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Assessing the Obstacles to Industrialisation: The Mexican Economy, 1830-1940Stephen H. HaberJournal of Latin American Studies, Vol. 24, No. 1. (Feb., 1992), pp. 1-32.Stable URL:http://links.jstor.org/sici?sici=0022-216X%28199202%2924%3A1%3C1%3AATOTIT%3E2.0.CO%3B2-XJournal of Latin American Studies is currently published by Cambridge University Press.Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available athttp://www.jstor.org/about/terms.html. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtainedprior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content inthe JSTOR archive only for your personal, non-commercial use.Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained athttp://www.jstor.org/journals/cup.html.Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission.The JSTOR Archive is a trusted digital repository providing for long-term preservation and access to leading academicjournals and scholarly literature from around the world. The Archive is supported by libraries, scholarly societies, publishers,and foundations. It is an initiative of JSTOR, a not-for-profit organization with a mission to help the scholarly community takeadvantage of advances in technology. For more information regarding JSTOR, please contact support@jstor.org.http://www.jstor.orgTue Nov 6 16:37:02 2007

Assessing the Obstacles toIndustrialisation : The MexicanEconomy, I 8 30-1 940*STEPHEN H. HABERAfter England began what came to be known as the First IndustrialRevolution at the end of the eighteenth century, industrial technologyquickly diffused throughout the nations of the North Atlantic. Withinfifty years of the first rumblings of British industrialisation, the factorysystem had spread to Western Europe and the United States. LatinAmerica, however, lagged behind. It was not until the twentieth centurythat manufacturing came to lead the economies of Latin America and thatagrarian societies were transformed into industrial societies.This article seeks to understand this long lag in Latin Americanindustrialisation through an analysis of the experience of Mexico duringthe period 1830-1940 The purpose of the paper is to look at the obstaclesthat prevented self-sustaining industrialisation from taking place inMexico, as well as to assess the results of the industrialisation that didoccur.The basic argument advacced is that two different types of constraintsprevailed during different periods of Mexico's industrialisation. Duringthe period from I 8 jo to I 8 80 the obstacles to industrialisation were largelyexternal to firms : insecure property rights, low per capita income growthresulting from pre-capitalist agricultural organisation, and the lack of anational market (caused by inefficient transport, banditry and internaltariffs) all served as a brake on Mexico's industrial development. During* Earlier versions of this article were presented at the 'K'hy the Lag in Latin AmericanIndustrialization?' conference at Harvard University, the Stanford University SocialScience History Workshop, and the Conference of the California Intercampus Groupin Economic History. Jeffrey L. Bortz, Frederick P. Bowser, Gregory Clark, John H.Coatsworth, Kenneth L. Sokoloff and John D. K'irth, as well as an anonymous referee,made detailed comments on earller drafts. Research for this article was funded bygrants from the Latin American Program of the Social Science Research Council andthe Fulbright Program. The usual disclaimers apply.Stephen H. Haber is Associate Professor of History at Stanford University/. Lot. Amrr \tun 24, I -3 r Pr~nfed in Greaf Britain

2 Stephen H. Hailerthe period I 880-1 910 the obstacles to industrialisation were largelyinternal to firms. These factors included the inability to realise scaleeconomies, high fixed capital costs and low labour productivity. Duringthe period from 1910 to 1930 these internal constraints combined withnew external constraints - including the Revolution of I 9 I 0-1 7, thepolitical uncertainty of the post-revolutionary period and the onset of theGreat Depression - which further slowed the rate of industrial growth.This article is organised into three sections, each of which takes up oneof these periods in detail. Each section begins with a discussion of theobstacles to industrial growth and then assesses their impact on thestructure and nature of manufacturing. The article ends with therekindling of Mexican industrial growth in the mid- I 930s. The outcomesof that wave of growth, which stretched through the mid-197os, are notdiscussed in detail here, since that period has been written aboutextensively by other scholars.Mexico is chosen for study because, of all the countries of LatinAmerica, it was the most successful industrialiser prior to the Second\YTorld War. As early as the I 830s cotton textile manufacturing in Mexicobegan to take place in a factory setting and by the 1890s Mexico wasproducing a wide range of goods in large-scale, vertically integratedenterprises. In fact, many of Mexico's present-day industrial giants, someof which form the nuclei of large conglomerates, date from the end of thenineteenth century. Examples can be found in the steel, cement, glass,explosive, cigarette, soap, cotton and wool textile, paper and beerindustries.Yet while industrial development began in Mexico quite early relativeto the rest of Latin America, the process of self-sustaining industrialisationthat took hold in England or the United States did not occur. Instead, aseries of obstacles produced a truncated process of industrialisationdependent on government intervention, lacking in backward linkages tocapital goods production, characterised by oligopoly and monopolyproduction, and dominated by entrepreneurs following rent-seekingstrategies.a-lssessing the obstacles to industrialisation, 1830-80In looking at the economic history of Western Europe and the UnitedStates, scholars have pointed to a number of features of those economieswhich encouraged rapid rates of economic growth. Among the featurescommonly mentioned are the availability of low-cost transport, a relativelyeven distribution of income, highly productive agricultural sectors, lowentry costs for early manufacturers, and the development of legalinstitutions designed to protect property rights and facilitate commerce.In short, it is generally agreed that those economies which were already

Industrialisation in Mexicoaffluent, which possessed large and well-integrated markets, and whichhad the ability to accumulate and mobilise the capital to financemanufacturing-ventures were the economies which were the first toindustrialise. Scholars have emphasised that no single feature or institutioncan be isolated as the determinant in industrial success, but they wouldagree that the lack of these features as a group would certainly workagainst successful industrialisation. It just so happens that from the 1830sto the 1880s almost all of the features which permitted industrial growthto occur rapidly in the Western European and US settings were lackingin Mexico.First and foremost, those countries which underwent successfulprocesses of industrialisation were already relatively affluent. They hadrealised slow rates of growth in per capita income for a number of decadeswell before they began to industrialise, and attained quite high levels ofnational income for pre-industrial societies. The Mexican economy, on theother hand, was not only significantly smaller than the successfulindustrialisers, it was also shrinking - both absolutely and relatively. In1800, according to John Coatsworth's estimates, Mexico's per capitaGDP (in I 9 j o US dollars) was $73, roughly two-fifths that of the UnitedStates and Great Britain. Throughout the first half of the nineteenthcentury, per capita GDP actually declined, falling to $j 6 per capita in I 845and $49 in 1860. In this last year it was only I 3 O/O of British per capitaGDP and 14 % of the US figure. It was not until the I 860s that per capitaGDP began to increase, rising to $62 in 1877 and to $91 in 18~~.'Underlying this fall in national income were a number of factors, all ofwhich we may also specify as obstacles to industrialisation. It should bekept in mind, however, that these were impediments not only to industrialgrowth, but to economic growth in general. Let us take up each of thesein detail.Perhaps the most noticeable obstacle to Mexican industrialisation wasthe lack of a national market because of high transport costs. Unlike theUnited States, England or the other early industrialisers, whose regionswere connected by low-cost transport systems (canal and riverine traffic,coastal shipping, and toll roads), Mexico's topography prevented thedevelopment of inexpensive modes of transport. Only one-third of theland mass of the country is reasonably level, and there aie almost nonavigable waterways, save for a few rivers in the sparsely populatedsoutheastern states of Veracruz and Tabasco. In addition, the greatmajority of the population has historically lived in the mountainousinterior of the country, meaning that coastal traffic could not play asignificant role in linking markets.John H. Coatsworth, 'Obstacles to Economtc Growth in Nineteenth Century Mextco',Anlerican Historical Review, vol. 83 (1978), p. 82.3

4 Stephen H. HaberAlmost all traffic therefore had to move over mountainous terrain byexpensive mule train or ox-drawn, wheeled vehicle. Transport by suchmeans was costly because it required an expensive highway system to beconstructed and maintained. It was also unreliable, as Mexico's rainyseason, which stretches from May to September, regularly made theroadbeds impassable. During the colonial period a road system was indeedconstructed in order to accommodate the heavy, two-wheeled carros thatwere used to transport silver from the mines in the Bajio and importedmanufactures from the port city of Veracruz to hlexico City, butbeginning in the eighteenth century this system fell into disrepair. Afterindependence in I 82I the situation became even worse, as there was littlemoney available for the improvement or maintenance of the rapidlydeteriorating roads. By the nineteenth century only a single roadwayexisted that was suitable for wheeled traffic over its entire length. Even onthis highway, which ran from Mexico City to Chihuahua via Zacatecas andDurango, mule trains outnumbered wheeled traffic2Railroads, which would have alleviated the transport problem, werenot constructed for the same reasons that affected highway maintenance.Federal funds were nowhere near sufficient to launch a railroadprogramme. Foreign investment could have been used to build a railsystem, but none of the regimes from 1821 to 1876 had much luck inenticing foreign capitalists into financing such a venture. Mexico's first railline, from Mexico City to Veracruz, was not completed until 1873. As lateas I 877 the entire Mexican rail grid contained only 640 kilometres of track,of which I 14 employed mules rather than steam engines as the source ofmotive power.3The result of this situation was extremely high transport costs. Twoexamples can give the reader an idea of how difficult the transportsituation was. In I 82j the Real del Monte mining company imported fromEngland steam engines and other equipment necessary to renovate itsmines in the state of Hidalgo. The j jo-mile journey from the port to themines (Veracruz to Pachuca) took almost twelve months. Similar delaysoccurred in the transport of textile machinery. In fact, imported textilemachinery often doubled in cost by the time it reached Mexico City fromVeracruz, a distance of only some joo miles.'The transport problem was compounded by widespread banditry. Bymid-century brigandage was so commonplace that the National Congresscould not meet because the representatives feared travelling from theirJohn H. Coatsworth, Growth Against Detelopment: The Economic Impact qf Railroads inPorjirian 1Vexico (Dekalb, Illinois, 1981), p. 18.Ibid.,p. jj."Fmrique Cardenas, 'Some Issues on ;\lexica's Nineteenth Century Depression ', mimeo(1981), pp 29-30.

