NCPA - National Center for Policy Analysis

Mexico Prefers Central Planning Over Market

October 31, 1995

Over the weekend, Mexico opted for a pact among government, business and organized labor to fix prices and output levels in order to boost its troubled economy. This came at a time when other Latin American countries are rushing to free up their private sectors.

The so-called "Pacto" would:

  • Hold prices for gasoline, diesel fuel and electricity to a 1.2% increase per month - with larger hikes scheduled later.
  • Increase the minimum wage by 10% in December and again in April.
  • Give tax breaks to businesses to increase private sector hiring.
  • Boost outlays for social services and job training.
  • At the same time, cut government spending by 4.75%.

Six previous Pactos have failed to increase national output or individual Mexicans' incomes. In fact, GDP has shrunk nearly 6% this year, and inflation is running at a 40% annual rate.

Source: Perspective, "Mexico's New Deal," Investor's Business Daily, October 31, 1995.


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