Latin American Development Models: A Parallel Between Brazil and Mexico

Brazil and Mexico have followed quite different development strategies. This paper focuses on a parallel between their trade policies since the 80’s as a proxy to an interventionist/reformist and a liberal/oligopolistic development model. Major differences emerged with the fatigue of Import Substitution Industrialization in the late 70’s. Since the 1982 moratorium, Mexico embarked on liberal reforms leading to the NAFTA: small value added exports, little innovation and concentration on the US market. Brazil preserved interventionist policies. Extensive trade liberalization came about only in 1990. “Real Plan” closed out inflation and launched sustainable stabilization. Mercosur´s dynamism came to a halt but commodity exports to China boomed. Crucial tests came in the years 2000. Brazil sailed well, outperformed Mexico and became one of the largest emerging economies. A more gradualist opening of the economy, diversified markets and innovation may explain the distinct results. The decisive element in development differentials between the two countries was the emergence of a wide, deep rooted reformist movement in Brazil. Laid down in the mid 90’s with the Real Plan, implemented along eight years under Cardoso, its basic features were not abandoned by Lula.