6 Stephen H. Hailerthan 2,500 persons, indicating that they were peasants who lived intraditional villages.' X good portion of this population (close to 60 % insome states) could not even speak Spanish, implying that they functionedonly in local markets.' Finally, Coatsworth's national income estimates forthe nineteenth century suggest an economy characterised by low incomelevels. Gross Domestic Product per capita in I 84j was only $56 (1950dollars), and was, as has previously been mentioned, shrinking.'' Themarket for manufactures would in fact have been even smaller than this$j6 figure indicates, since the nation's skewed distribution of wealth nodoubt produced an extremely uneven distribution of income. In fact, atthe turn of the century, when real GDP per capita had doubled since I 845,average household incomes were still so low that in years of bad cornharvests, when the price of this important staple rose, Mexico's workingclass could not afford to purchase cotton cloth."Not only was the market not conducive to the growth of manufacturing,neither was the legal-institutional environment. In the UnitedStates and England, for example, legal systems had developed in whichdecisions were based on precedent, in which judges made rulings based onpride in craft, and in which well-defined bodies of contract, commercialand patent laws were established. This made property rights, at least forthe 'respectable classes', easy to protect. In Mexico no such state of affairsexisted. Until the last two decades of the nineteenth century no legislationexisted to encourage the formation of limited liability corporations, amodern patent law did not exist, nor was there a body of mortgage creditlaw designed to protect long-term investments. Indeed, as was the case inearly modern Europe, economic activity of all kinds still required specialpermits and licences for which special taxes and fees were charged. Aboveall, litigants faced a corrupt and whimsical judicial system. Thus it wasextremely difficult to enforce contracts, collect on loans (especially if theywere to the government) or enforce property rights without resorting topolitical machinations. As David Walker has pointed out in his work oncommerce in nineteenth-century Mexico, without access to those whoJames K.Wilkie, The ,ZIesican Revolution: Federal Expendrture and Social Change since 1910(Berkeley, 1970), p. 218.Vtreccion General de Estadistica, Estadisticas Socrales dei Porfiriato, 1877-1910 (hlextco,19)6), pp 118-20. The data are for 1895, when in the nation as a whole 17% of thepopulation spoke only an indigenous language. The percentage of non-Spanishspeakers in the mid-nineteenth century was certainly significantly higher than the 1895figure. But even in 189j the majority of the populatton in indian-dominated states likeYucatan and Oaxaca spoke only an tndigenous language. In seven other states (out ofji) over 20% of the populatton spoke no Spantsh in 1895. It is highly likely that inthe mtd-nineteenth century the nattonal average approached the levels of these states.lo Coatsworth, 'Obstacles to Economic Growth', p. 82.I' El Economrsta ,Zlesicano, 7 >la)- 1904, p. I 14.

wielded political power and influence it was virtually impossible toconduct business of any kind.12 Since the government changed hands inthe early nineteenth century on an almost monthly basis (Mexico had 7jpresidents between 1821 and 1876), access to those who wielded thepolitical power necessary to enforce property rights constantly shifted aswell. The net result was an arbitrary institutional environment that madefree enterprise problematic.The ramifications of these various institutional and social factors wereseveral. First, it meant that the Mexican economy could not grow.Secondly, because of the lack of a robust economy, the Mexican statecould not defend itself from external or internal attack. Indeed, it wasduring this period that the nation lost nearly half of its territory to theUnited States, saw the secession first of the Central American provincesand later the Yucatan, and was successfully invaded by France. Finally,these factors served to discourage industrial development. Manufacturersfaced a divided and shallou~ market, an uncertain institutional environmentand a contracting economy.\%'hat is perhaps most surprising about the economic history of thisperiod is the amount of industrial development that did occur. The historyof early Mexican manufacturing is still far from written, but the picturethat does emerge indicates an impressive amount of industry relative tothe other countries of Latin America. In a way, some of thisindustrialisation was due to the very features that discouraged a morecomplete and self-reinforcing process of industrial growth. High internaltransport costs protected small manufacturers from the onslaught ofBritish goods. The ability of the well-connected to manipulate the state totheir own advantage produced a government finance bank (capitalisedfrom import revenues) which lent the majority of its portfolio to its ownboard members. The need for government revenues produced tariffs, bothfederal and state, which served to afford some protection to industry.The best-developed and fastest-growing of Mexico's nineteenth-centuryindustries was cotton textiles. In I 843, after a I 2-year period of investmentand growth (a small fraction of which was subsidised by loans from thegovernment-sponsored Banco de Avio, which existed from I 8 30 to I 842),the nation boasted 5 9 cotton textile factories, the great majority of whichwere located in the states of Mexico and Puebla, producing primarily forthe Mexico City market. These firms processed some 10.6 million kilos ofraw cotton into yarn, most of which was sold to independent weaversthough some was also processed into cloth in the factories. No data are'"oatsworth, 'Obstacles to Econorn~c Growth', p. 98; David VI'. Walker, Business,Kinshrp and Politics: The 12/lartrkey de Rio Fami/y zn i!lexico, rtzj-rX67 (.-lustin, Texas,1986).

8 Stephen f-1. f-Jaheravailable on the number of workers employed in I 842, but it was probablyin the area of ten thousand.13Eleven years later the number of active mills had actually declined toonly 42. Other indicators suggest, however, that the situation hadimproved for the remaining mills. If we use raw cotton consumption asa proxy for output (which eliminates the problems associated withmeasuring output in goods of different types and different qualities overtime), the data indicate a rise in production of I 9 %.'"his increase mayhave been due to the increase in the number of machines in service, whichgrew by 18 O/O. Lack of accurate labour-force data makes it difficult toassess the growth of labour productivity.By I 877, the end of the early period of Alexican manufacturing, the sizeof the cotton-textile industry had increased significantly since the I 8 5 0s.Mexico now had 92 cotton mills, though these were somewhat smaller insize than the 1854 factories: the average mill now worked only 2,7j 3spindles with 128 workers, compared to 3,004 spindles with 264 workersin 1 8 ~ ~ . ~ ~In comparison to the United States, this was a modest textile industry.Mexico's zjj,z7o ring spindles in 1877 was an extremely low figurecompared to the 10.7 million spindles in the United States in 1880.16Compared to other Latin American nations, however, this was quite asizeable industry. Brazil, for example, in 1866 possessed but nine mills,employing 768 workers and 14,875 spindles. By 1881 the number ofBrazilian mills had increased to 44, and now employed 60,419 spindles,but this was still only one-quarter of the number in Mexico."Besides cotton textiles other important industries existed as well,though none functioned on as large a scale. Unfortunately, little in the wayl3 Secretaria de Hacienda y Credito Pliblico, Documentos para el estudio de la industriali~acidnen Me'xico, 1837-1841 (Mexico, 1977), doc. 5 ; Ministerto de Fomento, Estadistica delDepartamento de Mixico (Mexico, 18j4), doc. 2. For a discussion of the Banco de Aviosee Robert A. Potash, The Mexrcan Government and Industria/ Development in the EarlyRepublic: The Banco de Az*io (Amherst, 1983). The literature has tended to overestimatethe role of the bank in financing illexico's early industrialisatlon. The total loans of thebank to cotton textile manufacturers from 1830 to 1842 came to yo9,ooo pesos, but inI 8 54, when there were fewer mills in operation than in I 842, the total value of the plant,equipment, and buildings of the industry (valued at acquisition cost) xvas 8,872,95 Ipesos, indicating that the bank could onl!- have been responstble for six per cent of thetinance capital of these enterprtses.'' hfinisterio de Fomento, Estadhtica del Departamento de Alixico, doc. 2. '' Calculated from ijid.; and Secretaria de Hacienda, Estadljtica de la RepliDlica ,\lexicana (Mexico, 1880), cuadros de industria.l6 US Bureau of the Census, Census oJ~Tlanqactures, 1879." A. 1'. de Borja Castro, 'Relatorio do segundo grupo', in Antonio Jose de Souza Rego,Relatorio da segunda exposipio nacionaide 1866 (Rio de Janeiro, I 869), p. 49; hfin~sterio deTrabalho, Industria, e Comercio, Comisio Executiva Textil, ~nd&tria textri algoderra(Rlo de Janeiro, 1946), p. 5 I.

