Monday, November 1, 2010

The Mexican Tourist Industry: An Example of how Global Capitalism Hinders Development and Perpetuates Class Division between Nations

Mexico began its integration into the international market after World War II, and was one of the first countries to be subject to the Structural Adjustment Programs of the World Trade Organization (WTO). These liberal economic structures and policies have become globalized, creating a form of Global Capitalism. Global Capitalism has become the dominant global economic system, and unfortunately has perpetuated the dichotomy the developed and underdeveloped world. Mexico, like many underdeveloped states, is heavily reliant on Foreign Direct Investment (FDI) in many business sectors. This is an example of the developed world's dominance and control over the Third World, and how they maintain their oligarchic control over the world's wealth. In particular, the shift in capitalist economic policy from Keynesian to liberal, neo-utilitarian and state-minimalist policy during the 1980s exacerbated this polarization.

With US Hegemony (or at least economic dominance, especially in regards to American Transnational Corporations), I thought it interesting to look to America's underdeveloped neighbour, Mexico. This essay will focus on Mexico's Tourist Industry, as its rise coincides with Mexico's changing economic policy, as they try to integrate the Mexican economy into the international system and shift development categories. This essay will first discuss capitalism as globalization, Mexico prior to liberalization, changes in capitalism during the process of liberalization, and conclude with the adverse affects liberalization had on Mexican development.

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, 32). Despite these economic benefits, the country still remains classified as 'under-developed', as a result of the dominance of Global Capitalism as Globalization. “Globalization is...defined as a particular way of organizing social life across existing state borders” (Sklair, 8). Capitalism's “most palpable impact has been through the worldwide process of restructuring of states and economies, bringing diverse population and regions into the realm of a common dynamic.” (Roberts & Hite, 217). It is clear that the results of Globalization and capitalism synonymous. “This dynamic is not simply a quantitative extension of commodity relations. It is rather a qualitative shift in the mode of social organization that marks a historic transition in the capitalist world order” (Roberts & Hite, 217).

Unfortunately, “the relations between advanced capitalist countries and dependent nations leads rather to a 'marginalization” of the latter within the global system of economic development” (Roberts & Hite, 92). In our capitalist world the less developed countries are kept down because of their lack of infrastructure, and can therefore not provide the quality of life that is available to those in the developed world, but lack the necessary capital to create and maintain such infrastructures. (Sklair 1991, 87). As the Third world attempts to shift categories of development they further become tied to the system. Developing countries cannot properly compete on the market until they develop similar infrastructures to the first world, which requires capital that is only available through loans from institutions and developed nations. Just like Mexico, all “countries tied to international capitalism by that type of linkage (debt) remain economically dependent, insofar as the production of the means of production (technology) are concentrated in advanced capitalist economies (Roberts & Hite, 86). However, the developing nations are unable to break the cycle, as they stand no chance in competing in the same market with the wealthy, developed nations that they themselves are in debt to. The poor are gradually becoming poorer as the wealthy tighten their grasp over the global economy.

The current globalized International economy is “basically made up of transnational conglomerates, firms which operate simultaneously in various national markets, thus constituting an international economic system which penetrates and overlaps with the national economic system” (Kumar, 53-54). While the movements of money, goods, services, ideas and communications across state borders are just too fluid for states to be able to control them as a result of our current global liberal capitalists market (Lacher, 1), all capital is sitting in the hands of very few through the form of Transnational Corporations, and is thus unable to benefit the poorer nations. Since “The most important economic, political and culture-ideology good that circulate around the world tend to be owned and/or controlled by small group in a relatively small number of places, mainly in and around global cities” (Slaire, 8), giving the transnational corporations (TNCs) more economic weight, and overall political power than previously. This Globalized capitalism is reshaping the political sphere and the nature of international relations; unfortunately, with this globalization is coming a form of reverse democratization. “Capitalism...reshapes political units, the nature of international society, and its dominant process through the twin process of democratization and globalization” (Lacher, 5). This means our world is globalizing but losing democracy as it is no longer solely governments with political power, and because economics has become the focus of our political system rather than the collective good. This is why the transnational capitalist class has become the focus of our political practices (Sklair, 8). As we lose democracy, we lose the voice of the collective, the voice that is demanding for change in order to stop this polarization of development categories.

The final steps in insuring this integration of the world into a capitalist system began in the 1980s with the neo-liberal economic ideals of lassez-faire economics. The solidification as capitalism as the new world structure coincides with Mexico’s rise of the tourist industry.

“The present underdevelopment of Latin America is the result of its centuries-long participation in the process of world capitalist development” (Roberts & Hite, 78). However, prior to the mass liberalization of the global market commencing in the 1980s, Mexico seemed to be an excellent example of development. 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, 42). From 1930-1960, Mexico experienced a period of political stability, combined with steady economic growth; it was known as the “Mexican Miracle” (Clancy, 45). The face of the economy started to shift from rural agriculture to urban industrialization, as Mexico attempted to become an industrialized country. 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, 63).

The state itself played a large role in the expansion of the tourist industry. 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, 107). 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. As mentioned previously, the TNCs are gaining more political weight as they increase their stronghold over the global economy.

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 or 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, 123), being the “owners (mainly TNCs) and operators of motels, hotels, guest houses and other lodging facilities” (Clancy, 124). With the ease of selling the resorts to foreign TNCs, the majority owners 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. Furthermore, it solidifies the dominance of the first world over the third world.

