The major long-term trends in the Mexican economy (with a particular reference to Mexico's capacity to absorb additional foreign investments)

z- RETURN TO REPCRTS DESK WITHIN This report is not to be published or quoted. ONE WEEK THE MAJOR LONG-TERM TRENDS IN THE MEXICAN ECONOMY With Particular Reference to Mexico's Capacity to Abeorb Additional Foreign Investments Report of the COMBINED MEXICAN WORKING PARTY Raul Ortiz Mena Victor L. Urquidi Albert WaterstOn Jonas H. Haralz September, 1952  X W -F~~ ~~~~~~~~~~~~~~~~~~~~~------- 4 z AR{{zar44<obi <E /<tr-' o ( s- '-/ o th 4 ) i P - z f 0 34 ' , ' :5 r |~~~~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ - ' o o C  The Honorable Eugene B. Black, President Irnternational Bank for Reconstruction and Development Washington, D. C. and Licenciado Antonio Carrillo Flores, Director General Nac ional Financiera Mexico, P. F. Gentlemen: `;Wie are pleased to submit to you the report prepared by the Combined ,viexican Working, Party on the long-term trends in the Mexican econonr, with 3pecial reference to Eexicots capacity to absorb additional foreign invest- ments. This report is the fruit of collaboration between Mexican and Bank economist over a period of .more than one year. In arriving at the conclusions to the report wie were able to draw from the history? of in',estment in Liexico lessons which should provre useful guidance for the futuLre. i;e believe the report supplies the essential foundations needed by the Mlexican Govrernment to formulate a devrelopment program. Many official agencies and ninistries are now concerned writh particuilar aspects of economic development, but1 there is no one organization in the Mexican Government writh the sta-ff or experience to produce a program for the country's ov;all development. We thtrefore recommend that the Government constitut p a technicians with authorityr to csrxy forward the work begun in the present report. IZhile its first task wolld be to recomnend to the Government steps to be +,aken to give effect to the conclusions of this report, it woulld be empowered, with the aid of its wn staff or the staffs of other Government agencies, to make further studies, to for-ulate investment programs, and to assist in the integration of the Government's de-velopment activities w.ithin the framevwork of a develonment program anproved by the President of the Republic. The data included in this report came from many sources, but the way they are presented and the conclusions drawn are the exclusive responsibility of the memiers of the Combined MJexican 'Witorking Party. 'Ie should li'ke to exnress our aprreciation to the many Mixexican Government ministries and. other public and private agencies for the information they furnished and. for the unfailing cooperation wre received from the staffs of both the Nacional Financiera -IL the International Bank, without which it would not have been possible to prepare this report in its present form. We are indebted in par- ticular to Nacional Financiera's Dep.rtnient of Financial Studies for making staff and facilities available to thb members of the Working Party. We also wish to express thanks to the Bank of MIexico for making available important unpublished data, especially in the Bank's Department of Economic Studies. It is our sincere hope that this report may be of value ;n promoting the economic develcpment of Mexico. Raul Ortiz Mena Victor L. TUrquidi Albert 'Waterston Jonas H. Haralz  MIMM7ES OF THE MOi3INED IXICAN WORKIKIG PARTY RAUL ORTIZ YMNA Nacional Financiera, S. A. VICTOR L. URQUIDI Banco de 'lexico ALBERT WATERSTON International Bank for Reconstruction and Development JOITAS H. HA-ALZ International Bank for Reconstruction and Development  FORY?OGRD In Februiary 1951, Nacional Financiera nroposed that the Mlexican authorities and the International Bank for Reconstruction and Development set up a combined working party to assess the major long-term trends in the Maxi- can economy with particular reference to Mexico's capacity to absorb additional foreign investments. The conclusions of the Combined Mlexican Working Party were not to be regarded as coz_a:utting either the 114exican Government or the International Bank on matters of policy. The International Bank welcomed this proposal, and the first meeting of the Working Party, consisting