Industrialisation in hfexico 9of time-series data is available for these other industries, but qualitativedata indicate that their rates of growth were quite slow. Many resembledartisanal shops more than modern factories. In the iron and steel industry,for example, an I 85 3 census listed but five foundries, only one of whichemployed more than roo workers. hledian foundry size was but 14employees. A similar situation prevailed in the glass industry, where anI 8 5 7 census turned up only five firms, four of which employed fewer thanroo workers. hledian firm size was 70 workers.'' Small-scale industriesexisted as well in paper manufacturing, beer brewing, and other activities,but again we know little about their development over time. It is clearlythe case, however, that even as late as the I 880s these industries were verymodest in scale. In the paper industry, for example, until 1892 thecombined value of production of the nation's I 2 paper mills was scarcelyone million pesos (at that time roughly $7oo,ooo). Total output wasapproximately four tons of paper per day.lgIn short, with the exception of cotton textiles, most of Mexicanindustry was still small in scale by the 1880s. An 1877 census of themanufacturing establishments in the Federal District, for example, turnedup 728 manufactories. Industries like boots and shoes, other leatherworking, hats, tailor shops, bakeries and wood-working predominated.Average firm size was only 17 workers, implying that these were moreartisanal shops than modern factories. Even in industries which in theadvanced economies were becoming large-scale, like iron and steel, smallscalefactories continued to predominate. In the iron industry, forexample, the 1877 Federal District census turned up only two foundries,whose combined investment in fixed capital was onl? 54,000 pesos (at thispoint the dollar and peso traded roughly one for one) and which employedonly roo workers between the two of them. Total output wasapproximatelv coo,ooo kilos of iron goods, with a value of onlv 60,000pesos.'OMost significantlv, all of the firms enumerated in the I 877 census wereconsumer goods producers; no capital or intermediate goods industriesexisted. Indeed, throughout the nation this was the case. The explanationfor this situation is fairly straightforward : the consumer goods industrieswere still too underdeveloped to support capital goods industries. Evenin the relatively rapidly growing cotton textile industry, an industriallB Secretaria del Estado, 'tlemoria de la Secretark dei Estado y dei Despacho de FomentoColoni~acidn 1ndustria.y Comercio de la Repibiica ~tfexicana, 18~7(Mexico, I 8 5 7), docs. I 8-z, 18-3.l9 Hans Lenz and Federico Gomez de Clrozco, La industria papelera en Afixico (Mexico,1940)~P.83.20 Secretaria de Hacienda, Estadfstica de la RepciDizca ~tfexicana (Mexico, 1880), cuadros deindustria.

loStephen H.Haberplant consisting of only 92 small factories running just over 2j0,ooospindles was not large enough to support a textile-machinery industry.The Mexican market had not yet reached the minimum threshold size tosupport capital-goods producers. %'hen it did, later on in the century,changes in the size of scale economies in capital goods industries again putthem out of Mexico's reach, a subject we will return to in the next section.Reussessitzg the obstucles to growth, 1880-1910Beginning in the 1880s the obstacles which had earlier limited Mexicanindustrialisation began to be removed. The spark that set off this processwas the inflow of capital from the United States and Europe. During thelast decades of the century foreign capital and foreign entrepreneurs (whopossessed knowledge about specific technologies and markets whichMexican capitalists did not) flowed into the nation, draining andretimbering the mines, spurring the growth of commercial agriculture,developing the oil industry and financing the whirlwind construction ofa national railway system. By 1910, according to the available estimates,foreigners had invested close to $2 billion in Mexico's railroads, mines anda variety of other undertakings - a sum that accounted for between 67 and73 % of the total capital invested in the country." The greatest part of thisforeign investment was clustered in export-related enterprises.'The key area into which foreign capital flowed was the transport sector.In I 873 Mexico possessed only 5 72 kilometres of railroads ;by I 88 3 it hadover j ,000. The network expanded to over 10,ooo kilometres by I 893 andto 16,000 in 1903 In 1910, just before the Revolution broke out, theMexican rail system boasted over 19,000 kilometres of track. These figuresaccount only for track laid under federal concession. In addition,commuter and feeder lines constructed under state or municipalconcessions accounted for an additional 7,8 10 kilometres.'"Although the system was laid out without any central plan, thegovernment generally awarding concessions on an ad hoc basis, theultimate effect was that a fairly well-integrated grid developed. Theprimary purpose of the railways was to move raw materials to the coastor to the northern border for export to foreign markets, but the sheernumber of feeder lines built eventually gave rise to an interconnected gridthat linked internal markets as well as the mining areas and the ports. Bythe turn of the century most of the major cities were connected to oneanother by rail.With the arrival of the railroad, transport costs fell precipitously," Rodney Anderson, Oufcasfs in fhezr 0ii.n Land: Lllrszcan Industrial It;'orkers, 1906-1917(Ilekalb, Illinois, 1976), p. 19." Coatsworth, C;rou'th /[qainst Del~eiopmenf, pp. jh and 40.

Industrialisation in MexicoI Istimulating the revival of the rest of the economy. According to theconservative estimates of John Coatsworth, freight rates fell from 10 centsper ton kilometre (using wagon transport) in 1878 to 2.3 cents per tonkilometre (using railroads) in 1910. If Mexico had tried to move thevolume of freight transported by the railroads in I 910 using the next-bestavailable technology, that is, wagon transport, the cost would haveincreased between five and ten timesz3 To give a concrete example: thecost of shipping a ton of cotton textiles the roughly 130 miles fromMexico City to Querktaro declined from $61 in 1877 to $3 in 1~10.~"The fall in transport costs rebounded throughout the economy ascommercial producers expanded their output to serve the now vastlywider markets they faced. Foreign investment in railroads madeinvestments in mining, petroleum and commercial agriculture economicallyviable. Over the period from I 8 80 to I 9 I o these economic sectorsboomed: silver production increased nearly fourfold, the output ofindustrial metals tripled and petroleum production increased from scarcelymore than 5,000 barrels in 1900 to over 8 million barrels by 1~10."Changes in the legal environment, facilitating capitalist enterprise,occurred as well. New laws were also written to encourage foreigninvestment in other areas. X new mining code was written in 1887, forexample, which deliberately did not reserve ownership of the nation'ssubsoil rights for the state, as the earlier mining code did. Instead it gaveownership to the private mining companies. In addition, in I 889 a generalincorporation law was passed, allowing for ease in forming limitedliability, joint-stock corporations. Other important legal changes occurredas well, including a new commercial code, banking and credit laws, publicdebt reorganisation and an end to internal tariff^.'^The vehicle for this process of institutional and economic transformationwas Porfirio Diaz. During his 34 years in power (I 876-1 91 I) hededicated himself and the power of the state to the expansion of theeconomy - at whatever cost. The aim of the Diaz government was tocreate the internal political and economic conditions that would attract theforeign capital needed to modernise Mexico. This inflow of capital in turnprovided the financial resources that permitted the continued expansionand consolidation of the central government. Under the lemma of 'Orderand Progress', the Diaz regime moved to eliminate the politicalopposition, break the power of the regional caudillos, curtail banditry andprevent the organisation of the working class. 'Order' was to be provided23 Ibid., pp. 97-103. " Anderson, Outcasts in their Ou~n Land, p. 12.'' Seminarlo de Historia Moderna de Mexico, Estadisticas econdrnicas del Porfiriato:,fueryade traba1o.y actividad econdmica por sectores (Mexico, 196>),pp. I 36-8 and 143.2Voatsuorth, 'Obstacles to C,conomic Growth', p. 99.

I 2Stephen H. Haberby the federal government, often at bayonet point. The 'progress' part ofthe equation would be brought about by the infusion of foreign capitalinto the economy. This was, therefore, a reflexive process. Just as Diazneeded to attract foreign capital in order to fuel the growth of federalgovernment power, foreign capitalists understood that it was in theirinterest that a strong centralised government be created that could instiland inspire popular loyalty and maintain order and stability."In short, during the last decades of the century the institutional andtransportation obstacles which had earlier impeded economic growthwere struck down. Peasant agriculture began to give way to higherproductivitycommercial agriculture; the mining sector, in declinethroughout the nineteenth century, began to set new records forproduction and sales, and new industries, like petroleum, were foundedand grew rapidly. The overall result was that the economy began to grow:per capita national income grew from $62 (1950 dollars) in 1877 to $91 in1895 and $132 in 1910.'~From the point of view of the Porfirian elite these economic andpolitical changes created the conditions necessary to foment large-scaleindustrial investment. They controlled a state that would support theirendeavours and keep the working class under control. At the same time,the creation of that expanding, wage-earning work force,2g thedevelopment of a national railroad system, the ending of provincialautonomy and internal tariffs, and the curtailment of banditry, meant thatthe internal market was growing rapidly. The expansion of commerce,both internal and external, was fuelling the process of capital accumulation:Mexico's merchants were growing increasingly wealthy,commanding capital that could be invested in all manner of economicactivities. Most important, hfexico's capitalists believed that the process ofeconomic growth that the country had been experiencing since the 1880swas going to continue. Influenced by the neo-positivist notions ofprogress then popular throughout Latin Amerlca, and convinced that theDiaz dictatorship was going to convert Mexico into a 'modern' nation,they were willing to sink their fortunes into industrial ventures. hlexico'ssecond round of industrialisation had begun.Beginning in the 1890s Mexican industry was transformed. Amanufacturing sector previously characterised by small, family-ownedBarbara Tenenbaurn, 'Plannlng for Alexican Industrial Development: The LiberalNation State, Tariff Pol~cy, and Kationaiism. 1867 to I~IO',unpublished paper,presented at Conference of the *Xrnerican l~iistoricai ,2ssociation. December 1985.'' Coatsa-orth, 'Obstacles to Economic

