thesis. regional development policies in mexico

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Regional development imbalances in Mexico; is there a real and pragmatic regional development strategy? Author: Cynthia Verónica Arredondo Cabrera Date: 23 July, 2012 Name of the Program: Master's in International and Development Economics First supervisor: Prof. Dr. Ulrich G. Wurzel Second supervisor: Dipl.-Vw. Dipl.-Geogr. Lech Suwala

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Page 1: THESIS. Regional Development Policies in Mexico

 

Regional development imbalances in Mexico; is there a real and pragmatic regional development strategy? Author: Cynthia Verónica Arredondo Cabrera Date: 23 July, 2012 Name of the Program: Master's in International and Development Economics First supervisor: Prof. Dr. Ulrich G. Wurzel Second supervisor: Dipl.-Vw. Dipl.-Geogr. Lech Suwala

Page 2: THESIS. Regional Development Policies in Mexico

Table of contents

Abstract

1. Introduction ................................................................................................................... 1

2. The development context in Mexico. ............................................................................ 2

2.1. A country snapshot .............................................................................................. 2

2.2. Human Development Index of Mexico. ................................................................. 4

2.3. Evolution of the Mexican growth strategies (from 1960- 2000) ............................ 5

2.4. The Mexican state approach to regional development ........................................ 10

3. Regional policies: state of the art in the international context ................................... 11

3.1. Concepts fundamentals ...................................................................................... 11

3.2. The OECD perspective and the endogenous growth theory. ............................. 13

3.3. The European Union Regional Policy. ............................................................... 17

3.3.1. Cohesion Policy: objectives. ................................................................. 18

3.3.2. Cohesion Policy: three funds. ............................................................... 19

3.3.3. Regionalization of the European Union. ............................................... 20

4. Regional disparities in Mexico .................................................................................... 21

4.1. Causes of regional disparities ............................................................................. 21

4.1. Spatial disparities: some indexes. ....................................................................... 22

5. Mexican regional development policy ........................................................................ 33

5.1. Regional development policy. 2001- 2012. ........................................................ 33

5.2. Two National Development Plans. ..................................................................... 34

5.3. Mesoregions and trust funds. ............................................................................. 35

5.4. Regional Development Unit.. .............................................................................. 37

5.5. Program of Urban Development and Land Planning. ......................................... 39

6. Conclusions ................................................................................................................ 44

Information sources. ............................................................................................................... 49

Appendix 1. Mexican states abbreviation ............................................................................... 56

Appendix 2. List of figures ...................................................................................................... 57

Page 3: THESIS. Regional Development Policies in Mexico

Abstract

This research attempts to approach the current structure of an emerging Mexican regional

policy, understanding its origins and the poor efforts for its development i.e., a regional

policy that is hardly marked by an urban vision. In Mexico, urbanization processes and

regional policies are strongly linked, to a great extent as a result of the growth strategies

followed since 1960, beginning with a protectionist policy during which the Mexican economy

enjoyed certain prosperity reflected in the high rates of GDP growth. The protectionist model

was considered depleted by early 1980’s, with the beginning of a Mexican economic crisis

that lasted the whole decade, and whose causes were surely internal, but some international

constraints also contributed to the decline of growth. This is one of the worst decades

in economic growth in Mexico of the twentieth century. In the 1990’s, looking for a model to

assist the economic recovery, came the abrupt economic liberalization and privatization

processes. Despite the dramatic changes in growth strategies, the regional inequalities in

Mexico have been a constant, which during the protectionist policy era tended

to decrease and for the liberalization era have tended to increase until today. Herein are

exposed the Mexican regional policy strengths and weaknesses, showing that currently,

regions in Mexico and their development have not had a major weight in the national policy

agenda. Extreme poverty and unequal income concentration are topics that need to be

tackled and a strong regional policy could bring potential benefits to this purpose.

*12,000 words.

Page 4: THESIS. Regional Development Policies in Mexico

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1. Introduction.

Mexican economic and social development and the policies involved have an impact at

regional levels. In fact, it is precisely at this level where severe regional inequalities can be

observed, meaning huge differentials in the development level among the Mexican states.

This argument leads to inquire the current development strategies. In this vein arises the

reasoning and the question of the research: Regional development imbalances in Mexico; is

there a real and pragmatic regional development strategy? The research presented in this

paper has the primary objective of providing an answer.

The reader may wonder why regions matter for development studies. Their relevance,

however, is great due to certain features that are here emphasized.

First, within regions exists a wide variety of development stakeholders, rural and urban

populations, the private sector and different levels of government, all of whom should be

taken into account in policy making of economic and social subjects. Different stakeholders

can work jointly for the establishment and achievement of common goals.

Regions can represent an advantage when creating knowledge networks and clusters of

diverse natures (innovation, technologies, private sector, economic sectors). Furthermore,

regions matter due to the concentration of various natural resources.

Different regions can have varied approaches to development, depending on the needs of

the territorial zones and the stakeholders involved. This variety allows for alternative

strategies for growth and development, which can be complementary or associative. The

feedback between regions depends on the degree of interconnectivity.

Regions at a subnational level can better represent the local interests. They are a synergy of

economic, social and political power to push policy makers towards regional common

interest. Additionally, regions can aggregate all the factors and conditions necessary to

increase competitiveness and face the challenges of globalization.

Throughout this research, regional policies in the national and international contexts are

presented with the aim to find out whether there is in Mexico a real regional development

strategy to tackle regional imbalances.

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The second part of this paper presents some essential features of the country, identifies its

current status in terms of human development, the growth strategies executed since 1960

and the prevailing approach of Mexican government to regional development.

In the third section, some fundamental concepts related to regions are explored. The

international trends in this area are also presented by analyzing the OECD statements

regarding regional polices in the world. These statements are compared with the

neoclassical and endogenous growth theories to identify the theoretical orientation of the

current international regional policies. The European Union’s regional policy is also analyzed

as a sample of a well-structured regional policy. Its genesis details are examined to find out if

it may represent a prototype for the Mexican regional policy.

This research highlights the Mexican regional imbalances in the fourth part, where five

causes are identified for the case study of this paper. Additionally, this section presents some

figures representative of the economic performance and social wealth in order to give the

reader a notion of the severity of regional imbalances.

The fifth section, Analysis of Mexican regional development policy, examines the existing

regional policy in Mexico, identifies the political and institutional tools and reveals the overall

strengths and weaknesses prevailing in the political approach.

Last but not least, the conclusions include a discussion of the research findings and suggest

ways Mexican policy makers could rethink the reasoning and the direction of regional policy.

2. The development context in Mexico.

2.1. A country snapshot.

The aim of this section is to provide an overview of the features of Mexico, to give more

sense to the regional development policy analysis in the coming chapters.

Mexico has a federal government with a President in the Executive Power, elected for a non-

renewable six-year term. The Congress is bicameral, consisting of the Senate and the

Chamber of Deputies.

There are three vertical levels of government: municipalities, states and the federal level. In

the political division of the territory the municipalities are the smallest units; the states contain

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different numbers of municipalities; and the federation represents the country as a whole.

Mexico is a country with 31 states and a capital, Distrito Federal. In terms of territory size,

compared with the Latin American countries, the Mexican territory is only exceeded by Brazil

and Argentina.

As the analysis done in this paper is per state, the first map includes the names of the states

that constitute Mexico and the population for each state.

Map 1. Political division of Mexico and population per state. 2010.

Source: Instituto Nacional de Estadística y Geografía (INEGI), (2010c), Censo de población 2010. México, pp. 9.

Code Name Population

2010

% of the total

populatio Code Name Population

2010

% of the total

populatio01 Aguascalientes 1.184.996 1,1 17 Morelos 1.777.227 1,602 Baja California 3.155.070 2,8 18 Nayarit 1.084.979 1,003 Baja California Sur 637.026 0,6 19 Nuevo León 4.653.458 4,104 Campeche 822.441 0,7 20 Oaxaca 3.801.962 3,405 Coahuila 2.748.391 2,4 21 Puebla 5.779.829 5,106 Colima 650.555 0,6 22 Querétaro 1.827.937 1,607 Chiapas 4.796.580 4,3 23 Quintana Roo 1.325.578 1,208 Chihuahua 3.406.465 3,0 24 San Luis Potosí 2.585.518 2,309 Distrito Federal 8.851.080 7,9 25 Sinaloa 2.767.761 2,510 Durango 1.632.934 1,5 26 Sonora 2.662.480 2,411 Guanajuato 5.486.372 4,9 27 Tabasco 2.238.603 2,012 Guerrero 3.388.768 3,0 28 Tamaulipas 3.268.554 2,913 Hidalgo 2.665.018 2,4 29 Tlaxcala 1.169.936 1,014 Jalisco 7.350.682 6,5 30 Veracruz 7.643.194 6,815 México 15.175.862 13,5 31 Yucatán 1.955.577 1,716 Michoacán 4.351.037 3,9 32 Zacatecas 1.490.668 1,3

112.336.538 100Total population

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Mexico is considered a very rich country in terms of climate and natural resources; it has

tropical, desert, dry and temperate weathers; fossil fuels, minerals, water and forestry

resources, and a great diversity of flora and fauna.

According to information from Instituto Nacional de Estadística y Geografía (National Institute

of Statistics and Geography) (INEGI) currently in Mexico 6.8% of the total population speaks

an indigenous language, most of them located in the south. The southern states with highest

shares of indigenous population are: Yucatan 63%, Oaxaca 58%, Quintana Roo 34% and

Chiapas 33%. In contrast, the northern states with lowest shares of indigenous population

are Coahuila and Nuevo León, both with only 2% of their total population (INEGI, 2010c).

2.2. Human Development Index of Mexico.

As an approach to its degree of development compared with the world, this section uses the

Human Development Index (HDI) to place Mexico in an international context. The reader

should be aware that the HDI at a national level does not represent the countries’ internal

disparities; a country with a high HDI can have at the same time very high distribution

inequalities. Still, the HDI at a national level can provide an idea about the countries’

development degree. In the Human Development Report 2011 from the United Nations

Development Program (UNDP), the countries are classified in four categories according to

their HDI.

The first category is Very High Human Development (countries with an HDI between 1 and

0.79.) The five countries at the top of this list are Norway, Australia, Netherlands, the United

States and New Zealand.

