What a Difference a Crisis Makes NAFRA, Mexico, and the United States

Abstract

Mexico's deep economic crisis, precipitated by the devaluation of the peso in December 1994, had a far-reaching impact. It sent the Mexican economy into a tailspin, unleashing extensive personal and corporate bankruptcies, a deterioration of real wages, unemployment, and malnutrition; it threatened the global financial system, stirring memories of the 1980s debt crisis and triggering financial panic as far south as Argentina (the so-called tequila effect); it altered the perception of economic health in Latin America as many began to glimpse failures in the neoliberal model of development (Naim, 1995); and, according to one observer, it even broke the long-established consensus between the International Monetary Fund (IMF) and the U.S. government (Ramirez, 1996: 29). Mexico's deep economic plunge also transformed the political climate in Mexico, stripping legitimacy from President Ernesto Zedillo while mobilizing opposition to both the long-ruling PRI and the neoliberal model it had championed since the mid-1980s. The crisis had important impacts on trade, immigration, investment, and the perceptions the citizens of both Mexico and the United States had of the North American Free Trade Agreement (NAFTA) and each other. Coming as it did in the first year of NAFTA, the crisis significantly altered the pattern of U.S.Mexican relations. With Jorge Castafeda (1995), Moises Naim (1995), Riordan Roett (1996), and others analyzing the economic and political consequences of the Mexican economic crisis, this article explores the impact of the crisis on NAFTA and U.S.-Mexican relations, with particular attention to its role in altering underlying opinions and perceptions. Included in this analysis is how NAFTA has weakened the ideological consensus in both countries and U.S. cultural hegemony in Mexico. The article is divided into three parts. The first