Industrialisation in 1VexicoI jand family-run firms producing for local and regional markets becameincreasingly characterised by large, capital-intensive, vertically integratedfirms producing for the national market. This transformation held trueacross product lines and across regions. From cement to steel, fromtextiles to beer, large corporations, many of them exercising monopolycontrol of the market (a subject we will return to in some detail shortly),began to appear, pushing aside the smaller, regional producers that hadhistorically been the mainstay of Mexican industry. A complete descriptionof this transformation is beyond the scope of this article, but a fewexamples can give the reader an idea of how Mexican industry changedonce the earlier obstacles to industrialisation were removed.Perhaps in no other area was the transformation from small, regionalproducers to a large, national producer as pronounced as in the steelindustry. In 1900 the first integrated steel mill anywhere in Latin Americawas founded in Mexico, the Fundidora Monterrey steel works. Thesubscribed capital of the firm was 10 million pesos (about $5 million at thecontemporary rate of exchange), making it the second largest manufacturingenterprise in Mexico and thirtieth largest corporation of anytype. Unlike the small foundries that had preceded it, FundidoraMonterrey was a totally integrated operation, handling all phases of steelproduction, from the mining of the ore to the rolling of finished products.Moreover, Fundidora Monterrey's equipment was a far cry from theantiquated technology utilised by its predecessors. Iron ore was reducedto pig iron in a Massick-and-Crook-type blast furnace capable of handling1,000 tons of ore per day, with an output of approximately 3 jo tons of pigiron; and three Siemens-Martin open-hearth furnaces, with a daily capacityof 3j tons each, and one Bessemer Converter refining the pig into steelingots. The firms also owned all the necessary rolling mills, cranes,locomotives and other machinery to turn out a variety of finished steelproducts.30 When the mill was running at full blast, over 2,000 workerstoiled round the clock in its various departments.A similar transformation occurred in the paper industrv, where onenew firm, the Compafiia de las Fabricas de San Rafael y Anexas, came tocontrol the nation's entire production of newsprint and virtuallycontrolled the domestic production of other classes of paper goods.Founded in I 890, San Rafael v Anexas ran two mills, both in the state ofMexico. Like Fundidora Monterrey, it was a totally integrated operation:'OJose Luis Ceceiia, 'lfixico en /a drbita zmperlai (hfexico, 197j), p. 87; The L\fexicanYearbook, 1912 (London, 191 j), p. I 14; Fundidora Monterrey, 'Informe .lnual, 1902',p. 46; Luis Torrjn Villegas, La industria .iider&rgica pesada de/ norte de ,lfixico ,a suabastecimiento de materias primas (hlexico, rgGj), p. 5 5 ; Oscar Realme Rodriguez, 'La~ndustria siderurgica national', unpubl. tesi~ de iicenciatura, Universidad Nacionali\utonoma de hfexico, 1946, p. 97.

14 Stephen H. Haberit owned and operated its own haciendas, where the trees were grown, ranits own mechanical wood-pulp plant, generated its own hydroelectricpower, and operated its own railroad. The total number of workers in allof these operations is unknown, but in its two paper mills alone 2,000operatives were employed. The total paid-in capital was 7 million pesos,and annual production was roughly three times that of all its smallcompetitors combined - roughly I 2 tons of paper per day. In fact, withina decade of its founding, San Rafael eliminated almost all of its domesticcompetition.31In other capital-intensive industries, like cement, beer, dynamite andexplosives, and glass, a similar process occurred: large, highly capitalisedfirms producing for the national market replaced the numerous smallshops which had preceded them.32 They also began to drive foreignproducedgoods out of the market. In beer production, for example, thenation's newer, larger, firms (the Cervecerias Cuauhtemoc andMoctezuma) not only began to challenge the numerous local beerproducers, but also replaced foreign beer imports. Beer imports fell fromapproximately 3 million kilos in fiscal 1889-90 to just over joo,ooo kilosin 1910 1I, while demand for beer was rising. The CerveceriaCuauhtemoc's production alone in I 91 o was over 2 j times that of the totalvolume of imports.33In more labour-intensive manufacturing, especially in consumer nondurable~,asimilar transformation was underway. Data from the twolargest of these industries, cotton textiles and cigarettes, illustrate thischange best.One of the most obvious indicators of this change in the textile industrywas the tremendous growth in the number and size of factories. At the endof the earlier period (1877) there had been 92 cotton mills in operation,each employing on average 2,7j 3 spindles, 98 looms and I 28 workers. ByI 89j the mills were both more numerous and larger : there were now I 10mills in operation, employing an average 3,741 spindles, I 12 looms and207 workers. By 1910 they were more numerous and larger still: therewere now 123 active mills, employing j ,714 spindles, 203 looms and 260workers on average. In other words, not only were there now roughly31The ,\lexzcan ?.earbook, 1908 (London, 1909), p. 539; Thhtfexican l'earbook, 1909-10(London, 191 I), p. 416; The ~tfexican I-earbook, 1912 (London, 1913), p. I 13, 126; Lenzand Gomez de Orozco, La industria paprlera, p. 83." For a more con~plete discussion of the transformation of these industries see StephenH. Haber, Industry and Cnderdei'elopment: The lndustriali~ation of L\fexico, 1890-rpqo(Stanford, 1989), chs. 4 and 6." Calculated from data In El Economista ,\lr.uisano, 24 Ilec. 1898, p. 249; El Economista,Ifexicano, 27 July 1907, p. 360; Fernando Rosenzweig, Comercio exterior de L\fe'xico,~ X ~ ~ - I ~ I I : estaCjljticas econo'nzicas del Porjriato (Ilexico, 19ho), p. 208.

Industrialisation in ,%.lexicaI jone-third more mills in operation than there had been three decadesearlier, but they were roughly twice the size of the earlier mills.34There had also been an increase in productivity since the early years ofthe industry. Physical productivity (measured in output of pieces of clothper active loom) increased some 3 79 % between I 843 and 1905, an averagerate of growth of productivity of roughly 2.5 % per year. This is a low endestimate, since it does not take into account improvements in the qualityof cloth or the increase in the production of fine-weave goods, both ofwhich were substantial. Labour productivity increased as well, thoughthis is somewhat harder to measure in the years prior to 1895 because ofsignificant changes in the allocation of the labour force between spinningand weaving departments of the mills. Xn analysis of post-1895 data,however, indicates a similar increase in output per worker: labourproductivity grew by 31 % between 1895 and 1905, a 2.7% annualincrea~e.~'Whatever the exact rate of productivity growth, it is clear that Mexico'snewer, highly mechanised firms were more efficient than their oldercompetitors and certainly were able to out-compete the nation's artisans,thereby forcing both of these traditional producers from the market. Ofthe nation's I yo cotton mills in 1905, for example, only 123 wereoperating, the other 27 (almost all of them smaller, older mills) unable tocompete against the newer, more efficient mills." The nation's artisansfared even worse: of the 41,000 artisan cloth producers in 1895, only12,ooo remained in 1~10.~'X similar transformation occurred in the cigarette industry where threegiant firms, employing automated cigarette rolling machinery fromFrance, drove the nation's artisanal producers out of the market. In 1898the nation's output of almost 5 million kilos of cigarettes was divided upamong 766 manufactories. Ten years later, in 1908, though productionhad increased by 76% to almost 8.7 million kilos, the number ofproducers had fallen by over 40% to 437. In other words, output perestablishment trebled over the ten-year period, from 6,410 kilos in 1898to 19,819 kilos in 1908. By June 191 I, the last date for which data exist,there were only 341 manufactories in operation, less than half the numberin existence just 12 years earlier.3s These figures probably understate thedegree to which the major producers forced out the smaller manufacturers,3Valculated from Secretaria de Hacienda y Credito Publico, Docurnentos, doc. 3;hlinisterio de Fomento, Estariljtica de/ Departaniento de ~tfixico, doc. 2; Seminario deHistoria, Estadisticas econo'rnzcas lie/ Porfiriato, p. I oh.35 Ibid." Calculated from Seminario de Historia, Eftadisticas econo'micas del Porfiriato, p. 106. " Anderson, Out~.asts in their Own Land, p. 47." Calculated from Secretaria de Hacienda, Boletin de estadistica fiscal, 1894-zpry (Mexico, x-arious years).

16 Stephen H.Habersince the data on the number of firms includes cigar manufacturers (whichwere not mechanised and therefore not subject to the same kind ofconcentration because of increasing returns to scale) as well as cigaretteproducers. Indeed, firm level data from the three major cigaretteproducers suggest that they controlled 60 % of the market by the close ofthe Porfiriato.Data on the labour force also indicate that the big, mechanised firmswere forcing the artisanal shops out of business. In 1895 there were 10,397workers employed in cigarette production. By 1910 there were but 6,893,approximately half of whom were employed by the nation's three majorfirms.39 If we assume that cigarette output was the same in 1895 as it wasin I 898, the first year for which output data are available, the data indicatethat output per worker increased from 473 kilos in 1895 to 1,216 kilos in1910 - an increase in labour productivity of I 17 % over the I !-year period- the apparent result of the substitution of automated rolling machineryin the big firms for thousands of workers rolling cigarettes by hand inhundreds of small shops. These figures, like those on output per factory,also tend to underestimate the degree of change in the industry. It isunlikely that output in 1895 was equal to the level of 1898 - it was almostcertainly significantly lower. Thus, if anything, the degree to which theautomated machinery employed by the large firms raised labourproductivity was probably greater than the I 5 7 % increase estimatedhere."'Family-owned enterprises remained in Mexico. In some lines ofmanufacturing, like leather goods, cigars and food processing, small firmscontinued to dominate. Even in the increasingly concentrated cotton andwool textile industries, small firms that produced for geographicallyisolated areas continued to hold out. Wherever there were sizeableeconomies of scale or speed, or where the lack of a skilled labour forcecreated incentives to mechanise production, however, big firms werepushing the small producers out. Because no comprehensive industrialcensus was ever carried out during the Porfiriato, it is not possible tocalculate the percentage of industrial production attributable to large-scalemanufacturing. Data from the census of 1929, however, shed some light onthe subject. As a percentage of total national production of manufactures,the subsectors that were becoming increasingly concentrated - steel,textiles, cement, beer, dynamite, soap, paper, glass, tobacco products -accounted for just over half of all manufactures produced in 1929. I39 Anderson, Oxtcasts in their Ou~n Land, p. 41.Calculated from Secretaria de Hacienda, Boietin cir estadistica fircaL, 1894 191j (Mexico,L-arious years).