The second is the High Human Development category (countries with an HDI between 0.78

and 0.69). Of the forty seven countries in this group, Mexico is in tenth place with and HDI of

0.77. The countries with a very similar HDI as Mexico are Bulgaria (0.77), Saudi Arabia

(0.77), Panama (0.76) and Serbia (0.76). In the Latin American context, Mexico has a higher

HDI than Venezuela (0.73), Brazil (0.71) and Colombia (0.71).

The third category is Medium Human Development (countries with an HDI between 0.68 and

0.52). The top five countries in this group are Jordan, Algeria, Sri Lanka, Dominican Republic

and Samoa. Finally, the fourth category is Low Human Development, which includes all

those countries that have an HDI between 0.51 and 0.28, the lowest HDI in 2011 belonging

to the Democratic Republic of the Congo.

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Despite the fact that Mexico belongs to the group of countries of high HDI, it is the country

with the highest inequalities of GDP per worker compared to the Organisation for Economic

Co-operation and Development (OECD) member countries (see Graph 1, note Mexico at the

very bottom).

Graph 1. Gini Index of inequality of GDP per worker. (OECD member countries).1

Source: Organisation for Economic Co-operation and Development (OECD), (2009), Reviews of regional innovation. 15 Mexican states, figure 1.1.8, pp. 65.

2.3. Evolution of the Mexican growth strategies (from 1960- 2000).

In order to understand the origin of the current regional approach of Mexican policy, it is

necessary to talk about the history of the industrialization and growth strategies and their

impact on regional development. Three stages are identified: 1) The economic miracle

(1960- 1980), period of the Import Substitution Industrialization (ISI) policy in which the

manufacturing sector strengthens; 2) The lost decade (1980- 1990), a period of recession,

high external debt and of the reorientation of the Mexican economy; and 3) Export model

1 The United States is a more drastic case about of HDI blindness of internal inequalities. It has an HDI of 0.90, placing it in the Very High HDI group despite its Gini index of 0.20 in 2003 (very close to Mexico in the above OECD table), meaning it has a very high degree of unequal income distribution.

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and markets liberalization (1990- 2000), a time when the Mexican economy consolidates its

orientation towards openness with the North American Free Trade Agreement (NAFTA).

1) The economic miracle (1960- 1980).

The ISI policy helped to reduce regional disparities in Mexico. The ISI was instrumental in

strengthening national industry. The state was the main driver of the ISI through a

protectionist policy of the national industry by import tariffs and other trade barriers and the

sale of cheap inputs produced by state enterprises. The flows of foreign currency increased

through foreign loans, foreign direct investment (FDI) and oil exports. The agriculture sector

did not get any benefit from ISI policy in terms of FDI; instead, the manufacturing industry

emerged stronger in this period.

Graph 2. FDI inflows to Mexico by sector (millions of US dollars). 1980- 2011.

Source: Own elaboration with information from Secretaría de Economía (SE), (2012).

During ISI policy there was not an adequate relocation of emerging industries. Moreover,

industries that were supported were mainly centralized in the northern border and in the

center of the country.

Despite the mixed results of ISI, this period is known as the economic miracle because the

GDP grew 6.7% in average from 1960 to 1980, being the two best years 1964, with 11.9%,

and 1979, with 9.7% (World Bank data, 2012a). Additionally, in this period Mexico stopped

being a rural country due to the growing industrialization and an increasing population in

urban areas caused by the rural- urban exodus. During the 1980s, Mexico emerged as an

urban country, in this decade 55% of the population was concentrated in 227 cities (Garza,

G., 2010, pp. 82).

0

5,000

10,000

15,000

20,000

25,000

1980

1985

1990

1995

2000

2005

2010

Agriculture

Industry

Services

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The ISI policy initially had a positive regional impact. Carlos Vilalta (2010, pp.96) mentions

that a decrease of regional disparities can be observed due to the macroeconomic factors

brought by the industrialization: the economy growing at a faster rate than the population, low

inflation, employment creation through the expansion of industry, protection of the local

private sector and strategic public investment. These factors led lagging states to achieve

faster rates of growth than the already advanced states.

The new industrialization led to a transformation process in many senses. Employment

structures, the regions, the cities and the inner- city interactions, all these meant new

demographic challenges. The government began to be interested in regional development in

urban terms.

2) The lost decade (1980-1990).

By the early eighties, ISI policy was considered depleted because the industry that emerged

from it showed low productivity without export capacities.

As a consequence of the high amounts of foreign loans needed for ISI execution, the foreign

debt increased to 45% as a share of the GDP for 1982 (González Marín, 2002, pp. 20). At

the same time the international oil prices decreased, weakening the oil export industry,

hence foreign currency inflows. The interest rate of the international loans rose, as well.

These external constraints made the Mexican foreign debt higher and harder to pay. The

Mexican government negotiated the payment with the International Monetary Fund (IMF),

which suggested the contraction of public expenditure as a precondition for debt payment

negotiation. As part of the fiscal austerity, Mexico executed a process of privatization of state

enterprises in line with the Washington Consensus.

A high foreign debt, the contraction of public spending, privatization of state enterprises

(railways, communications and banks), inflation, that caused a significant differentiation in

the real wages of the various states (Vilalta C., 2010, pp.99) and a weak national industry

due to low levels of diversification and productivity, resulted in a recession that lasted the

entire decade. During this period GDP grew only 1.6% (Garza, G., 2010, pp. 33). Despite the

internal economy weakness, Mexico became part of General Agreement on Tariffs and

Trade (GATT) in 1986, which began a new trend towards market liberalization.

The lost decade had a strong impact on regional inequalities. The strongest effects were

observed predominantly in the agricultural states of the south, while the less affected were

the industrialized states of the north.

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3) Export model and markets liberalization (1990- 2000).

In the 1990s, the new national strategy for economic growth was focused towards exports,

and the private sector began to be considered the main engine of industrialization and

economic growth. The political priority was the expansion of foreign economic relations. The

recession of the last decade meant a reduction of the domestic market, an advantage to

augment export volume.

In 1994, the first of several trade agreements, NAFTA, came into effect; it was assumed that

it would bring bigger FDI inflows from the United States to Mexico; in reality, the FDI inflows

continued as in past years, and even with a downward trend, reaching the lowest levels in

2010 since 1980.

Graph 3. FDI inflows to Mexico from USA, 1980- 2011 (% of the total annual FDI).

Source: Own elaboration with information from SE, (2012).

The Mexican economy dependence on the United States market and the productive

specialization of certain branches of the Mexican industry are some consequences of this

trade agreement. The region that benefited most from this export model was the north

because it is the region where most of the export industries are concentrated.

0

10

20

30

40

50

60

70

80

90

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

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Graph 4. Main export markets in Mexico, 2010 (% of the total).

Source: Parker, K. ed., (2011), Country Report Mexico, UK: The Economist Intelligence Unit, pp. 20

Exports and FDI have benefited only certain border cities with manufacturing industry, tourist

regions and regions specialized in financial services, productive sectors characterized by

high shares of growth. As a result of trade liberalization, agricultural and rural regions have

been neglected, deepening regional inequalities.

Undoubtedly there has been an increase in exports. According to World Bank data (World

Bank, 2012b) , Mexican exports raised from 16.8% in 1994 to 30.4% in 1995 as share of the

GDP, a percentage that has remained to date with few variations, exports representing

30.8% of GDP for 2010.

However, the overall performance of the economy does not exhibit the same growth, as

observed in the graph below. The GDP growth since 1982 shows a downward trend. In fact,

it is during the years of ISI that GDP growth shows a better performance.

Graph 5. GDP growth in %, 1961- 2010.

Source: Own elaboration with information from the World Bank, (2012a).

USA80%

Other14%

Brazil1%

Japan1%

Canada4%

-10

-5

0

5

10

15

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

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The differentiated economic growth of Mexico in each of the analyzed stages depends on

endogenous and external factors and constraints. Moreover, this differentiation shows an

accelerated urban development of cities that traces state priorities regarding regional

development policies.

The main consequence of the economic policies since 1960 in demographic and economic

terms is the consolidation of some cities as the leading urban centers of the country. The

current regional strategy consequently focuses on strengthening the cities and metropolitan

areas2.

2.4. The Mexican state approach to regional development.

Growth and development strategies have undergone drastic changes since 1960, whereas

regional imbalances have remained. Despite this context, the political approach of the

Mexican state to regional development has been the same: the consolidation of urban areas.

Mexico showed accelerated urban growth from 1960- 1980 in part due to the high rate of

migration from rural to urban areas. Since then migration has been continuous, the

population concentration being a constant worry of the state. Mexico was not an isolated

case in this issue. In 1971, the United Nations (UN) prioritized human settlements and

urbanization in the international agenda. The UN vision is the one that the Mexican state

uses to define regional development policies focused on population distribution and land

planning. For instance, Mexican regional policies seek a better population distribution in the

whole territory through human settlement management. In this sense, regional development

is subordinated to the urban development programs.

As part of its interest for urban development, the Mexican government created in 1978 the

Sistema Urbano Nacional (National Urban System). It identifies the main cities according to

population size, it recognizes the ties among them, their structures and their functional

features, it defines the territorial borders of the cities and metropolitan zones and it is the

point of departure for policy makers to make decisions about resources and policies. Hence,

the organization of the whole national territory is understood from the cities and their areas of

influence.

2 Regarding Metropolitan zones concept, there are three valid definitions established in 2005 by Secretaría de Desarrollo Social (Secretariat of Social Development) of Mexico: 1) the set of two or more municipalities where a city is located, with 50,0000 inhabitants or more, whose urban area, functions and activities are beyond the geographic limits of the municipality that originally contained it, incorporating to neighbor municipalities, predominantly urban, to its influence area; 2) single municipalities containing a city of one million or more inhabitants; and 3) all municipalities with cities of 250 thousand or more inhabitants that share conurbation processes with cities of United States.

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The system of cities and the current regional development approach do not emphasize

regional inequalities reduction as an objective, a problem that will be analyzed further in this

research.

3. Regional policies: state of the art in the international context.

3.1. Concepts fundamentals.

There are many definitions concerning regions, regionalization, regionalism and regional

development, most of them linked to international economics and trade blocks among

countries. The fields and parameters of regional action are very diverse. Hence, the reader

must be aware of the flexibility of the concepts in their application. Moreover, it must be

considered that concepts evolve according to historic, political, social, and economic

processes. The definitions quoted here can be applied in a national context when

considering the subnational territorial divisions of a country, and in an international context,

when taking in to account international blocks.