of two Mexi- can and two Bank economists, took place in YJashington in April 1951, when its terms of reference and program of studies were agreed upon. Subsequent meet- ings took place in Mexico, nhere most of its wnork was done, and in IWashington. The Combined MlLexican w"Torking Party interpreted its task as falling into two main narts: (1) a reviewi of the course and effects of investment in Mexico from 1939 to 1950, and (2) an assessment of the prospects for the national income and the balance of payments over a period of approximately ten 3years. Estimates of what will happen in the immediate or the distant future therefore play little part in the report. Besides the text, the report includes 153 tables and 5 appendices. The tables are based on information available in February 1952, and contain a wealth of data on Mexico's economic development, mainly from 1939 to 1950. A considerable part of information could not be adequately treated in the text, and the tables are included for the use of tiose who wish to go more  fully into points mentioned in the report. Much of the data on national income, gross national product, public and pri4tate investment, production and consunption, external debt and the balance of payments are new and appear for the first time in this report. The ;:iorking Party hopes that the M-exican Governnent will find it possible to continue the series of data started in this report. In most fields, the official statistics are incomplete or inaccurate, or both, and in some instances discrepancies in a single field have prored baffling. For example, no fewer than three official bodies issuie foreign trade statistics which pass as authoritative, In fact, none of these three sets of data gives an accurate account of Mexico's foreign trade, and it is unusual for the figures issued by the three institutions to agree. There is a real need in Mexico to improve official statistics and to integrate the activities of the agencies engaged in collecting or regrouping statistics. Much timte was spent by the lVorking Farty atteimpting, not always successfully, to check and to improve the official data, Despite these difficulties, how- ever, the 'Viorking Party believes that it has not called upon the statistical foundationsof the report to support a heavier burden of conclusions than they can bear. - iA -  TABLE OF C OTENUTS Page I. THE MATIONAL T1CTI A. Growth of tational Income B. Per Capita Income . . . . . . . . . . . . . . . . . 5 C. Consurmption .. . . . . . . . . ..... . . . . . 6 D. Level of Investment . . . . . . . . . t. . . . . . 8 E. Financing cf Investment . . . . . . . . . . . . . . . 10 1. Domestic Savings . . . . . . . . . . 2. Fox-iegn Finmncin- . . . . . . . . . . . . . . 12 F. Investment and Output . . . . . . . . . . . 14 ............................l II. AGRICULTURE, LIVTESTCCN, FORESTRY AID FISHERIES A. Agriculture . . . . . . . . . . . . . . . . . . . . . 17 1. Investment in Agriculture .17 2. Regi_onal Differences in Agricultural Develop- ment . . . . . . . . . . . . . . . . . . . . 17 3. Financirc Agricultural Investment . . . . 19 4. Agricultural Credit .. 20 5. Composition of Agricultural Investment . . 23 a. Private Agricultural Investriient . 23 b. Public Agricultural Iinvestment . . . . 23 6. Public Irrigation . . . . . . . . . . . . . . 25 7. Agricultuaral Production . . . . . . . . . . . 30 a. Increase in Harvested Area . . . . . . . 30 b. Increase in Yields . . . . . . . . . . . 32 c. Changes in Distribution of Crops on Cultivated Area . ... ... . . . . 36 d. Destination of Agricultural Production 37 8. Prospects for Agricultural Development . . . 40 B. Livestock . . . . . . . . . . . . . . . . . . . . . hl C. Forestry . 4. D. Fisheries . h3 III. !:NINvG A. Investment . . . ..... . . 6 B. Production . . . . . . . . h8 1. Recent Production History . . . . . . . . . . 48 2. Production Prospects . . . . . . . . . . 51 C. Official Policy .. ..52 :; _i  Page IV. PTEITROIEM A. Pattern of Investment . . . . . . . . . . . . . . . . 57 1. Composition of Investment . . . . . . . . . . 58 2. Financing Investment . . . . . . . . . . . . . 61 B. Production, Consumntion and Distribution. . . 61 C. Production Prosnects.. 63 D. Implications for Future Policy . . . . . . . . . . . 68 V. ELECTRIC POWER A. Electric Power Development in 193