Indtlstrialisation in Mexico I 7estimate that these industries comprised 56.6% of the total capitalinvested in manufacturing and contributed j6 % of total value added."In terms of the accomplishments of US industrialisation, this was a verymodest level of industrial development. By Latin American standards,however, Mexico's industrial growth was quite impressive. By 1910Mexico had well-developed beer, cotton and wool textile, basic chemical,iron and steel, paper, cement, shoe and boot, and cigarette industries.Brazil, the most industrialised country of South America, had textile,beverage, and leather-working industries which rivalled those of Mexicoin size and complexity, but did not have any of the more complexindustries, such as paper, steel, cement or basic chemicals. These were notdeveloped until the two decades following the First World War.42Impressive as Mexico's early industrialisation was, significant obstaclescontinued to stand in the way of self-reinforcing growth. These obstacles,for the most part, were internal to firms, and included the inability torealise scale economies, low labour productivity, and high fixed capitalcosts relative to the ability of the economy to mobilise capital. Let usexamine each of these, and their consequences for the rate and structureof industrial growth, in detail.The Mexican market was still relatively shallow compared to those inthe advanced industrial countries. Even after a 30-)-ear period of rapideconomic growth and urbanisation in which a sizeable wage-earning classwas created, nearly three-quarters of the population continued to live insmall villages. A significant segment of the population continued tofunction outside the market economy, producing for their own subsistencethrough traditional peasant agriculture. Even in areas where haciendashad su~allowed up Indian communities, this did not imply that all of thedislocated peasants became wage workers; sharecropping and rentalarrangements still tended to predominate. In addition, many areas of thecountry had not yet been integrated into the national rail transport system,with large sections of the south and long stretches along the Pacific Coastremaining outside the rail grid. Most importantly, the vast majority of thepopulation was still quite poor. The range of manufactured products theycould be expected to consume was therefore restricted. No studies havebeen conducted to date on average wage rates and living standards duringthe Porfiriato, but a number of indicators point to low and unequallydistributed income^.'^ First, per capita GDP was quite low: $1 32 (1950'' Calculated from data in Direccion General de Estadistica, Primer censo industrial de 1930(Irfixico, I 934).For a discussion of the development of these industries in Brazil see Wilson Suzigan,Indistria Brasiieira: Origem e Desenvoivimento (S2o Paulo, 1986)." The minimum wage series in Seminario de Historia hfoderna, Esfadisficas econo'micas delPorjriafo, pp. 147-54. are widely cited to make this point but are of dubious value for

- -I 8Stephen H. Haberdollars) in 1910, compared to $807 in Great Britain and !$1,03j in theUnited States.'" In addition, the distribution of this income was highlyskewed. A redundant labour force and highly capital-intensive methods ofproduction suggest that most of value added went to capital, not tolabour. In fact, the income of the average household was so low that theconsumption of cotton cloth was highly sensitive to changes in the priceof corn, which along with beans and chiles made up the largest part ofthe diet of Mexico's working class."This uneven and limited market had to combine with a relativelysophisticated and expensive technological base. hlexico now had a larger,better integrated market than it did in the 184os, but there had also beensignificant changes in manufacturing technologies since that time, puttingmany industries out of Mexico's reach. In general, these advances loweredunit costs of production by taking advantage of economies of scale andeconomies of speed. Thus, the optimal size (the scale of production atwhich unit variable costs would be minimised) of firms increasedsubstantially. This not only prevented Mexico from entering many lines ofmanufacturing, but also shaped the industries which did develop inseveral significant ways.Since the minimum-efficient scale in capital goods production hadincreased, and since capital goods industries now required well-developedscientific and engineering capabilities, Mexico had little choice but toimport its capital equipment.46 Thus, hlexico's blast furnaces and rollingmills came from the United States, the high-speed cigarette machineryfrom France, the paper-making machinery from Switzerland, the textilelooms, spindles, and other equipment from England, Belgium and theUnited States. Although this certainly sped up the process of earlyindustrialisation," this imported technology, designed for massa variety of reasons. In the first place, Llexico did not in fact hare a legal minimumwage prior to the 1930s. Secondly, the authors did not publish the sources or methodsused, so there is no \La\ of knoulng exactl\ what the 'minlmum wage' figuresrepresent. It is most likely the case thatthe reported figures represent the lowest wagerate that the researchers could find for a particular year, which is not, to put it mildly,a systematic approach to gathering wage data." Coatsworth, 'Obstacles to Economic Growth', p. 82.EL Economists ,\lexicano, 7 Llay 1904. p. "4.36hlexico's investment in human ca~ital uras extremelv low. The educational svstemserved only the few, with the vast majority of the population having almost no formalschooling and aery low levels of literacy. In 1895 only 14% of the population couldread and write. See Direccidn General de Estadistica, Estadisticas sociales del Porfiriato(Mexico, 19j G), p. 123." Alexander Gerschenkron made this point about the role of imported technology forlate developers in Eastern Europe. See his Economic Backwardness in HistoricalPerspecti~se:A Book oj' Essays (Cambridge, 1962), ch. I.

Industrialisation in ,\/lexico I 9production/mass consumption economies, was inappropriate for theMexican market. This had two ramifications.The first was that there was a severe problem of excess installed capacityin many industries. In the cement industry, for example, Mexicanmanufacturers were able to run at only 43 % of capacity between 1906 andI 9 I I. In the steel industry the situation was even worse. Although therewas only one major producer, Fundidora Monterrey, it still only managedto run at 30 % of capacity between 1903 and 1~10.~' Even in consumergoods, where the capital equipment was more easily divisible and scaleeconomies tended to be smaller, there was a capacity utilisation problem.The scarcity of consistent data makes it impossible to estimate capacityutilisation rates in these industries accurately, but reports from manufacturersand analyses conducted by the hlexican financial press on cottontextile manufacture, the largest and best developed of the consumer goodsindustries, indicate that the industry could not run at capacity. Incompeting for control of the market at the turn of the century, Mexico'smajor textile mills began to switch to the recently developed, highvelocity, automatic machinery. If the entire hlexican textile industry hadthen been run at capacity, the market could not have absorbed all theoutput. Indeed, crises of 'overproduction' occurred on a fairly regularbasis : at least twice during the latter part of the Porfiriato, in I 90 1-2 andagain in 1907-8. Throughout the years of the Revolution (1~10-I~) andthe 1920s the problem was endemic.49The second ramification of the importation of capital goods was that itincreased the costs of entry: Mexican industrialists had higher start-upcosts than did industrialists in the advanced industrial economies. Notonly did they have to pay for the foreign-produced machinery; they alsohad to set aside funds to cover the cost of transport, insurance in transit,and the salaries of the foreign technical personnel who set up the plant. Inthe cotton textile industry, for example, these added expenses pushed upthe final cost of erecting a mill in 1910 from $12.72 per spindle in GreatBritain to $19.72 per spindle in Mexico, a difference of nearly 60 %I."As a result, a large part of Mexican industry was inefficient from itsbeginning. Foreign-produced capital goods led to high costs of entry andlow levels of capacity utilisation, with concomitantly high unit costs ofproduction. Had Mexico been able to export manufactures this unit costproblem could have been solved. An attempt was in fact made in 1902 toHaber, Industcy and Ilnderdeveiopment, p. j j. See EL Economiita 12lexican0, 18 Jan. 1902, p. 245 ; 21 June 1902, p. 203; 5 Sept. 1903 (English edition), p. jj6; 11 July 1908, p. 297. j0 Gregory Clark, '\Y'hy Isn't the Whole World Developed? Lessons from the CottonMills ', Journal of Economic Hirfocy, vol. 47 (1987), p. 146.

