NAFTA and Mexico's current economic crisis: Short-run and long-run perspectives

Policy-makers in both Mexico and the U.S. reacted to the economic crisis which began in Mexico in December, 1994 as if it were a problem of short-run financial liquidity. The argument presented in this article is that Mexico's current crisis has its origins in long-standing, fundamental problems of the Mexican economy. These long-run problems include: massive external debt, a severely skewed income distribution, inadequate job creation, low productivity per worker and lack of investment in infrastructure. The short-run policy response will not address the long-run problems.