Beginning with the most basic concept, a “region” can be understood:

• “[…] as units or ‘zones’ based on groups, states or territories, whose members share

some identifiable traits.” (Fawcett, L., 2005, pp. 21).

• “[…] a limited number of states linked together by a geographical relationship and by

a degree of mutual interdependence.” (Nye, J., 1977 cited in Tavares, R., 2004, pp.

5)

• “[…] geo-economic spaces integrated by one or more adjacent states, which

homogeneity or internal similarity (economic, social and natural) is major than that

observed together with any other neighboring states.” (Carrillo Arronte, R.,1973 cited

in Hernández Laos, 2005, pp. 43 ).

All these definitions make reference to a certain level of economic, geographic, political and

social homogeneity as a preliminary condition for regions’ delimitation.

However, some scholars argue that regions’ delimitation are defined by homogeneous and

heterogeneous elements; Porras (2007, pp. 164) raises a debate in this concern: on the one

hand the regions’ delimitation depend on demographic and geographic aspects, the

economy, cultural features of human settlements and natural resources. The

interdependence of these elements causes the regions to have similar production factors,

hence homogeneous regions. On the other hand, globalization impacts all levels of social

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and economic organization, making the regions more heterogeneous. There is no convention

in this regard.

It is also relevant for the purposes of this research to differentiate between “regionalism” and

“regionalization”; the first is defined as:

• “[…] a policy and project whereby states and non-state actors cooperate and

coordinate strategy within a given region. The aim of regionalism is to pursue and

promote common goals in one or more issue areas.” (Fawcett, L., 2005, pp. 24).

• “[…] institutionalized intergovernmental coalitions that control access to a region.”

(Tavares, R., 2004, pp. 6)

While “regionalization” is understood as:

• “[…] regionalization is first and foremost a process. Like globalization, it may take

place as the result of spontaneous or autonomous forces. As its most basic it means

no more than a concentration of activity – of trade, peoples, ideas, even conflict – at a

regional level. This interaction may give rise to the formation of regions.” (Fawcett, L.,

2005, pp. 25)

Therefore “regionalization” is the process of region delimitation, which could be driven by

markets, local features and needs, while “regionalism” has to do with policy creation at the

supranational or subnational levels.

It is also necessary to define “regional development”, due to the fact that this research is

devoted to analyzing regional development policies:

• “Regional development is the process of sustained change which its end is the

permanent progress of the region, of the regional community as a whole and of each

inhabitant of the region, […] is the process of generating economic wealth, social

welfare and sustainability” (Boisier, 1996, pp. 6)

• “The process of social and economic growth of certain geographical units to ensure

the rural-urban functionality and the quality of life improvement for population […]”

(Secretaría de Desarrollo Social, 2001, pp. 137)

The tool of regional development is policy; hence “regional development policy” is

understood as:

• “[…] is the use of economic incentives to attract industry to one location or another.”

(Sachs and McCord, 2008, pp. 2)

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This definition focuses mainly on economic incentives which could support small and

medium enterprises, the tax policy favoring certain sectors, land regulation, support to

cooperatives’ creation and credits’ access. Nevertheless, regional development policy must

incentivize other things, such as research and development, the enhancement of skilled

labor, creation of networks and clusters of various types, innovative projects and civil

organizations, among others.

Finally, defining “regional economics” helps in creating a concrete approach to a regional

development policy aim. The good performance of regions will be translated into the good

performance of the country. Hence, regional development policies ultimately benefit the

economic growth and social welfare of a country. As Krugman (2009, pp. 146) states:

• “The nature of regional economics- that is, how the economies of regions within a

nation fit into the national economy.”

In this sense, regions’ delimitation is driven by economic integration with macro- economic

arguments for improving the economic performance of a country, or of the all Union in the

case of the European Union (EU).

When talking about regions, their policies, processes and goals, it is unavoidable to talk

about geographic units and of the very wide diversity of factors that delimitate them. It is

equally essentially to talk about cooperation, coordination and integration in economic, social

and political fields in order to achieve common goals.

3.2. The OECD perspective and the endogenous growth theory.

There is not a global guideline for regional development policies, that is, if they should

address concrete problems in specific lagged areas or pursue economic growth in all

regions. Even regional development policies can easily be confused with pro- poverty

policies or with policies that support only certain sectors of the economy. Therefore, the

identification of the best practices in regional development is difficult; there is no blue- print in

this regard.

Regardless of the lack of an international convention, the OECD statements concerning

regional policies represent an international trend in regional policy practices, at least for the

member countries like Mexico.

The OECD considers that during the 1980s and 1990s, globalization posed new challenges

to intra-country regions. Trade liberalization, the increasing presence of transnational

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companies and a narrowed public budget have contributed to wider gaps among countries

and regions. This statement is confirmed by Cypher and Dietz (2004, pp. 234) mentioning

that within the period from 1965 to 1980 low income countries grew faster than high income

countries, but from 1980 to 2000, the opposite situation occurs. There is a widening gap in

the rate of growth between low and high income countries. As a response, countries are

changing their regional development policies.

To observe how the countries have changed their regional policies to face regional

inequalities, in 2010 the OECD executed an analysis of member countries’ regional policies.

The Organization concluded that regional development policies have evolved over the last

ten years, a change that has been defined as a shift in the regional development paradigm

(OECD, 2010). More specifically, they have gone from an exogenous development of regions

(defined as the old paradigm) to an endogenous development of regions (defined as the new

paradigm).

The old paradigm entails governmental funds to address investment and infrastructure,

government aid focused in lagging areas for regional disparities reduction; a lagging- regions

approach. The new paradigm implies governmental actions devoted to enhancing the

capabilities and competitiveness of regions. Regional development is endogenous

resourced- based with a broad focus towards all regions. For the OECD, the old paradigm is

grounded on an equity principle, whereas the new paradigm is based on an economic growth

principle.

The following chart contrasts the main aspects of the regional policies in the old and the new

paradigms.

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Chart 1.Paradigm shift of regional development policy.

Source: OECD, (2010), Regional Development Policies in OECD Countries, table 1.1., pp. 13. The chart was almost entirely taken from the document; it was adapted, adding more information from pages 11 to 14, in the same document.

The OECD analysis indicates that the paradigm shift is an ongoing process; hence some

countries still remain in the old paradigm, while other countries have a clearer policy situated

in the new paradigm or have a mixed scheme. As well the OECD recognizes a current trend

in expanding support to large cities, as part of regional development policies, to transform

them into the main drivers of growth of regional economies. This is the case of Mexican

policies, as will be seen in chapter five.

Although the analysis explicitly does not refer to any theoretical framework, from the

description of old and new paradigms, it can be inferred that they are based in the

neoclassical and endogenous growth theories, respectively. In the following paragraphs, the

old and the new practices of regional policies will be compared to see in how far they fit in

the theories’ assumptions.

Concerning regional inequalities reduction, the neoclassical growth theory predicts the

convergence of income among regions through an automatic equilibrium mechanism,

Old paradigm New paradigm

Focus Exogenous regional development Endogenous regional development

Causes of egional disparities

Regional disparities in income, infrastructure stock, and employment

Lack of regional competitiveness, underused regional potential

Regional development policy

- Governmental aid to address investment and infrastructure '- Government targeted aid interventions in lagging areas '- Targeted actions to regional disparities reduction through transfers

- Governmental actions devoted to increase the capabilities of regions to make them more competitive

General policy framework

Compensating temporally for locationdisadvantages of lagging regions,responding to shocks (e.g. industrial decline) (Reactive to problems)

Tapping underutilised regional potentialthrough regional programming (Proactive for potential)

General policy approach Reduce regional through distribution Improve regional competitiveness

Spatial orientation policies Targeted at lagging regions All-region focus

Stakeholders Central governmentDifferent levels of government, variousstakeholders (public, private, NGOs)

Theme coverage Sectoral approach with a limited set of sectorsIntegrated and comprehensive development projects with wider policy area coverage

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explained by factors mobility (labor and capital) and by the law of diminishing returns. The

endogenous growth theory does not predict any convergence. Furthermore, it rejects the

diminishing returns, proposing instead constant returns to investment. In this sense,

neoclassical theory fits with the old paradigm, due to its lagging behind regions approach to

help lesser income regions converge with regions of higher income. The endogenous growth

theory, on the other hand, fits with the new paradigm and its all- regions approach.

Endogenous growth does not imply an accumulation or spatial agglomeration of capital to

generate growth as the neoclassical theory does. Spatial agglomeration occurs in the old

paradigm when the government intervenes with aid only in lagging regions to address

investment and infrastructure.

The concept of capital in the neoclassical approach involves investment, savings and

technology. In the endogenous approach it is much wider, including education, skilled labor

by training, and in general, the disposal and use of technological knowledge as determinant

factors in producing output. This wider concept fits with the new paradigm by the integration

of regional development projects with a wider policy scope.

It is relevant from the endogenous growth theory, that it integrates to the economic factors to

growth, other social and political arguments, such as political stability, level of education

attained, business environment, population growth, income distribution, institutional

structures and all the proper aspects for each economy, at a country or regional level. In this

sense, endogenous growth theories are focused on development, whereas neoclassical

theories are mainly focused on economic growth. In this regard, the OECD statements are

contradictory to the theory because they state that the new paradigm is focused on economic

growth, as the neoclassical model would suggest.

Endogenous growth implies taking into account very specific features of the countries or

regions to define growth strategies. All the factors of growth are generated internally in each

singular economy. This is similar to the new paradigm suggestion of tapping underused

regional potentials to find internal factors of growth.

While the neoclassical approach legitimizes governmental interventions only for the

regulation of market forces or to correct market failures, the endogenous growth theories

give a strategic weight to governmental participation through polices to enhance the

economic growth. For example, subsidies, in the endogenous growth perspective, can be the

tool to improve the physical and social infrastructure (institutional processes and

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performance, legal system enforcement). The neoclassical approach considers subsidies a

hindrance of market forces. In this regard in the OECD study, the new paradigm approach is

the same as neoclassical growth theory.