zoStephen H. Haberenter the international market, but was a resounding failure. The lack ofa merchant marine to ship its goods to foreign markets, the lack ofinstitutions to provide credit to exporters, the competition of producersfrom the advanced industrial economies, and high tariff barriers in otherLatin American countries, all worked against Mexican industrial exports."A second obstacle to successful industrialisation was the lowproductivity of hlexican labour compared with that in the advancedindustrial countries, and this again pushed up production costs. TheMexican working class had its social roots in the peasantry; many workerswere only recently off the farm; some moved back and forth between thefactory and the field. They therefore worked with the rhythm of apeasantry, not of an industrial proletariat. For this reason Mexicanindustrialists did not have the same degree of control over labour as didtheir counterparts in the United States, England or Germany. Thoughthey could force workers to work long hours, they could not instil inthem the attitudes and values that are essential to the development ofindustrial discipline. Like European industrialists in the late eighteenthand early nineteenth centuries, Mexican factory owners regularlycomplained about the 'laziness' of their work force and their inability toforce the workers to submit to routinised work.'*This resistance on the part of the working class took two forms. One wasthat workers openly resisted employers' attempts to increase productivityor achieve greater discipline on the shop floor. There were even occasionswhen entire shifts of workers abandoned their machines in order to attenda fiesta at a nearby hacienda or Darrio.j3 The second was that hlexicanworkers generally worked less intensively than did their American orEuropean counterparts. In the weaving departments of Mexico's cottontextile mills in 1910, for example, the average worker operated 2.j looms,j1 For a detailed discussion of this attempt to export manufactured goods during thePorfiriato see Haber, Industry and LTnderde~melopment, pp. 39-43j2 For a typical analysis of the productivity of Alesican labour by a Mexican industrialistsee Jose Robredo, Punto de t'ista de los indusfriales de bilados-y fejidos de la Repciblica (Alexico,I 9t r), p. > I. For a similar analysis by a foreign observer see G. Jenner, ' Informe de hfrG. Jenner sobre la inversion del capital ingles en hiexico', in Informesj documentosreiaticos a comercio interior, mes de setiembre 1886 (hiexico, I 886). This experience with theslow transition to 'factory time' u7as not unique to Llexico. In hfeiji Japan, forexample, people returning from stud! or work abroad regularly commented on thelaxness and lack of time discipline of Japanese workers compared to their Westerncounterparts. The transition to modern conceptions of time and work, hourever,appears to have proceeded more rapidly in Japan than in Mexico. See Thomas C.Smith, Satiz'e Sources oj',/apanese Industrialipation, I;JO-1920 (Berkeley, I 98 8), p p z t >-8.j3One of the more notorious cases of this occurred in the San Lorenzo cotton mill inOrizaba \'eracruz in igrj. For details on this case see Archivo General de la Sacion,Ramo de Trabajo, Box > 60, file 6, doc. I I.

whereas British operatives worked 3.8, and New England operativesworked 8.0. In the spinning department of the mills the results weresimilar: in Mexico 540 ring spindles per worker, compared with 62j forBritish workers and 902 for New England workers. When reduced to asingle measure of staffing levels - loom equivalents per worker - the dataindicate that Mexican textile mills employed almost twice as manyworkers per machine as did British mills, and over two-and-one-half timesas many workers per machine as did New England mills.'"To an extent the disadvantages of lower capacity utilisation rates,higher start-up costs, and lower labour productivity would have beenoffset by lower labour costs in Mexico. Workers in Mexico's textile mills,for example, earned on average roughly half of what British workers didand less than one-third of what New England workers did. But it is clearlynot the case that these lower labour costs would have made up forthe higher capital and operating costs in the textile industry: hlexico'scosts of production were still almost 20 % higher than in Great Britain."Moreover, in less labour-intensive industries, like beer brewing, glassmaking, steel and chemicals, the savings from lower wages would havebeen even less significant than they were in the textile industry.Mexican manufacturers therefore found it difficult to compete in thehome market against foreign manufacturers without the protection andsupport of the government. Almost all of Mexico's major industriesreceived some sort of tariff protection or federal subsidy. Beginning in theI 880s import duties on manufactures jumped markedly, with the schedulesbeing revised upwards in I 892, 1893, I 896 and 1906. By the end of thePorfiriato, levels of protection were so high that one US commercial agentreported that 'the Mexican tariff on cotton goods is the highest in theworld [sic], being exceeded only by those of Russia and Brazil. In someclasses of cloth the duty amounts to three times the value of the goodsabroad. ''13 In other product lines levels of protection were extremely highas well. In the dynamite industry, to cite but one example, a series ofdifferent import duties and excise taxes produced a tariff of 80% onimported goods.'7In addition to protective tariffs, most of the country's majormanufacturing enterprises operated under some kind of federal concession,which gave them tax-exempt status for a period of between seven5Vlark, 'Why isn't the Whole World Developed?', pp. 15 1-2. " Ibid., pp. 146 and I yo. 56 LK'illiam A. Graham Clark, Cotton Goods in Lafin America: Part One, ~Wexico, Cuba, and Central America (LY'ashington D.C., 1909). p. 38,5;Calculated from data in Be Mexican l'earbook, 1909-1910, pp. 414-1 5 ; E/ Economisfa~Vlexicano,4 Jan. 1902, p 217.

zzStephen H. Haberand 30 years. In 1893 the government declared that all new industriescapitalised in excess of 2j0,ooo pesos were exempt from direct federaltaxes and from customs duties on the machinerv and other materialsneeded to erect their factories. The required minimum capitalisation waslowered to roo,ooo pesos in I s98.j8A few enterprises were able to do evenbetter in their negotiations with the Diaz government. It sometimesgranted firms the sole right to tax-exempt status within a particularproduct line. In effect, in order to promote industrialisation in anextremely difficult environment, the government was setting up officiallysanctioned and subsidised monopolies.Besides the development of inefficient, highly protected industry, theother major feature of this wave of Mexican industrialisation was thetendency of manufacturing to be extremely concentrated. Within anygiven product line a few large firms controlled the lion's share of themarket. In steel, glass, soap, paper and dynamite production, single firmsheld monopolies or near-monopolies. Cigarette manufacturing wasdominated by two horizontally integrated giants (there were actually threefirms, but the largest producer owned 50% of the stock in the nation'ssecond largest, effectively reducing the number of competitors to two). Inbeer and cement three big firms carved up the market. Even in cottontextile production, which is usually characterised by near-perfectcompetition, two firms claimed roughly 20 % of total national productionand almost all the production of fine, high-quality goods. A comparisonof four-firm concentration ratios indicates that Mexico's textile industrywas 60 % more concentrated than Brazil's and 280 % more concentratedthan that of the United States in r9ro."This non-competitive industrial structure evolved for two reasons.First, as has already been discussed, technological considerations limitedthe number of producers who could hope to prosper in Xlexico's shallowmarket. Secondly, the underdeveloped nature of Sfexico's financial sectormeant that a small group of financiers skilled at manipulating both themarket and the state held an unusual degree of political and economicpower. They were therefore able not only to demand (and receive) highlevels of protection from the government, but were also able to employa wide arsenal of anti-competitive weapons designed to create barriers to'"latsuo Yamada, 'The Cotton Industry in Orizaba: A Case Study of hiexican Laborand Industrialization During the Diaz Regime', unpubl. I\IX diss., university ofFlorida, 1965,p. 49.'' For a more complete discussion of industrial concentration and the creation of barriersto entry see Haber, Industry and L7nderdeuelopment, chs. 4 and 6. For an analysis ofconcentration ratios for the textile industry see Stephen H. Haber, 'IndustrialConcentration and the Capital Alarkets: A Comparative Study of Brazil, Mexico, andthe United States, 18jo-rgjo',Journal of Econon~ic History, aol. 5 I (1991).

entry to would-be competitors. How then, d ~d the obstacle of a poorlydeveloped cap~tal market affect the development of Mex~can industry?As has alread) been discussed, by the tlme that th~s wave ofindustrialisation was underway in Mexico, the cost of entry to the marketin manufacturing was much higher than it had been in late eighteenth andearly nineteenth centuries when Great Britain began what came to beknown as the First Industrial Revolution. By the late nineteenth centurythe state of manufacturing technology was such that entry into the massproduction of most industrial goods required capitalisations running intomillions of dollars. What had evolved in Europe over a long period oftime, financed through an extended process of reinvestment of profits,now had to be purchased all at once. Entry costs were raised even furtherby the fact that the technology and capital goods that had to be importedwere expensive to ship, to insure in transit, and to set up once they arrivedin Mexico.Manufacturers therefore had to raise initial capitalisations running intothe millions of pesos, but the ability of the economy to mobilise capitalwas restricted. A government-affiliated industrial finance bank could havebeen used to channel capital into manufacturing, but this had already beentried from 1830 to 1842 with very limited success. The idea was neverrevived, even after the conditions for industrialisation became morepropitious. The private banking system could likewise not be counted onto serve as a source of finance capital. Mexico's banking system, still in itsinfancy, was designed to do nothing more than facilitate commerce. Aslate as 1910, the entire banking system still numbered less than yo firms- most of them extremely small enterprises with capitalisations in the areaof only $ryo,ooo. Almost all of these banks were legally constituted onlyto serve as sources of short-term credit, meaning-that they could at mostprovide working capital to manufacturing companies.60Most of the investment capital for Mexican manufacturing thereforecame from the nation's most prominent merchant-financiers. They werethe only group in hlexico with sufficient liquid wealth to finance the veryexpensive plant and equipment that had to be imported. Given the largecapital requirements of the enterprises and the perceived risk inmanufacturing, no one financier would commit all his resources to anysingle project. Instead, several financiers would combine to form a jointstock company. Since the number of major financiers was relatively small- no more than 25 - the overall effect was that a tight clique controlledMexico's most important manufacturing companies.60 For a detailed discussion of banking institutions during the Porfiriato see Hilda SanchezMartinez, 'El sistema monetario y financier0 mexicano bajo una perspectiva historica:el Porfiriato', in La banca, pasadog present?: ensayos del CIDE (hlexico, 1983).

