the impact on Asian or European exports to Mexico. This was due in part to NAFTA commitments made by Mexico and due in part to co-production agreements between Mexico and the United States. U.S. exports to Mexico slipped only $4 billion in 1995 while Mexican exports to the U.S. rose about $12 billion that same year. Mexico’s trade surplus with the U.S. has stayed relatively steady since 1995 at about $10 billion per year. The fall in the Mexican economy was muted and its recovery much faster because of NAFTA. The number of workers in Mexico’s formal economy (permanent workers affiliated with the Mexican Social Security Institute) fell to 9.9 million at the peak of the 1995 recession and has risen to 12.2 million at the end of 1998. NAFTA provides investors with an additional level of confidence and its existence undoubtedly helped the political case for the major rescue package put together at the outset of the peso crisis. Mexico’s economy is recovering well from this recession, growing 4.5 percent in 1996, 7 percent in 1997, and 4.6 percent in 1998. Due to this growth, U.S. exports to Mexico have recovered well and are now 55 percent higher than before the peso crisis. However, even with this process of recovery in Mexico, some of Mexico’s workers are still feeling the effects of the devaluation and the resultant recession. Many of the unemployed bitterly remember the government’s promise of prosperity after the NAFTA. “The dream has vanished,” said Fernando Nava, 46, a Mexican executive laid off in January. “Businesses may be healthier now, but there are grave social problem… It’s easy to lay people off, but what then? We’re waking up very painfully to the crude realities.” Despite NAFTA and its dispute settlement mechanisms, several trade conflicts have proven impossible to resolve. The most notorious have to do with tomatoes, avocado and free transit for ...