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; this was Mexico's first step towards a liberalized economy. 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”. With the more liberal economic regulations, capital started to go flood to the wealthy and leave the thrid world in a drought through unregulated FDI. “First signaled by the Mexican default in 1982, this frought was probably the signle most important factor in the overall deterioration of the economic performance of the third world in the 1980s” (Roberts & Hite, 327). The government did not truly liberalize the economy until Mexico had to suspend its debt payments after the oil crisis in 1982, but this did not bring benefits are rather perpetuate the division between the developed and developing worlds.

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).Shift from Keynesianism to neo-utilitarian state-minimalist economic policy began around 1981 thanks to political influence of Ronald Reagan and Margaret Thatcher (Roberts & Hite, 326). Unfortunately, with market liberalization is it “next to impossible for developing countries governments to protect their own service industries from competition from well-established foreign firms” (Roberts & Hite, 283). Structures imposed by the WTO tried to two contradictory things: accommodate the third world countries aspirations to catch up to the first world, while maintaining the first world oligarchic wealth (Roberts & Hite, 329); “The international structure of the system suffers fundamental transformations as a consequence of exogenous changes in the nature o the external links of the country. these exogenous changes are the product of the evolution of the system of international relations within which the country operates, and particularly of the evolution of the hegemonic power of that system of international relations” (Kumar, 52).
Allowing for further loans to service debt and keep the country afloat meant these countries were “tied to international capitalism by that type of linkage (debt) remain economically dependent, insofar as the production of the means of production (technology) are concentrated in advanced capitalist economies (Roberts & Hite, 86) . “The IMF assumed a de facto role of banker to the world, determining with the World Bank, conditions by which states could re-negotiate their outstanding loans and/or service their debt. these conditions were universally imposed and adopted, as state privatized public assets slashed social budgets, cut wages, devalues national currencies, and promoted exporting” (Roberts & Hite, 222).

Developing countries must adapt to the dominant economic structures in order to remain figures in the global economy. However, their adaptation and liberalization of their economies has led to the further polarization of development categories among countries. These structure mean that “developing countries as a group are being more tightly constrained in their national development strategies by proliferating regulations formulated and enforced by international organizations” (Roberts & Hite, 226), which “often jeopardized the delivery of essential collective goods like public health, education and sustainable environment and it has exacerbated inequality within and between nations to a degree that is destructive of the basic social solidarity” (Roberts & Hite, 422). Furthermore, “the multilateral and bilateral agreements actively prevent developing countries from procuring the kinds of industrial and technology policies... aimed at accelerating the 'internal' articulation of the economy” (Roberts & Hite, 227-228). Since the 1950s, the gap, in terms of the development of industrial sectors, has been narrowing between the developed and underdeveloped nations (Roberts & Hite, 126), but industrialization and development are not synonymous, as the developing nations are not experiencing the promised benefits that come with restructuring.

The “most dramatic case of state restructuring in recent is that of the Mexican dress rehearsal for the implementation of NAFTA in the 1990s” (Roberts & Hite, 222) . This is because NAFTA goes against Mexican constitution Article 27 established after 1910 revolution, as it opened up land for sale to both Mexican and foreign business with no representation from local communities. This led to a rise in Zapatista uprising, opposing the signing of NAFTA, but they were unsuccessful and NAFTA was signed (followed immediately by the peso crisis ) (Roberts & Hite, 299).

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, 56). “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, 33). 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 neighbor, the US, is the clear front-runner for hotel TNCs (Adams, Gupta, and Mengisteab, 59).

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, 23). As the rise of the Mexican tourist industry coincided with global economic market liberalization, what could have become a profitable venture and export for Mexico became another failed venture. In fact, with the industry being predominantly foreign owned, it further cements the control the developed world has over Mexico, cementing its label as underdeveloped. The evolution of the capitalist system increased the polarization between countries and within the countries themselves (Kumar, 52-53)

However, presently the global economy is going to be experiencing restructuring with the aparent recession that will be occuring the the US. As the US undergoes election, one maor topic is that of NAFTA and many of the candidates (notably from the Democratic Party) have proposed the abolition of NAFTA. It is uncertain what this could mean for Mexico who is dependent on FDI to expand their tourist industry as well as for paying off debt. If the world decreases the market's liberty, Mexico must follow, but in my opinion, it is safe to assume that prior acts of market liberalization will remain inhiberters to development.


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.
Hite, Amy B., and J. Timmons Roberts, ed. 2007. The Globaliztion and Development Reader: Perspectives on Development and Global Chance. MA, USA: Blackwell Publishing.
Kelly, Thomas j. 1999. The Effects of Economic Adjustment on Poverty in Mexico. UK: Ashgate Publishing Ltd.
Kumas, Krishna., ed. 1980. Transnational Enterprises: Their impact on the Third World Societies and Cultures. Boulder Colorado: Westview Press Inc.
Lacher, Hannes. 2006. Beyond Globalization: Capitalism, Territoriality and the International Relations of Modernity. New York, NY: Routledge (Taylor and Francis Group).
Merrill and MirĂ³, ed. 1996. Mexico: A Country Study. Washington: GPO for the Library of Congress.
Sklair, Leslie. 1991. Sociology of the Global System. UK: Harvester Wheatsheaf.

World Bank Group. 2008. “MexicoData.” The World Bank Group, Retrieved on February
25, 2008. HYPERLINK ""

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