24 Stephen H. HaberThe two most salient characteristics of this class of merchant-financierindustrialistswere that few of them were Mexican by birth and fewer stillknew anything about manufacturing. Of the nine men who made up thefirst board of directors of the Fundidora Monterrey steel mill, for example,only one had any relevant technical experience.61 These were not thetinkerers of the English Industrial Revolution or the productionorientatedengineers and scientific managers of US industry. They werefinanciers whose principal talents lay in making deals to maintain theirmonopoly positions and in manipulating the economic apparatus of thestate to provide them with protection from foreign and domesticcompetition. Their presence on the boards of Mexico's major manufacturingenterprises therefore reinforced the tendency of Mexicanindustry to collude rather than compete.These merchant-financier-industrialists were well positioned to shapegovernment policies to their liking. Indeed, they were the economicbackbone of the Porfirian state: they subscribed to the government'streasury bonds, they sat on the boards of the nation's most importantfinancial institutions and they represented the government in internationalfinancial markets when it borrowed money abr~ad.~' In fact, it was not somuch a case of the state representing the interests of these financiers as itwas that these financiers were the state. They controlled the emission ofpaper money through their ownership of the Banco Nacional de MCxicothere was no government-run central bank. They shaped nationalmonetary and exchange-rate policy through the seats they occupied on theComision de Cambios y Monedas, and they held the strings on the flowof international loans to the Mexican government through theirconnections to the major banks in Madrid, Geneva, Paris and New York.This class of merchant-financier-industrialists used their political andeconomic power to pursue rent-seeking strategies. At the same time,poorly developed capital markets kept other groups from challengingtheir hold on industry. That is, rather than make innovations in newprocesses or techniques as entrepreneurs in some follower countries dld(Germany stands out as a case in point), Mexico's entrepreneurs sought tolimit competition and earn monopoly rents. Given the fact that theirentrepreneurial talents and experience were in commerce and moneylending- not in production - and given the fact that demand for many oftheir products was highly inelastic, this strategy made sense from the pointof view of maximising returns to the firm. Indeed, returns tomanufacturing were low (many enterprises, including some of the61 Fundidora Monterrey, ' Informe Xnual ', I got.Lfexico's most important financiers operated on an international scale and hadconnections to the big foreign banks. See Sanchez Alartinez, 'El slstema monetario'.

monopolies, were perennial money-losers or made very irregular profits),and would have been lower still if firms had not pursued anti-competitive~trategies.~~A detailed discussion of how Sfexico's financiers carried out strategiesdesigned to limit competition is beyond the scope of this article, but ingeneral it usually involved closing off access to some important factor ofproduction, like technology (through the control of foreign patentrights), raw materials or government protection. Where they could, firmsalso tried to close off access to the distribution and marketing networks.These strategies were usually accompanied by an attempt to buy out anycompetitors or would-be competitors.Since there was not a well-developed capital market in Mexico, thesestrategies could provide market dominance over the long run. This wasnot the case in countries that had well-developed capital markets, like theUnited State or - to cite a 1,atin American case, Brazil - since the highprices imposed by a monopoly attracted competitors who could use thenational capital market to finance the creation of a rival firm.64 This is, infact, what happened to most of the giant consolidations formed in theUnited States during the great merger movement of the 1890s Ananalysis of paper manufacturing in the two countries elucidates the point.In both countries single firms (the San Rafael y Anexas paper company inMexico, and the International Paper Company [IPC] in the United States)came to control the market in the I 890s through strategies of mergers andconsolidations with rival firms at the same time that they integratedvertically in order both to capture the economies of speed in papermanufacturing and to cut off access to raw materials to would-becompetitors. Both firms also concentrated on the production of newsprint,the product line with the largest market, (though they produced othergoods as well). In the United States, the monopoly rents that IPC earnedattracted competitors who were financed by the stock and bond markets.Within seven years of IPC's founding, 20 new producers entered themarket, driving IPC's share of the market down from 64 % in 1900 to48 % by 1905 .65 In Mexico, the lack of a well-developed capital market andthe cohesiveness of the merchant-financier families who dominated the63 For an analysis of the profitability of Alexican manufacturing during this period seeHaber, Industy and Underdeveiopmenf, ch. 7.6' Brazil had a much better developed banking system and far larger and more complexstock and bond markets than Alexico did. Over the long run this allowed Brazilto overtake hfexico's early lead in industrialisation and also gave rise to lower levelsof industrial concentration than existed in hiexico. See Haber, 'Industrial Concentration'." Xaomi Lamoreaux, The Great ~Zlerger ~Zlovement in American Business, 1894-xgoj(Cambridge, Eng., 198 5), pp I 26-7.

z6Stephen H. Habereconomy enabled San Rafael to hold on to its control of the market overthe long run. It was not until 1936 that San Rafael's monopoly wasbroken, when the Mexican government, for political reasons, decreed thatthe distribution of newsprint was a strategic industry that should becontrolled by the State, not by a private firm. It therefore created agovernment distribution monopoly, though San Rafael continued tocontrol production.In short, during the 20 years between I 870 and I 910 Mexico underwenta rapid process of economic modernisation and growth. A national marketwas created by the building of a rail network, the mining sector wasrevitalised, a petroleum industry was created, agriculture becameincreasingly commercialised and industry moved into a wide variety ofnew products that had never before been produced in Mexico, drivingimported goods from the market and pushing the nation's artisans to thewall. But the contradictions and obstacles inherent in the rapidindustrialisation of an economy like Mexico's prevented self-sustainingindustrialisation from taking hold. The market was still too small tosupport capital goods industries (it could barely sustain consumer-goodsproducers in many lines of production), the industries that did exist wereunable to compete without extensive support and protection from thegovernment and a group of rent-seeking financiers came to control themanufacturing sector.The end of the Pax Porfiriana, 1910-1930It could be argued that the process of economic growth from I 880 to 1910would have eventually overcome the obstacles which stood in the way ofself-reinforcing industrialisation. The continued growth of the economymight have broadened and deepened the market, expanded the bankingsector and formed a national capital market, built an educational systemadequate to the task of developing engineering and industrial designcapabilities, and continued to break down pre-modern forms ofagricultural production. W'hile this could have happened in theory, thereality was that the uneven process of economic growth in Mexico set offa revolution against the Diaz dictatorship from both above and below, notonly ending the model of growth of the Porjriato, but also producing aslowdown in industrial growth for the next 2j years.Contrary to much of the popular mythology about the effects of thehlexican Revolution (much of it motivated, as John W'omack has pointedout, more by ideological presuppositions than by an analysis of theempirical data),@ the Revolution of 1910-1 7 did not destroy hlexico's66 John Womack, 'The Mexican Economy During the Revolution, 1910-1920:Historiography and ,lnalysis', ,2larxist Pt-r~pt-rttct-S,v01. I (1978), pp. 80-123.

Industrialisation in Mexico 2 7industrial plant, nor did it send the industrial barons of the Porjriato intoexile, never to return. Mexico's physical plant, especially the large firmsthat had the political and financial resources to protect themselves, camethrough the fighting in one piece. Thus, output quickly reached itsPorfirian levels once the fighting stopped in 1917. Mexico's industrialistswere also still present after the Revolution, and in fact were evenmobilising politically to defend their interests as early as I 9 I 7 against thenew state taking shapc6'The Revolution did, however, significantly affect the confidence ofhlexico's industrialists. It was not that the post-revolutionary governmentswere anti-industrial or anti-business - they were in fact made up ofbusinessmen - but rather that the rules of the game had been rewritten bythe Revolution. The industrialists no longer controlled the reins of powerthe way they had done during the Porjriato; urban labour, which hadplayed an important role in the defeat of the peasantry during the civil warof 1914-17, now played a much larger role within the state, extractingimportant concessions in the 1917 Constitution such as the right toorganise and strike, an eight-hour day, a six-day work week, and equal payfor equal work. The political climate was also unstable: it was not entirelyclear what direction Mexico would follow during the 1920s, whether therewould be a renewed round of violence moving the Revolution to the leftin an attack on private property or to the right against the progressivecompromises of the Constitution of I 9 I 7.The result was a marked deceleration in new capital spending byindustrialists, a dramatic fall in the value that financiers placed on theirassets, and a jump in financial rates of return as investors began to demandsizeable risk premiums to keep their money in Mexico. An analysis ofcapital spending by Mexico's major steel, cotton textile and cigarettemanufacturers, for example, reveals that firms began to run their alreadyestablished plants into the ground after the Revolution. The book valueof the physical plant of the country's major textile manufacturer (theCompadia Industrial de Orizaba) fell by I 6 % between I 920 and 1924, andof the major cigarette producer (El Buen Tono) by 21 % between 1918and 1924. Even in the steel industry, where there was considerable newinvestment between 1919 and 1921, the brakes were soon put on newcapital spending, resulting in a drop in book value of five per cent between1921 and 19.24. Data from the federal tax register of the cotton textileindustry, which covers all cotton spinning and weaving firms, indicate a'' Primer Congreso Nacional de Industriales, R~setia-r memoria delprimer congreso nactonalde industriales reunido en la Ciudad de ilfixico bqo ei patrocinio de /a Secretarrb de IndustriaComer~to-~ Trabajo (Mexico, 1918).

