Friday, October 29, 2010

Mexico's Tourist Industry & SAPs

With approximately 20 million tourists annually that pump 8 billion dollars (USD) into the economy, the tourist industry is a major aspect of Mexican life, especially as it employs approximately 8 million Mexicans (Clancy 2001). Despite the economic benefits, the country still remains classified as 'under-developed'. While there may be economic factors that explain why this country remains underdeveloped, it is unfortunate that little to no information is available for how this industry affects Mexican culture. As development does not solely include economics, but also other variables like culture it is important not to ignore these variable when trying to institute positive change. First this will discuss Mexico's historical development of it's tourist industry and it's shift from government driven development to market driven development, and conclude that although poverty, under-development and inequality involve economic factors (like liberalization and industry development), positive change cannot aptly be instituted without knowledge of the individuals, their communities and how they are affected by the tourism industry

In the 1960s Mexico was known to few around the world as a vacation destination. Those to visit Mexico were primarily from the United States (US) who generally visited cities located along the border, like Mexico City and Tijuana (Clancy 2001). From 1930-1960, Mexico experienced a period of political stability, combined with steady economic growth; it was known as the “Mexican Miracle” (Clancy 2001). The face of the economy started to shift from rural agriculture to urban industrialization. However, the country was still importing more than it exported. As a result the Banco De Mexico studied this issue and released a report that concluded the country needed to start 'exporting paradise'; in short they were to increase tourism opportunities through the creation of new resorts, refurbishing existing resorts and aggressively marketing the country as a vacation destination . Tourism made the shift from border-tourism to international tourism (Clancy 2001).

The state itself played a large role in the expansion of the tourist industry. They were essential in the execution of development. Strategically they placed resorts in coastal regions and marketed them towards foreign, middle-class, mass tourism. As the areas chosen were lightly populated, the acquisition of land was simple and displaced few citizens (Clancy 2001). Cancun was the first project; it was completed in 1971 and started seeing results by 1974. The tourism industry became a quasi-governing power in the region because of its stronghold over local economies, giving the hotels and resorts a lot of political weight, to the region and the country.

Establishing these new vacation destinations required a plethora of start-up capital, which was gained through foreign and domestic investment. Surprisingly, the majority of capital came from within the country. However, to ensure the success of the resort, foreign hotel TNCs were sought out to invest r purchase the property. This allowed the resorts to be associated with the quality, reliability and amiable experience associated with popular, well-known names. However, “the fact that those who own and control the Mexican industry are made up of a fraction of international and domestic capital suggests that the benefit associated with tourism exports accrue mainly to the few” (Clancy 2001), being the “owners and operators of motels, hotels, guest houses and other lodging facilities” (Clancy 2001), as they are the “primary beneficiaries from tourism” (Clancy 2001). With the ease of selling the resorts to foreign TNCs, the majority owners of the majority of hotels are the foreign chains; Mexico ranks first among developing countries in foreign-affiliated hotels. This means high volumes of money do to stay in the country, but also that foreign TNCs are not familiar with the culture and day-to-day life and needs of the people which could make their impact harmful on the unfamiliar community.

As Mexico had strict regulations and tariffs on foreign investment and importing in “April 1971, new regulations allowed the title to land in the prohibited zones to be held in trust for foreign investors by an authorized Mexican bank. The maximum length of the trust was established at 30 years, after which it could either be renewed for an additional 30 years or the property sold to a Mexican citizen”. However, the government did not truly liberalize the economy until Mexico had to suspend its debt payments after the oil crisis in 1982 . This period of structural change, through Structural Adjustment Programs (SAPs) was established and monitored by the World Trade Organization (WTO) as a condition to the debt suspension (Kelly 1999).

SAPs were intended to help stabilize the economy and stimulate growth to ensure the repayment of debt, through shifting from state-directed development to market-directed development. However, during this period of structural adjustment, poverty levels rose especially after the peso crisis in 1994 ( Merill and Miro 1996). “Although the government increased the minimum wage by 21 percent during 1995, the cost of living rose by more than 50 percent as a result of the currency collapse. In September 1995, the minimum wage was sufficient to cover only 35 percent of workers' basic necessities, compared to 94 percent in December 1987”( Merill and Miro 1996). This had no effect on the tourism industry as it flourished during these periods of crisis. However, this is just another example of how the profits generated remain in the hands of very few (Clancy 2001). Furthermore, the signing of the North American Free Trade Agreement (NAFTA) in 1994, ensured that by 2000 all regulations regarding FDI had been removed, leaving the Mexican market open and vulnerable to TNCs; especially as Mexico's neighbour, the US, is the clear front-runner for hotel TNCs (Adams, Gupta, and Mengisteab 1999).

As the country has had little to no success in alleviating poverty and increasing quality of living since the 1980s, it is clear that factors exist that perpetuate class division and inequality (Adams, Gupta, and Mengisteab 1999). As such it is important to look at the industries within the country and the role they play in development. It is thus integral to look at this billion dollar industry of tourism and discover how it affects the culture and economy of the country.

Previous studies regarding FDI in tourism have been conducted but focus their research on the economic aspects and factors surrounding issues of inequality and development, and the impact on the local economy. However, it is important not to ignore the cultural aspects and changes that come with institutional change through the establishment of resorts and resort cities. Little to no research information is available regarding the cultural affects of these hotels, including similar studies done in other developing countries. While looking at economics may help create a direction for proposed policy making, it focuses too heavily on the big picture and necessitates the inclusion of the needs and hopes for the individual and their community; without understanding the social inequality we cannot presume to create change.

Adams, Gupta, and Mengisteab. 1999. Economic reform and Political Turmoil in Mexico. Globalization and the Dilemmas of the State in the South, UK. Macmillan Press Limited.
Clancy, Michael. 2001. Mexican Tourism: Export Growth and Structural Change. Texas: University of Texas Press.
Kelly, Thomas j. 1999. The Effects of Economic Adjustment on Poverty in Mexico. UK: Ashgate Publishing Ltd.
Merrill and MirĂ³, editors. 1996. Mexico: A Country Study. Washington: GPO for the Library of Congress.

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