The comparison shows that regional development policies of the new paradigm, even when

they are defined by the OECD as endogenous resources oriented, they are not entirely

consistent with the endogenous growth theory’s basic statements.

3.3. The European Union Regional Policy.

The EU is an international reference in terms of regional policy because it possesses a very

well-structured policy. The institutions, programs, tools and processes have been evolving

since its creation. Currently, it has a long- term vision and a co- responsibility mechanism in

projects execution, monitoring and in funds administration. The regional policy stands out for

being inclusive, working jointly with governmental representatives of each country at national,

regional and local levels, private sector, non- governmental organizations, trade unions, civil

society, academics and many other stakeholders. It is also relevant the wide spectrum of

projects financed by the funds, embracing culture, urban and rural development, agricultural

projects, among others. Even though it has an all- regions approach, most of the efforts are

concentrated in lagging regions.

It is interesting to look deeper into the EU and its regional policy, how regional development

policy has evolved over time and how its scope has changed.

Since the beginnings of the EU in 1957, a regional policy approach was used to reduce the

differentiated development levels among member countries. The European Social Fund was

created as the first budget management instrument for regional policy. At that time, the

actions towards regional development were direct interventions from the government of each

state through subsidies and the enhancement of sectoral policies. Early in the 1970s, the

European Regional Development Fund was founded. These funds remain in the form of the

Structural Funds of the EU.

The years 1986 and 1993 were crucial due to the respective formulation of the Economic and

Social Cohesion Policy and creation of an additional financing tool for regional development,

the Cohesion Fund. Since its conception, the Cohesion Policy has been substantially

concentrated in gaps-reduction of lagging behind regions through long term programs, cross-

sectoral strategies, jobs creation, gender equality, supporting innovative projects,

interregional cooperation, the inclusion of rural development, among others. The creation of

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the Cohesion Policy was a radical change in the political approach to regional development

due to the inclusion of social arguments to regional development policy, in addition to the

economic growth reasoning of helping lagging regions to catch up.

The following chart shows an image of the current regional development policy: the funds as

the financing tools, the objectives to which the funds are devoted to, and the types of projects

that each fund addresses. The Convergence objective is the priority for regional policy; it is

covered by the three funds.

Chart 2. EU regional policy program 2007-2013: funds, projects and objectives.

Source: Own elaboration with information from the European Commission (EC); European Union (EU) Regional Policy, (2007).

3.3.1. Cohesion Policy: objectives.

The addition of new members to the EU in different periods brought regional imbalances to

tackle, which necessitated a flexible regional policy that could adapted to the new

requirements while always keeping its priority of emphasizing the support to backward

regions.

From 1989 to 2006 the objectives embraced two dimensions: social and economic. In 2007

there was a drastic change in the objectives with the establishment of a three dimensional

regional policy: economic, social and territorial cohesion for the EU. The objectives have an

all- regions approach, opening the possibility of access to the finds to more regions.

The following chart shows how the regional policy objectives have changed from period to

period. It should be noted that the rural areas have always been part of the objectives. It is

not entirely devoted to already industrialized areas neither to rural areas; it is a mixed

Fund nameEuropean Regional Development Fund

(ERDF)

European Social Fund (ESF) Cohesion Fund

Projects types

- Infrastructure - Urban development - Competitiveness - Territorial co-operation- Research - Innovation - Environment conservation

- Adaptability of workers and enterprises- Access to employment - Social inclusion- Combating discrimination - Access to the labour market for disadvantaged people

- Environment - Trans-European transport networks

Convergence Convergence ConvergenceRegional Competitiveness and

EmploymentRegional Competitiveness and

Employment

European Territorial Cooperation

Objectives coverage

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inclusive scheme. In the last period (2007- 2013), the objectives show a major shift by the

inclusion of the territorial dimension.

Chart 3. EU regional policy objectives from four program periods.

Source: Own elaboration with information from the EC; EU Regional Policy, (2008a).

The topics incorporated into the regional development agenda are ever broader, the priority

topics for funding today being research and innovation, environment, culture, health,

transport, energy, employment, social inclusion, education and training.

3.3.2. Cohesion Policy: three funds

As mentioned above, the Cohesion Policy possesses three financing tools, the European

Regional Development Fund, the European Social Fund (together Structural Funds) and the

Cohesion fund. The resource allocation is results-oriented, geared towards the achievement

of the objectives.

1989 - 1993 1994 - 1999 2000 - 2006 2007 - 2013

1

Promoting the development and structural adjustment of regions whose development is lagging behind

Promoting the development and structural adjustment of regions whose development is lagging behind

Promoting the development and structural adjustment of regions whose development is lagging behind

Convergence: aims at speeding up the convergence of the least-developed member states and regions

2 Converting regions seriously affected by industrial decline

Converting regions seriously affected by industrial decline

Supporting the economic and social conversion of areas facing structural difficulties

Regional Competitiveness and Employment: covers all other EU regions, that Convergence objective does not cover, with the aim of strengthening regions' competitiveness and attractiveness and employment

3 Combating long-term unemployment

Combating long-term unemployment and facilitating the integration into working life of young people and of persons exposed to exclusion from the labour market, promotion of equal employment opportunities for men and women

Supporting the adaptation and modernisation of policies and systems of education, training and employment

European Territorial Cooperation: supports the cross-border, transnational and interregional cooperation and networks

4 Facilitating the occupational integration of young people

Facilitating adaptation of workers to industrial changes and to changes in production systems

5

Speeding up the adjustment of agricultural structures and promoting the development of rural areas.

Speeding up the modernisation and structural adjustment of agricultural structures, of the fisheries sector, and of rural areas

6Development and structural adjustment of regions with an extremely low population density

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The decision of which projects are financed is taken by the European Commission and the

government of each member country. The latter are responsible for the funding

management. The co-responsibility scheme is also valuable, the projects are financed both

by the supranational funds and by the involved countries.

It is interesting to observe what the regional policy represents for the EU budget. In the year

1989, 25% was the share of the Structural Funds to the EU budget; for 2007 it increased to

36%. This 11% rise in eighteen years shows the increasing importance of the regional

development policy in the EU agenda; probably linked to the accession of countries to the

EU.

In 2004 alone, ten countries were added3, which had the lowest GDP per capita in

Purchasing Power Standard (PPS) in that year among the EU member countries. Likely, this

expansion of the EU is related to the continuous increasing allocation of resources to the

Convergence objective, rising from 64% in 1989 to 82% in 2007. Regional disparities

reduction is also a priority of the Cohesion Policy.

Chart 4. Structural funds: % of the EU budget, and the % to Objective 1 (convergence)

Source: Own elaboration with information from the EC; EU Regional Policy, (2008b).

3.3.3. Regionalization of the European Union.

The regional policy has two ways of setting regions. This double mechanism is very helpful

when there is a large geographical territory with big regional imbalances.

Firstly, the member countries are classified according to a convergence criteria base in the

GDP per capita of each country. Eligible for funding are the regions whose GDP per capita is

lower than 75% of the average in the EU (EU Regional Policy, 2007, pp. 1), but other factors

such the population size and the national GDP are also assessed. According the degree of

3 Countries added to the EU in 2004: Cyprus, Slovenia, Czech Republic, Malta, Hungary, Estonia, Slovakia, Lithuania, Latvia and Poland.

Concept 1989 - 1993 1994 - 1999 2000 - 2006 2007 - 2013Structural Funds: % from the total EU budget

25% 33% 33% 36%

Structural Funds: % assigned to Objetive 1

64% 68% 72% 82%

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convergence, countries are classified in four categories; being the priority the countries with

the biggest regional imbalances.

The second mechanism addresses the managerial needs of a huge territory. The

Nomenclature of Territorial Units for Statistics4 (NUTS) is the classification for subdividing

national territory. Each member country is divided in three administrative boundaries (NUTS

1, NUTS 2 and NUTS 3) according to population size thresholds for each level. Usually the

classification NUTS 2 is the level where the funds are allocated. But to which hierarchical

level the regional policies are applied also depends on the national administration of the

territory.

This broad depiction of the regional policy of the EU gives the reader a good example of a

well-structured, adaptable regional policy with its own budget, clear objectives, monitoring

systems for projects and funds, a wide participation of stakeholders, a co- responsibility

mechanism, specific institutions and programs per period. These features might be replicated

in other countries.

4. Regional disparities in Mexico.

4.1. Causes of regional disparities.

In this chapter, some factors that can be considered as the origin of regional disparities in

Mexico will be treated briefly. Identified are five causes of regional inequalities. In addition

some facts and figures of Mexican regional disparities are presented. For this purpose some

indexes are compared to contrast the states that constitute Mexico; the indexes selected are

representative of the economic and social development.

1) Accelerated urbanization: in the period from 1960 to 1980, Mexico began an

accelerated urbanization process as a result of the newly industrialized areas. It became

evident that the Mexican cities’ growth exceeded the governmental capacities to attend to the

needs of a rising population. In 1975, 45.5% of the total population inhabited cities, and for

the year 2009 this share rose to 72.3%.

4 According to current information of the EU Regional Policy webpage, there are 97 regions at NUTS 1, 270 regions at NUTS 2, and 1,294 regions at NUTS 3 level. These regions are valid from 1 January 2012 until 31 December 2014.

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In the same period, the number of cities grew from 166 in 1975 to 364 in 2009. (González, L.,

2009, pp. 15).5

2) Capital agglomeration: since the adoption of the ISI model, capital tended to be

concentrated in certain regions of the country. This trend continued with the NAFTA and

other free trade agreements signed thereafter. FDI inflows were concentrated in

manufacturing industries mainly in the north of the country.

3) Internal migration: the high migration rate from rural to urban areas has caused a

labor shortage in rural areas, a situation that hinders the economic growth of rural regions.

4) Population growth vs. economic growth: according to INEGI, from 2000 to 2010, the

population grew 15.2%. The World Bank indicates that the Mexican GPD grew 2.3% in the

same period. This comparison shows the difficulties in tackling regional disparities due to

poor economic performance coupled with high rates of population growth.

5) Constant economic crisis: an economic crisis affects the household income level and

implies a contraction of public expenditures, which contributes to a higher degree of social

backwardness. Mexico has had four economic crises in the last thirty years6, a situation that

has not allowed economic stability hampering the execution of long- term polices.

