar rate of savings dui·ing the next five or six years. With savings no longer rising., at a time when increased investn1ent is needed 1 • Mexico will have to rely more on external lQans ror the next five years; there• after, official loans maybe expected to decline while opportunities for private investment increase. 'l'he amount of investment necessary could be reduced by avoiding errors ot planning and execution., such ae: have occurred in the past. For insta11ce, the inadequacy of the railroads and the failure to develop sources o! ra:w matertals as plant capacity expanded, helped to keep industrial output well below capacity in 1939-1950 1 especially in the iron and steel industry. Re·!iurns from irrigation inve~tments were reduced by delays in the construction or distribution canals and other complementary works and by the lack of measures to promote better fanning. Expensive port works were of little iL~e because of the inaccessibility ot the hinterlands; and the slow construc'tli,on of f'eeder roads prevented ms.in • highways and railroade from attaining maximum usefulness • Some expenditures in 1939-1950,including those for many large irrigation • • - .5 ··- • projects, highways, hydroelectric plants and industrial expansion, have so far yielded only a part of their potential contribution to output. In the next decade, increases in output from these investments should partly counteract the expected decline in other investment yields. Also, their benefits could be increased by relatively minor expenditures for complementary works. In 1939-1950 M~..xico did not need an agency to coordinate investment in order to maintain a high rate of output. The Mexican economy has now reached a point where the uncoordinated selection of projects is no longer likely to bring the same results as in the past. The time has come when Mexico may want to abandon the project-by-project approach and look at development as an organic whole. This would not require a rigid "plan" 1 but rather a policy which would channel savings appropriately and give first priority to projects which would • make the largest contribution to economic development.!) The report recommends that the Mexican Government constitute an autonomous group of technicians with authority to carry forward the work begun in the report itself. The first task of the group would be to reconnnend to the Government steps to be taken to give effect to the conclusions of the report. In addition the group would be empowered to make further studies, to formulate investment programs, and to assist in the integration of the Government's development activities~ •