28 Stephen H. Habersimilar decline, with the value of capital in equipment and buildings per active mill falling by 13 % between 1922 and ~ ~ r ~ . ~ ~ The lack of capital spending was driven by the pessimism of investors,who were revaluing their assets downwards. An analysis of the ratio ofmarket-to-book values for the three firms discussed above indicates thatinvestors perceived that their assets were worth only yo % of what theyhad perceived them to be prior to the Revolution. Along with a declinein the value of assets came concomitant jumps in stock yields, as investorsbegan to demand a sizeable risk premium in order to stay in the Mexicanmarket. The average yield on common stock in Mexico's major industrialcompanies increased from 4.6% per annum during the period betweenI 896 and I 910 to 9.4% per annum between 1918 and 1925. Similarly, realfinancial returns to investors increased sixfold; jumping from 3 % perannum during the period I 90 1-1 o to I 8.7% during the period from 19I 8to 1925, the result of a dramatic fall in the real market values of stocksbetween 1910 and 1918, which produced sizeable capital gains for thosewilling to invest in the market afterward^.^' There is also evidence that the-1920s were a period of capital flight in hIexico, as investors began to keepmore of their cash assets abroad."The pessimism of the investment community in Mexico was borne outin the latter part of the 1920s as hIexico began to enter the GreatDepression. Beginning in 1926 the prices of Mexican exports went on adownhill roller coaster ride. Between 1926 and 1928 export revenues fellby ten per cent, from $3 34 million to $299 million. The drop acceleratedthereafter, with exports eventually falling to only $97 million in I 93L Thisdrop was not compensated for by a similar drop in import prices. Not onlydid the volume of exports decline by 37 % between 1929 and 1932, but theterms of trade deteriorated by 21 % as well. Thus, the purchasing powerof Mexican exports fell by over 50 % in just three years. The negativeeffects of the collapse of the export sector, which had significant effects onemployment and demand, were exacerbated by pro-cyclical monetary andfiscal policies.'1 Though the estimates are rough, the available dataindicate that real per capita Gross Domestic Product fell by 5 .g% in 13.27,0.9% in 1928, 5.4% in 1929, and 7.7% in 1930. In 1931 there was a slightrecovery, with an increase in GDP of I.j %, but it was not long-lasting.For a detailed discussed of the effects of the Revolution, as well as a discussion of houthesevalues were calculated, see Haber, Ind/is.fr, and Ynderdt-celopment, ch. 8.'' For a detailed discussion of the sources and methods employed in this analysis seeHaber, Industry and Cnderdetelopment, pp. 144-8'' Joseph Sterrett and Joseph Davis, Tile Fircal and Economic Condition oj .Ilexico (Nea-~.York, 1928), p. 190. " F.nrique Cardenas, La industriali?acion n/exicana d~rante la Gran Depresion (Mexico, 1987), chs. 3 and 4.

Industrialisation in MexicoIn 1932 real per capita GDP fell by an incredible I 6 %. Over the six-yearperiod real GDP per capita fell by 30.~%.~~ The results, as one mightexpect, of this downturn were contractions in industrial output, nominalwages, employment, profits and new investment. In fact, many ofhlexico's major industrial firms came close to bankruptcy during thedepre~sion.'~It was not until the mid-~gjos,therefore, once a general economicrecovery began, that a new round of industrial development took place.Several factors were behind this recovery. One was government deficitspending, which not only pushed up aggregate demand, but also servedto remove some of the remaining obstacles to industrialisation. Extremelysignificant here was spending on a federal highway network (the roadsystem increased from 1,426 kilometres in 1930 to 3,929 kilometres by~ ~ ~ which o ) created , ~ demand ~ for producer goods like cement and steel,as well as linked markets, and spending on irrigation systems in the northof the country, which increased agricultural productivity. The second wasthe agrarian reform, which redistributed wealth in the countryside andtherefore, over the medium term, redistributed incomes as well, therebyincreasing the size of the market. Thirdly, though there was a good dealof conflict between the government of Lazaro Cirdenas (1334-40) andindustrialists, one of Cardenas' accomplishments was the restoration ofsocial peace in Mexico. Industrialists may not have wielded politicalpower in the Cirdenas government, but Cirdenas did create a stablepolitical environment through the formation of a national party, therebyrestoring the confidence of the industrialists in the viability of the State.hlexican manufacturers no longer had to fear the vagaries of an unstablepolitical system. Finally, there was a recovery of the price of hlexico'smajor exports, silver and oil, which revived the economy through thesame mechanisms that had earlier forced it to contract. Overall, from 1933to 1939 real per capita GDP grew by 24 %, or roughly three per cent per- -year. ''With the increase in demand, the return of profits, and the creation ofa stable political system, industrialists, Porfirian as well as a new group ofimmigrant entrepreneurs, began a new round of investment in manufacturing.Not only did investors revalue their assets upwards (the ratioof market-to-book values increasing twofold for the older, major firmsbetween 1932 and 1938), but spending on new plant and equipment" Calculated from data in Instituto Sacional de Bstadistica Geografia e Informdtica,Estadisticas histdricas de ilfe'xico (hlexico, I 98 j), p. 3 XI.73 For a detailed discussion of the effects of the depression on employment, \vages, profits,and investment see Haber, Industy and Underdevelopment, ch. 9.'4 Instituto Nacional de Estadistica Geografia e Informdtica, Estadtiticas histdricas deIWX-ico,p. 566. Calculated from ibid., p. j I I .2 9

joStephen Ei. Eiaberoccurred as well. On an aggregate level, real expenditures on private fixedcapital formation were I 67 % higher in I 9 3 9 than they had been in I 9 3 2.Part of this increase in capital spending was the result of modernisationprogrammes undertaken in older industries. The value of the physicalplant of the Fundidora Monterrey steel mill, for example, increased by3 j % between 1934 and 1937. The value of the physical plant of the majorcotton textile producer, the Compadia Industrial de Orizaba, almostdoubled during the same period, increasing by 98°/~.76Of equalsignificance to the renewed investment programme of older industries wasthe creation of new firms. Basically, these new companies did not enterinto competition with the old established giants. They left beer brewing,steel-making, paper milling, and other capital-intensive, verticallyintegrated operations to the companies that had dominated those lines ofmanufacture since the Porjriato. Instead, the new entrants to the marketconcentrated on new products, like rayon knitwear, cotton knitwear, silkand high-grade cotton shirtings, hosiery and other goods that had beenimported up until then. In fact, of the 692 firms listed in the 1938 taxregistry of the textile industry, well over half were involved in themanufacture of these new product^.^'Manufacturing, in fact, came to lead the economy at this point, withvalue added in this sector growing 14j % faster than GDP as a whole."In fact, for the next forty years manufacturing was the engine of growthof the Mexican economy. In this round of Mexican industrial developmentnew obstacles to growth presented themselves, and many of the oldobstacles continued to persist. As had occurred in the earlier period, theseshaped both the rate and structure of industrialisation, and prevented,once again, a self-sustaining process of industrialisation from taking hold.Although Mexico did not become an industrial society until the secondhalf of the twentieth century, a significant amount of industrialisation wasachieved in the nineteenth century - particularly during the 20 years from1890 to 1910. Even as early as the 1830s Mexican policy-makers andentrepreneurs attempted to copy the experience of Western Europe byintroducing modern technology and modern organisational arrangementsin the cotton-textile industry. hlexico's low level of nineteenth-centuryindustrial growth was not therefore a product of not wanting toindustrialise.ifi Cardenas, I*a zndusfriali~acidn twexicana, p. 144: Haber, Industcy and Ihderdei~elopment, ch.10." Secretaria de Hacienda y Credito Pliblico, 'Director10 de las fabricas de hilados ytejidos registrados ' (Mexico, 1918).'"irdenas, I,a industriaii?acio'n mexicana, p. 10.

Industrialisation in MexicoThe problem for Mexican industry during the early and mid-nineteenthcentury was that the economic environment was not conducive tomanufacturing growth on a large scale. Internal tariffs, the lack of reliableand inexpensive transport and widespread brigandage precluded thecreation of a national market. Insecure property rights, a corrupt judiciaryand political instability made contracts difficult to enforce and gave rise toan uncertain institutional environment. Finally, low household incomesprecluded the development of deep and secure markets.During the three decades associated with the dictatorship of PorfirioDiaz these obstacles were overcome, but by this point new constraints onindustrial growth presented themselves. These obstacles were largelyinternal to firms. In the nearly IOO years since the onset of the IndustrialRevolution important developments had occurred in manufacturingtechnology, which both raised the minimum-efficient scale of productionand increased fixed capital costs. The Mexican market, in the meantime,had not grown in step with this technological revolution, nor had therebeen the kind of change in labour productivity and attitudes about workthat had occurred in Western Europe. In addition, hlexico had not createdinstitutions designed to mobilise the capital needed to finance this newtechnology. Mexico was therefore unable to adapt much of this newtechnology without either creating non-competitive production andmarketing arrangements or resorting to government subsidies andprotection. The result was an impressive amount of industrialisation byLatin American standards, but a relatively unimpressive industrialrevolution by the standards of the North Atlantic economies.It is conceivable that had the model of growth of the Porjriato persisted,many of these obstacles to industrialisation might have been overcome.Incomes might have risen, educational levels might have improved, thebanking system would have continued to expand and the internal marketwould have grown. Continued economic growth might have created itsown demand, eliminating the obstacles that stood in the way ofindustrialisation. Indeed, Mexico's industrial entrepreneurs were bankingon this to happen. It was for this reason that they often invested ahead ofthe market, erecting industries which were too large for the demand theyfaced and losing money over the short run in the hope that when themarket expanded they would be in a position to take advantage of it.This, however, did not happen. In fact, the very inequalities that werean integral part of the Porfirian model of economic growth produced aRevolution. The Revolution, while it did not destroy the nation'sindustrial plant, created significant uncertainty among the industrialistclass. These events, coupled with the onset of the Great Depression,produced a slowdown in the rate of growth of industrial investment until3 I

jzStephen H. Haberthe middle of the 1930s. It was therefore not until the middle of thetwentieth century, almost a century after the first rumblings ofindustrialisation began in Mexico and nearly yo years since the first largescaleindustrial enterprises were established, that Mexico began to makethe transition to an industrial society in which manufacturing led theeconomy.