4.2. Spatial Disparities: some indexes.

In this section, a list of eight criteria is used to judge the spatial inequalities among Mexican

states. GDP per capita is used to show the income disparities. GDP per state reveals the

hyper concentration of economic activity. The share of population in poverty exposes the

geographical location of poverty. Migration plays a role in regional gaps, probably enlarging

them. The FDI inflows analysis makes plain that they are concentrated in only two cities. HDI

shows that the inequalities have remained for the at least last ten years. Finally, the GINI

index provides important information about the developed regions in relation with the least

developed regions.

5 The criteria of cities definition used by González, L., was based on Luis Unikel’s definition, who considers for the Mexican case, urban cities as those human settlements of 15,000 inhabitants or more. Nevertheless it is not the unique criteria, and at national level there is not an agreement about the methodology used to define the number and size of the Mexican cities: while the Consejo Nacional de Población (National Population Council) uses the Unikel’s criteria, the Instituto Nacional de Estadística y Geografía (National Institute of Statistics and Geography) uses its own criteria for cities identification, which are all the human settlements with 2,500 inhabitants or more. As seen both criterions are far different; also worth to note that both are governmental institutions; all this demonstrates the lack of common understandings for the urban planning. 6 Years of Mexican crisis since 1980: in 1982, 1995, 2001 and 2009.

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1) GDP per capita per state.

GDP per capita displays the purchase power of the population. The index is showed here per

state and within a time period, from 1970 to 1990, with the aim to make evident how the

disparities within the country have become bigger in the lasts decades.

The following graph, besides showing the variation of the GPD per capita per state, shows

two trend lines: the white line shows the GDP per capita trend for 1970 and the black line

shows the trend for 1999. Comparing the two lines, it can be observed that the variation in

GDP per capita per state in 1999 tends to be bigger than it was in 1970.

Graph 6. GDP per capita, 1970- 1999 (thousands of Mexican pesos of 2003).

Source: Secretaria de Desarrollo Social (SEDESOL), (2001), Programa Nacional de Desarrollo Urbano y Ordenación del Territorio 2001- 2006, Mexico, pp. 46.

In China and India, the region with the highest GDP per capita is seven times higher

compared to regions with lowest GDP per capita; in the United States this difference is about

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only two and a half times and in Japan it is about only two times (EU Regional Policy, 2008c,

pp. 4) According with information of INEGI for 2010 in Mexico the state with the highest GDP

per capita (Campeche) is sixteen and a half times higher to the region with lowest GDP per

capita (Chiapas).

2) Contribution to the national GDP.

Regarding the contribution of each state to the national GDP, Distrito Federal (DF) and

Mexico (Méx) together contributed 27% to the national GDP in 2009. The states with the

lowest share, Tlaxcala (Tlax) and Colima (Col), together contributed only 1%. One fourth of

the national GDP relies on only two states.

On the one hand these percentages depend on the population distribution. This shows the

hyper concentration of the economic activities in mainly two states: Distrito Federal (DF), with

a great variety of specialized services and México (Méx), which has an important industrial

development. On the other hand, the huge differences in the national GDP participation

could be related to the low productivity of states.

Graph 7. National GDP distribution per state in %, 2009.

Source: Own elaboration with information from INEGI, (2011)

3) Poor population share.

The Consejo Nacional de Evaluación de la Política de Desarrollo Social (National Council

for Evaluation of Social Development Policy) (CONEVAL), a Mexican governmental

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institution, has developed its own methodology for poverty measurement.7 CONEVAL’s

results are used in the following figure, in which can be observed that Chiapas, in the south

of the country, is the poorest state with 78% of its population living in poverty. The other side

of the coin is Nuevo Leon, in the north, with a minor share of poverty, 21%. This simple

example shows the trend in the socio- and geo- economic structures in Mexico.

Graph 8. Population in poverty per state (% of each state population), 2010

Source: Own elaboration with information Consejo Nacional de Evaluación de la Política de Desarrollo Social (CONEVAL), (2010a).

7 The poverty measurement includes the following variables: a) Current income per capita (monetary and non monetary income), b) Average educational backwardness in the home, c) Access to health care services, d) Quality and spaces of houses (considering the building material and housing spaces in terms of overcrowding) , e) Access to basic services in the housing (water, piping, energy and cooking fuel supply) Acces to nourishment, g) Degree of social cohesion (economic inequality through GINI index, social polarization and social networks)

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The three poorest states, Chiapas, Guerrero and Oaxaca, have their highest share of GDP in

tertiary activities of the economy, mainly commerce. The main sector of employment,

however, is agriculture. The three richest states, Nuevo León, Coahuila and Distrito Federal,

have their highest share of GDP in both secondary and tertiary activities, manufacturing and

services.

The following map helps to visualize the geographic location trend of poverty.

Map 2. Distribution of population in poverty, 2010.

Source: CONEVAL, (2010a). Pobreza 2010; Porcentaje de la población en pobreza según entidad federativa, 2010.Estados Unidos Mexicanos.

4) Social Backwardness Index.

The Social Backwardness Index was also developed by CONEVAL. It aggregates 11

variables8 related to education, health services, housing basic services and assets. The

index ranks the states according to their degree of social backwardness in five categories:

Very Low, Low, Medium, High and Very High.

8 The list of 11 indicators integrated in the Social Backwardness Index: 1) Percentage of illiterate population of 15 years or more. 2) Percentage of population aged from 6 to 14 years, who do not attend school. 3) Percentage of population of 15 years or more, with incomplete basic education, 4) Percentage of population without access to public health services, 5) Percentage of inhabited private houses with dirt floors, 6) Percentage of inhabited private houses that do not have toilet., 7) Percentage of inhabited private houses that do not have piped water, 8) Percentage of inhabited private houses that do not have drainage, 9) Percentage of inhabited private houses that do not have electrical energy, 10) Percentage of inhabited private houses that do not have washing machine, 11) Percentage of inhabited private houses that do not have refrigerator. This is not a poverty index because it does not include the income, social security and nourishment variables.

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The following map shows the classification of the Mexican states according to their degree of

social backwardness for the year 2010. Again, this map shows that the straggler states are in

the south of the country, and the more well-off states are in the north of the country.

Map 3. Social Backwardness Index, 2010.

Source: CONEVAL, (2010b), Degree of social backwardness at state level, 2010.

It is interesting to observe to what extent social backwardness has evolved in the last ten

years. In the following table, Mexican states are classified in three blocks: 1) states in which

social backwardness has increased, 2) states with the same degree of social backwardness

and 3) states in which social backwardness has decreased. It is important to note that the

first block of states represent 33% of the total population, the share of the population that has

become worst-off in terms of social wealth in the last ten years. Only one state improved in

the same period.

Very lowLow

HighMedium

Very high

97673

Degree of social backwardness

Amount of states

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Chart 5. Social Backwardness Index: evolution in ten years, 2000- 2010.

Source: Own elaboration with information from CONEVAL, (2010b).

5) Internal migration.

Internal migration, labor force mobility, is closely related to the economic growth and social

development of the country and its regions. The following map shows the severity of out-

migration per state. It can be seen that most of the states in the south suffer from a persistent

out-migration.

State Year 2000

Year 2005

Year 2010

Evolution in ten years

Colima Low Very Low Very LowJalisco Low Low Very LowTamaulipas Low Very Low Very LowGuanajuato Medium High MediumNayarit Medium Low LowQuerétaro Medium Medium LowQuintana Roo Medium Medium LowSinaloa Medium Low LowVeracruz Very High High HighPuebla High Very High HighAguascalientes Very Low Very Low Very LowBaja California Very Low Very Low Very LowCoahuila Very Low Very Low Very LowDistrito Federal Very Low Very Low Very LowNuevo León Very Low Very Low Very LowSonora Very Low Very Low Very LowChiapas Very High Very High Very HighGuerrero Very High Very High Very HighOaxaca Very High Very High Very HighDurango Medium Medium MediumMorelos Medium Medium MediumTabasco Medium Medium MediumTlaxcala Medium Medium MediumZacatecas Medium Medium MediumBaja California Sur Low Low LowChihuahua Low Low LowMéxico Low Low LowCampeche High High HighHidalgo High High HighMichoacán High High HighSan Luis Potosí High High High

Yucatán Medium High High Decrease of social backwardness

Degree of social backwardness

Remain the same degree of social backwardness

Increase of social backwardness

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Map 4. Degree of states’ population outflows, 1995- 2008.

Source: OECD, (2011), Regions at a glance 2011, pp. 87.

According to the Consejo Nacional de Población National (National Council of Population)

(CONAPO) of Mexico, economic motivation is one of the main causes of the internal

migration. This institution also observes that most of the out- migration flows go to the center

due to the presence of specialized services and industrial poles, to the north due to the

presence of assembly plants or to cross to the United States.

6) Foreign Direct Investment.

It is considered that FDI is one of the most important drivers for development and growth,

hence it is relevant how it is distributed.

The following figure shows the unequal distribution of FDI among Mexican states. Within the

period 1999 to 2011, only two cities received 67% of the total FDI: Distrito Federal and

Nuevo León, well-developed cities that together represented 25% of the national GDP for the

year 2009.

In this case, the states with lowest shares of FDI (less than 1%) are those in the red legend;

most of them are in the south of the country, the same situation described in past figures.

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Graph 9. FDI distribution (% of the total FDI), 1999- 2011.

Source: Own elaboration with information from SE, (2012).

7) Human Development Index.

HDI aggregates variables of life expectancy at birth, mean years of schooling, expected

years of schooling and Gross National Income per capita, it is very helpful in showing the

degree of development in a multidimensional sense.

The three lowest levels of HDI in Mexico are between 0.74 and 0.76 and belong to Chiapas

(Chis), Oaxaca (Oax) and Guerrero (Gro), three of the poorest states in Mexico located in the

south of the country. The two highest levels are 0.88 and 0.92 and belong to Nuevo Leon

(NL) and Distrito Federal (DF). These states even exceed the national level of 0.83.

%

3%

4%

5%

5%

11%

56%

Chiapas Oaxaca

Hidalgo Guerrero

Colima Campeche

Tlaxcala Yucatán

Sinaloa Tabasco

Nayarit Veracruz

Aguascalientes Morelos

Michoacán San Luis Potosí

Durango Guanajuato

Quintana Roo Zacatecas

Baja California Sur Querétaro

Coahuila Sonora

Tamaulipas Puebla

Jalisco Baja California

Chihuahua México

Nuevo León Distrito Federal

2%

1% and less

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Graph 10. HDI per state, 2010.

