Re‐Examining the Case for a Vertical Industrial Policy in Mexico: A Step Backward or Forward?

Abstract

This article examines the evolution of Mexican industrial policy since World War II. From the 1950s, Mexico intervened actively in the economy, closed it off from international competition, and achieved high economic growth rates. At the same time, it faced serious imbalances in fiscal and external accounts, which resulted in the debt crisis of the early 1980s. Afterward, Mexico left the productive sphere and allowed the market to rule the economy through a horizontal industrial policy, resulting in slower economic growth rates but less macroeconomic imbalance. This study suggests that Mexico needs to follow a long‐term vertical industrial policy approach, avoiding fiscal and external account deficits and favoring activities or economic sectors associated with higher levels of productivity, innovation, and technological capacities, which contribute to enhance local productive linkages and positive dynamic externalities. By doing so, it will certainly accelerate its long‐term economic growth.