Source: Own elaboration with information from the United Nations Development Program (UNDP), (2011)

It is interesting, as well, how the HDI has evolved over ten years, to observe in how far the

national policy has addressed the spatial disparities.

In the following chart, states are grouped in three categories according to the change of

place in the HDI national rank from 2000 to 2010: the place 1 is the state with the highest

HDI and the 32 is the state with the lowest HDI. In yellow are the states that show a drop in

place, in grey those states that have remained in the same place and in green the states that

have ascended in the national rank.

The states with the lowest and highest levels of HDI from Graph 6 are in the group of states

which has remained in the same place in the national rank; hence, the biggest regional

disparities have remained.

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Chart 6. HDI per state, 2000 and 2010 and the position variation in the national rank.

Source: Own elaboration with information from UNDP, (2012).

8) Gini Index.

The Gini Index as a measure of income concentration is used here to show the inequality in

income per capita per state in Mexico. This index, unlike the other indexes used, shows that

Distrito Federal and Nuevo Leon are not as good, meaning that its index is closer to one than

to zero. Distrito Federal (Gini of 0.52) and Nuevo León (Gini of 0.50) have a very similar

value to the state with the worst Gini Index, Chiapas (0.54). Hence, the states with better

economic performance in terms of GDP per capita and that contribute more to the national

Year 2000

Ranking position

2000

Year 2010

Ranking position

2010Campeche 0.83 9 0.83 15 -6Baja California 0.85 3 0.85 8 -5Tlaxcala 0.77 23 0.80 26 -3Quintana Roo 0.83 7 0.85 9 -2Yucatán 0.78 19 0.81 21 -2Nayarit 0.78 22 0.81 24 -2Chihuahua 0.84 4 0.86 5 -1Durango 0.80 15 0.83 16 -1México 0.79 17 0.82 18 -1Distrito Federal 0.90 1 0.92 1 0Nuevo León 0.85 2 0.88 2 0Tamaulipas 0.82 11 0.84 11 0Colima 0.81 12 0.84 12 0Puebla 0.77 25 0.81 25 0Hidalgo 0.76 27 0.80 27 0Veracruz 0.75 28 0.79 28 0Michoacán 0.75 29 0.79 29 0Gurrero 0.73 30 0.77 30 0Oaxaca 0.72 31 0.76 31 0Chiapas 0.71 32 0.75 32 0Coahuila 0.83 5 0.86 4 1Jalisco 0.81 14 0.83 13 1Sinaloa 0.79 18 0.83 17 1Tabasco 0.78 20 0.82 19 1San Luis Potosí 0.78 21 0.81 20 1Sonora 0.83 8 0.86 6 2Morelos 0.79 16 0.83 14 2Guanajuato 0.77 24 0.81 22 2Baja California Sur 0.83 6 0.87 3 3Aguascalientes 0.83 10 0.85 7 3Querétaro 0.81 13 0.84 10 3Zacatecas 0.76 26 0.81 23 3

Rise in the national rank

Variation in relative

position of HDI 2000-2010

Evolution in 10 yearsStates

Human Development Index

Decline in the national rank

Remain in the same position in

the national rank

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GDP are close in terms of inequality to the state with the worst performance in all indexes,

Chiapas.

Graph 11. GINI Index of per capita income per state, 2010.

Source: Own elaboration with information from CONEVAL, (2010c).

Concentration of population, economic activity and FDI in Distrito Federal and Nuevo Leon

has neither lead to a better distribution of income nor to a higher development level. The

most important lesson of GINI index for Mexico is that besides the remaining spatial

inequalities, economic wealth is concentrated in a low share of the population and in certain

economic sectors and geographic regions. In Mexico, there are huge inequalities among the

states, but there are also huge inequalities inside the states.

5. Mexican regional development policy

5.1. Regional development policy. 2001- 2012.

The last section made evident the severe inequalities among states, which are relevant for

the country’s economic performance and for regional development policies addressing those

inequalities. In this section, the strengths and weaknesses of the Mexican regional policy

from the last ten years are identified, analyzed and commented on. Examined are official

documents: the Plan Nacional de Desarrollo (National Development Plan) (NDP) of two

periods and the Programa Nacional de Desarrollo Urbano y Ordenación del Territorio

(Program of Urban Development and Land Planning) (PNDU- OT), as well the institutional

structures of the Secretaría de Desarrollo Social (Social Development Secretariat)

(SEDESOL), where regional policy is developed.

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In 1997, the OECD recognized in its report “Regional Development and Structural Policy in

Mexico” the total absence of a regional policy in Mexico. Since then, two big steps have been

taken towards structuring a regional policy. First, five mesoregions, were defined in 2001.

Second, five trust funds, one for each mesoregion, were created. These two important

actions mark the point of departure for the analysis presented.

Despite these advancements, there are weak aspects of the incipient regional policy. The

gaps found that will be deeply commented later in this chapter are briefly listed here:

a) Lack of legal basis

b) Lack of a common organizational frame for trust funds

c) Weak decision making process

d) Lack of regional budgets

e) Weak resources allocation processes

f) Lack of transparency in funds management

g) Lack of programs per period defining concrete and pragmatic goals to be achieved

h) Lack of continuity of regional projects

i) Lack of an integral regional vision

j) Lack of communication among and within mesoregions

k) Lack of projects’ monitoring

5.2. Two National Development Plans.

The NDP is the official document presented by the President at the beginning of each

presidential period, and it establishes the national policies and strategies to be followed

during the corresponding period. It defines the guidelines for the objectives and

governmental tasks of the Executive Power. Since 2001, there have been two presidential

periods, hence two NDPs (first period: from 2001 to 2006, second period: from 2007- 2012).

These programs reflect the Mexican government’s political approach to the regional

development topic.

Early in the year 2001, the government increased its interest in regional policy. The NDP of

the first period makes two important contributions to regional policy: the establishment of five

mesoregions and the creation of five trust funds.

For the NDP of the second period (2007- 2012) the government lost its interest for regional

development. In this official document there is not one section devoted to regional policy.

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This topic is poorly covered throughout the document, and this NDP does not make any

specific proposal.

There are common statements in the NDPs of both periods. There is an open admission of

the current regional disparities, of the huge migration from rural to urban areas and that the

gap between regions has become bigger in the lasts years. They recognize the imbalances

within regions in GDP per capita terms, the low productivity in the regions that are lagged

behind and the insufficient infrastructure in these regions. Moreover, the importance of the

big cities as development poles is declared in both documents.

Despite these recognitions, the strategies proposed in the NDP of the period 2001- 2006 are

not strong policies with an integral regional vision, inclusive of urban, main cities, and rural

areas; neither strategies nor programs were outlined.

Finally, in both documents, the approach to regional development is overshadowed by urban

development, by the regulation of large cities as the central axis of a regional dynamism.

5.3. Mesoregions and trust funds.

The five mesoregions defined in 2001 can be considered merely a geographic definition of

boundaries which group two or more states into a common territorial delimitation-

Map 5. Mexican mesoregions, 2001.9

Source: Gobierno de los Estados Unidos Mexicanos, Presidencia de la República, (2001). Plan Nacional de Desarrollo 2001- 2006, pp.10 9 The states of each mesoregion: 1) Northwest Mesoregion: Baja California, Baja California Sur, Sonora, Sinaloa, Chihuahua y Durango. 2) Northeast Mesoregion: Tamaulipas, Nuevo León, Coahuila, Chihuahua y Durango. 3) Central- Western Mesoregion: Jalisco, Michoacán, Colima, Aguascalientes, Nayarit, Zacatecas, San Luis Potosí, Guanajuato y Querétaro. 4) Central Mesoregion: Distrito Federal, Querétaro, Hidalgo, Tlaxcala, Puebla, Morelos, México. 5) South- Southeast Mesoregion: Campeche, Yucatán, Chiapas, Oaxaca, Quintana Roo, Tabasco, Guerrero, Veracruz y Puebla.

Northwest MesoregionNortheast MesoregionCentral- Western MesoregionCentral MesoregionSouth- Southeast Mesoregion

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The creation of the mesoregions, besides the geographical delimitation, meant a common

forum for the state members. Nevertheless, clear objectives, programs to be followed,

operational processes and communication channels inside the mesoregions and between

them were never defined.

The mesoregions do not have any administrative or legal powers. There is no legal basis

governing processes and structures, the geographic and administrative configuration, the

internal negotiations among states members or the negotiation among mesoregions.

In addition, in December 2001 five trust funds were created, one for each mesoregion. Their

aim was the resource management for projects supporting regional development.

Currently, four of the five trust funds are active. Only the Northwest mesoregion does not

have any activity, and its trust fund was dissolved because none of the members is

interested in supporting common projects. Nevertheless, the four active trust funds, face

many limitations in their organization, decision making process and resources allocation.

Regarding their organizational structure, roughly speaking, each one consists of

representatives of the local governments and a representative of the federal government

through SEDESOL. Additionally, there are technical councils composed of workgroups by

sector (agriculture, economy, industry, infrastructure, education, etc.). The local governments

of the states and the federation co- operate to choose the projects to be executed.

Nevertheless, the organization of each trust fund can vary. There is no compulsory

organizational structure to be accomplished, and they do not have a common administrative

structure.

Concerning the decision making process, the regional development projects are presented

by the state members of the mesoregions to SEDESOL, who takes the final decision on

which projects will be executed and to which projects monetary resources will be provided.

It is important to highlight that in the national budget there is no a specific item for the trust

funds. Despite this fact, there is a very simple process for resource collection and allocation.

Each state, by its own means of money collection and administration, contributes to the trust

fund to which they belong, and the federal government complements the funds collected by

the states. Federal contributions may consist of subsidies and direct transfers. This process

is a common agreement between all the stakeholders involved, but there is no specification

regarding the proportion of money contributions by the states and federal governments.

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It is crucial to point out that there is neither an obligation backed by law that ensures the

participation of states in the trust funds, nor a coercive nature of the commitments acquired

by the state when planning a development project. The states can abandon the projects and

the trust funds at any time.

In pragmatic terms, the trust funds are economic figures that concentrate the monetary

resources from the federation and from the states, which gives certain cohesion to the

mesoregions as money containers, so to speak. But neither the mesoregion nor the trust

funds’ structures are deeply developed or detailed. The trust funds and the projects financed

through them result only when the wills of the states come together.

Moreover, as the direct communication among states is not allowed in legal terms, when one

state communicates with another state, the presence of a representative of the federal

government is always required. The trust funds become a platform for dialogue between

states. In this sense, the trust funds serve as a communication tool.

The result of these deficiencies is that currently mesoregions are purely a geographical figure

and the trust funds a weak economic instrument, both without legal power. There is no

cohesion mechanism; hence, their functioning depends on the will of the states.

5.4. Regional Development Unit.

In 2001, at the time of the mesoregions’ and trust funds’ creation, a specific office devoted to

regional development was created as well. At the beginning, it was under the direct

responsibility of the president, but as of 2007 this office was moved to SEDESOL with the

name of Unidad de Desarrollo Regional (Regional Development Unit) (UDR). This change

reflects a decrease in terms of power and decision making, and the reduction of importance

of the regional development topic in the national policies. The current attributions and

objectives of this office are explained in this section.

Currently the objectives of the UDR are the reduction of regional disparities and policy

articulation that enables economic growth and regional development. The primary means to

achieve these is the coordination of the governmental institutions and their policies at the

horizontal level (inter- secretariat coordination) and the vertical level (coordination of states

and federal government).

At the horizontal level are the eighteen governmental secretariats, which are defined by

sectors: education, health, security, tourism, economy, communications, finances,

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agriculture, among others. Each of them has their own policies, programs and projects, and

the UDR articulates programs from the different secretariats when they involve two or more

states.

At the vertical level are the 32 local governments of the states and the federal government.

The Organic Law of Public Federal Administration of Mexico specifies that local governments

cannot speak directly to each other, then UDR coordinates the communication between the

states within the mesoregions and the federation whenever two or more local governments

want to execute a regional project. The following diagram explains the coordination scheme.

Diagram 1. Regional Development: policy coordination.

Source: Own elaboration with information from the interview to José Manuel Zevallos, from Unidad de Desarrollo Regional, SEDESOL, 23 May 2012.

The UDR administrates the four currently functioning trust funds. The trust funds decide

independently which projects they want to support, and the UDR votes for the execution or

not of the proposed projects, by the analysis and evaluation of projects to asses if they really

would have a regional impact. In other words, the benefits of the projects supported from

mesoregions should not have an impact on only one state.

In order to estimate the regional impact, ex- ante and ex- post of the regional projects, the

UDR is currently constructing its own Index of Regional Capacities, which is not used yet, as

indicated by the Subdirector of the UDR, José Manuel Zevallos, in an interview in May 2012.

In the same interview, the Subdirector mentions that the development priorities of

mesoregions and the priorities of the federal government can differ. The mesoregions, when

defining their development priorities, are more “sensitive” regarding the real requirements of

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the region. It can also happen, however, that the states, through the mesoregion to which

they belong, propose projects without regional impact.

Sometimes the decision whether projects will be financially supported or wait-listed is a

matter of political power and interests of the local governments and of the federal

government. These situations are likely to provoke confrontations between the involved

governments and are the result of the lack of a particular and individual program for regional

development, the lack of a law that rules it in its structure, activities and financing, and of a

weak institution with very poor attributes.

In addition, the actions of the UDR have a special focus in urban development with the

political principle of strengthening the urban areas, the cities being the nucleus of the region.

In theory, regional development is pushed from inside to outside, from urban to rural areas.

This in turn means that within regions there is not equal interrelation among towns, cities,

and states. The “region” means first the cities within the mesoregion and then the outlying

areas.

Concerning monitoring processes, the UDR does not have a monitoring system for the

regional impact of the projects executed. They use the macroeconomic and other standard

indicators, such as some used in the section of spatial disparities of this work, to look into the

general development achievements.

5.5. Program of Urban Development and Land Planning.

The Program of Urban Development and Land Planning 2001- 2006 (PNDU- OT) deepened

the proposals of the NDP of the first period, integrating territorial or land planning, urban and

regional development.

This program was issued by SEDESOL in 2001 and intended to create the guidelines for

territorial, urban and regional development to be followed from that year on. Even though the

program planned to end in 2006 and then be reworked, the original program is still valid; the

reworking of the program never occurred. This situation well reflects the low priority of the

topic within the national policies.

Through the PNDU- OT, three policies were established, which are mainly focused on urban

areas but mention some little aspects of regional development.

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1. Soil and land reservation policy. Objectives: integrate land suitable for urban

development, meet the requirements for housing, identify current and future demand

for land, and identify potential urban land for the location of various urban activities.

2. Urban and regional development policy. Objectives: urban planning and

management, strengthen governance and city management, improve urban

infrastructure and public services provision, address the urban periphery and

marginalized areas

3. Land planning policy. Objectives: spatial orientation of the development, planning and

territory forecasting, strengthen the process of the urban and regional planning and

management, articulate regional actors.

In the second policy, regional space is seen as the “urban periphery and marginalized

areas”, while the third policy has a territorial approach. Regional development and all its

implications are not seen as relevant subjects of specific objectives. As part of the Land

planning policy, the creation of two regional funds was contemplated: the structural and

compensatory funds. In theory, the first fund was to be assigned to already developed and

dynamic regions and in regions with development potential. The compensatory fund was

planned to address the most backward regions, the less dynamic regions and regions in

economic fall. Its creation was inspired by the Structural Funds of the EU. They were never

created.

Even though it pretends to have an integral view, this program emphasizes the urban and

land planning aspects, subordinating the regional development to them. Just some little

issues regarding regional development are covered.

In the following diagram, it can be observed that the PNDU- OT contains mainly strategies

related to urban development and land planning topics. Some of the issues regarding the

regional development are included, but they are not deeply developed and no clear and

pragmatic strategy is established. The regional development policies are superficially

touched upon.

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Diagram 2. The three topics addressed by the PNDU- OT, 2001- 2006.

Source: Source: Own elaboration with information from the interview to José Manuel Zevallos, from Unidad de Desarrollo Regional, SEDESOL, 23 May 2012.

The program represents the federal view, which has the same approach to urban, territorial

and regional development topics.

The document is primarily centered on urban development. The cities are seen as the main

locations of growth factors, as dynamic poles for growth and development. It considers that

the impact of globalization of cities has been changing the structure of employment, with a

demographic impact in the cities. Hence, they are the priority in the national policy. As a

result of this conception, the strategy of the PNDU- OT is strengthening the main cities of the

country as means to internal market reinforcement.

The federal government’s conception is that since Mexico is a predominantly urban country,

the urban spaces should have major weight in public policies. The cities have the highest

importance in the policy setting. Regional development policy is defined under this vision.

The program finds two main functions of the cities

• “[…] the material and organizational support of productive, social and cultural

activities.” (PNDU- OT, 2001, pp. 26)

• “[…] the space through which the development can be incorporated to vast regions

of the country which are in conditions of marginalization and poverty.” (PNDU- OT,

2001, pp. 26)

The second function is relevant for regional development. Following its logic, cities have the

function of diminishing regional disparities by being a platform for the poor areas’ integration

into development.

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The program states that the current policies follow the scope of the OECD on market

economies, where the state intervention for the integration of marginalized, rural and spread

areas, should be fully justified (PNDU- OT, 2001, pp. 30). It explains that that the mechanism

of integration and diffusion of development benefits from cities to lagging areas will be done

by the market forces.

For the identification of the main cities, the Mexican government created the National Urban

System. The cities’ classification criteria are according to population thresholds. The smallest

cities are considered those human settlements with 15,000 inhabitants or more. The system

was created to understand the urban spaces where the development priorities are focused.

In this system, urban development is conceived as equipping the cities with public services

such as water and energy supply, urban infrastructure and land use management, and is the

responsibility of federal and local governments.

Map 6. National Urban System: Mexican cities, 2005.

Source: González, L. (2009), El papel de las ciudades en el desarrollo regional, in La situación demográfica de México 2009, México: Consejo Nacional de Población, pp. 75.

15 thousand to 49.9 thousand inhabitants

Number of cities

229

50 thousand to 99.9 thousand inhabitants 40

1

100 thousand to 499.9 thousand inhabitants

500 thousand to 999.9 thousand inhabitants

1 million to 10 millions inhabitants

10 millions inhabitants or more

60

20

8

National Urban System, 2005

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The current policy privileges the capital agglomeration in cities. The real problem regarding

the regional inequalities comes when these economic concentrations are not deeply linked to

the spread areas or to their nearest influence areas. Usually, the biggest urban areas turn

abroad due to international trade.

Cities are the core of development and economic growth, and rural areas would benefit from

the flows of productive factors. However, the figures of the spatial disparities section show

that the relationships among the urban, rural spaces and marginalized areas hinder the

spread of the benefits resulting from the city-strengthening policies. The flows of productive

factors do exist, but they are mainly from rural to urban areas. The main industries are

established in major cities, and there is no technology transfer to less industrialized areas.

Financial flows to rural areas come mostly from remittances and are used for consumption

and not for investment. Finally, the labor force migrates from rural to urban areas, as

demonstrated by the indexes in the spatial disparities section.

The following words reflect perfectly the approach of the PNDU- OT to the urban

development and land planning: “[…] the territory, its resource endowment, its morphology

and, especially, its management, are key determinants of growth. The efficient administration

of the territory is at present a major competitive advantage of nations.” (PNDU- OT, 2001, pp.

32)

According to the program conception, the territory is the new paradigm of development. This

paradigm is in practice land planning, which assumes the spatial, geographic and

demographic administration of the economy and its implications in society.

The program, as part of the new territorial approach, alludes to the exploitation of territories

according to their comparative advantage, natural resource endowment and human

settlements. In this regard, it is worth mentioning that trade liberalization came so abruptly

without providing the necessary factors to boost competitiveness in lagged regions, making

even more difficult for them to catch up with more developed areas, in this case, the cities.

In this sense, the economic activity lacks of a regional integration that allows lagged regions

to enhance their competitiveness, to reduce their production costs and to strengthen their

local markets.

Summarizing the vision of the PNDU- OT that includes superficially some topics related to

regional development, the vision of the federal government concerning urban, territorial and

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regional development is, in praxis, the territorial reserve management, equipping of urban

areas, housing and addressing urban poverty.

It is necessary for a truly integrated policy to include urban, territorial and regional

development, giving the necessary weight to specific objectives, programs and projects, and

providing the necessary budget to execute them. Also essential is governmental support to

boost regional competitiveness.

6. Conclusions.

The purpose of the present paper was to identify the particular features of Mexico in the

national and international contexts, to recognize the growth strategies of the last decades

and to display some of the causes of the regional disparities. Two additional goals were to

present the international trends in regional policy as shown through OECD statements and to

exemplify the EU regional policy as a clearly defined regional policy. Finally, the last chapter

distinguished the Mexican trends in regional policies.

All of these points considered, this final part mentions very concretely the most relevant

findings. Then, some comments about policy advocacy and suggestions that could improve

Mexican regional policy are made.

Regarding theoretical aspects, there is no a common understanding for regionalization, if homogeneous or heterogeneous features should be taken into account. In the end, there is no a blueprint, and it depends on the countries’ particular features and the political scope.

In the study of regional policies it is difficult to escape the current debate of to what extent the

governments should intervene in the economy, which are the government actions or policies

to incentivize economic growth of regions, and if this last is a task of the government or of

market forces. The evidence of persisting regional disparities challenges both perspectives.

In the international context there is no outline for regional policies. While some countries

address their efforts and resources towards lagged regions, others have an all- regions

scope.

In the overall performance of the Mexican economy, this research shows that one of the

most severe problems to be tackled is income distribution. Even though Mexico has a high

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45  

HDI, its Gini Index reveals unequal income distribution. To address inequalities among and

inside regions, Mexican regional policy should be strongly linked to income distribution

policies.

Trade liberalization with a weak economy caused rapid change with serious effects, since the

lagged regions did not have the means to reach the competitiveness that the international

markets demand, causing these regional economies to be less competitive.

In the Mexican regional context, it is clear that although that Mexico experienced drastic

changes in its growth strategies at the end of the last century, regional inequalities remained.

It deserves to be mentioned that regional policy in Mexico began to be supported in 2001

with the creation of mesoregions and trust funds, which has been the most relevant event in

the regional policy. Nevertheless, it is still at an early stage of gestation; the five mesoregions

and the trust funds are tools that do not have clear lines of action. There is not a single

program for the definition of objectives. Indeed, their major attribution is the government

coordination at the horizontal and vertical levels, a very reduced field of action.

After 2001, there was no continuity in the policy structuring. The result today is that the trust

funds are the voluntary association of the states, each with its own vision, priorities,

objectives, which could lead to a discontinuity of states’ interests.

The section about spatial disparities demonstrated the geographical location of inequalities.

The trend of the poor south and the rich north is very clear. The development of the regions

depends on their own savings and investment capacity, nevertheless it is necessary that the

State instruments for resources collection and overall for their channeling towards the

poorest regions and with less infrastructure, to compensate somehow, the current trend of

FDI concentration in the most dynamic regions.

One of the major issues of the Mexican regional policy is that regional development has been

understood through the urban development perspective. This situation can be considered a

consequence of the ISI policy, a period during which the cities grew rapidly, increasing the

state's interest for urban development. The low degree of policy adaptability has caused the

regional development policies to be subordinated to urban development policies.

The current policy of strengthening cities probably increases the trend of the labor force

concentration in the main cities and of the more productive economic activities. These factors

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46  

might promote the already-developed cities’ growth, while the spread and rural areas lag

behind even more, causing regional disparities to remain or even increase.

Mexican regional policy is merely governmental coordination; a very limited vision for the real

challenges of a country with huge regional disparities.

Finally, Mexican regional policy covers only the urban sector. The lack of a comprehensive

vision for regional development is leaving out the rural sector.

The contribution of this research is to state, in the following paragraphs, how the weak

features can be overcome.

Mexican regional policy has had the same approach since the 1970s. The government

should prioritize the evolution of the regional approach towards a policy able to deal with the

economic, demographic and social challenges occurring in the regions as an effect of

globalization.

Given the weak attributions of the regional policy, the creation of a political power that

coordinates the regional synergies according to common objectives looking to improve

productivity and taking into account the particular features of each region can thus be

suggested.

Following the EU Cohesion Policy features, the Mexican government should structure a more

inclusive regional policy, involving private sector, non- governmental organizations, trade

unions, civil society, academics and other stakeholders. The policy should extend the

spectrum of social, cultural, economic growth, innovation, technology, research and

development, education and gender equality projects. Finally, it should unify in a single policy

the urban and rural sectors. Regional policy cannot remain subordinated to urban

development policies.

The results of this research reveal the need for a strong regional policy due to the regional

disparities, to the technical and administrative capability differences of the local

governments, to the broad variety of natural resources, to a multi- ethnic society, to the

multiple productive economic activities, and to all the regional peculiarities. This requires

different types of polices and incentives and not a common national policy.

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In this sense, the Mexican government should increase the influence of the current Regional

Development Unit or should create and agency for regional development. This could create

potential benefits.

First of all, this agency could be a supra-, state- and sub- federal administrative figure, an

intermediate level of government between the states and the federation. This currently does

not exist, so it would be an innovation in the public administration organization. The creation

of such an agency would require the states to transfer powers to this new level of

government. Mesoregions would be ascribed to this mesolevel agency, as a central figure to aggregate

information regarding the regions’ performance, stakeholders’ interests and resources.

Regarding the money collection for the trust funds, it is essential to define an item in the

federal budget for regional policy, which can be complemented with contributions of the

states through a cooperation scheme with fixed quotas for states according to its GDP. The

proportions of federation and states contributions should be defined for the case of each

mesoregion. As mentioned before, each mesoregion has its own features, and there are

different competitive levels among them. Also, the agency should establish transparent

processes of resources allocation. In this way, the resources can be allocated under a results

oriented system.

Furthermore, the agency would be the responsible for the design of multi- annual programs,

defining clear objectives, ex- post monitoring strategies for projects and commitment

mechanisms for the states, all these with a comprehensive vision to identify the priority

areas.

In addition, it would create communication channels between the states of each mesoregion,

and among mesoregions. Additionally, the agency should look for international cooperation

for regional development and as well cooperation between the regions in projects of common

interest.

Moreover, research should be focused towards the identification of the specific features of

each mesoregion in order to distinguish the local factors that should be enhanced. Mexican

regional policy requires research about the interconnectivity of regions, cities, urban- rural

areas and the functional links between them, which would be helpful for policy makers in

deciding which areas should be incentivized in order to call the capital, for the dispersion of

knowledge, for research and development collaboration and for private and public sector

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48  

cooperation. More research is needed for a better understanding of the five mesoregions’

dynamics, their strengths, their weaknesses, their economic potentialities.

Future studies are needed to identify which are the key sectors that should be prioritized in

the regional development agenda, which are the accurate reforms needed to enforce

regional policies in the Mexican context (tax reforms, creation of the regional development

agency, regional growth strategies, etc.)

International cooperation for regional development policies is a topic in which the

government should also focus their efforts.

Also important is to recognize the macroeconomic and microeconomic perspectives of

regional development and to build a complementarity directed exclusively towards regional

development.

The importance of Mexican regional policy should be redefined, growth strategies should be

reoriented beyond of sectoral policies; giving the regions a greater weight than they currently

have in the national priorities.

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Appendix 1. Mexican states abbreviation. Abbreviation Name of the state

Ags Aguascalientes

BC Baja California

BCS Baja California Sur

Camp Campeche

Chis Chiapas

Chih Chihuahua

Coah Coahuila

Col Colima

DF Distrito Federal

Dgo Durango

Gto Guanajuato

Gro Guerrero

Hgo Hidalgo

Jal Jalisco

Méx México

Mich Michoacán

Mor Morelos

Nay Nayarit

NL Nuevo León

Oax Oaxaca

Pue Puebla

Qro Querétaro

Qroo Quintana Roo

SLP San Luis Potosí

Sin Sinaloa

Son Sonora

Tab Tabasco

Tamps Tamaulipas

Tlax Tlaxcala

Ver Veracruz

Yuc Yucatán

Zac Zacatecas

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Appendix 2. List of figures

Graphs

Graph 1 Gini Index of inequality of GDP per worker. (OECD member countries) .......... 5

Graph 2 FDI inflows to Mexico by sector (millions of US dollars). 1980- 2011 .............. 6

Graph 3 FDI inflows to Mexico from USA, 1980- 2011 (% of the total annual FDI) ........ 8

Graph 4 Main export markets in Mexico, 2010 (% of the total) ....................................... 9

Graph 5 GDP growth in %, 1961- 2010 .......................................................................... 9

Graph 6 GDP per capita, 1970- 1999 (thousands of Mexican pesos of 2003) ............ 23

Graph 7 National GDP distribution per state in %, 2009 .............................................. 24

Graph 8 Population in poverty per state (% of each state population), 2010 ............... 25

Graph 9 FDI distribution (% of the total FDI), 1999- 2011 ............................................ 30

Graph 10 HDI per state, 2010 ........................................................................................ 31

Graph 11 GINI Index of per capita income per state, 2010 ........................................... 33

Maps

Map 1 Political division of Mexico and population per state, 2010 .............................. 3

Map 2 Distribution of population in poverty, 2010 ...................................................... 26

Map 3 Social Backwardness Index, 2010 .................................................................. 27

Map 4 Degree of states’ population outflows, 1995- 2008 ......................................... 29

Map 5 Mexican mesoregions, 2001 .......................................................................... 35

Map 6 National Urban System: Mexican cities, 2005 ............................................... 42

Charts

Chart 1 Paradigm shift of regional development policy ............................................... 15

Chart 2 EU regional policy program 2007-2013: funds, projects and objectives ........ 18

Chart 3 EU regional policy objectives from four program periods ............................... 19

Chart 4 Structural funds: % of the EU budget, and the % to Objective 1 ................... 20

Chart 5 Social Backwardness Index: evolution in ten years, 2000- 2010 .................... 28

Chart 6 HDI per state,2000 and 2010 and the position variation in the national rank 32

Diagrams

Diagram 1 Regional Development Unit: policy coordination ........................................... 38

Diagram 2 The three topics addressed by the PNDU- OT, 2001- 2006 .......................... 41

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